Transportation management software delivered under the software-as-a-service umbrella is evolving as next-generation hybrids and cloud computing delivery models enter the marketplace.
Side Bar: Opting Into Data.
Third-party logistics operators that provide trucking services are benefiting from new hybrids and delivery models that enable shippers to strike an ever-finer balance between tactical and strategic control. For many, that means they can keeping broader carrier management tools in-house while leveraging through 3PLs the vast new scale, advanced connectivity and scalability of today’s transportation management systems.
The evolution of TMS is occurring as carriers are retrenching in the wake of the recession and shedding logistics management services. In 2010, Schneider Logistics sold its freight forwarding and customhouse brokerage business, which included seven sites in the U.S. and two in China. YRC Worldwide, the largest U.S. trucking operator, recently sold most of its logistics unit to a private equity investor.
During the boom years leading up to 2007, many trucking companies started brokerage businesses. Most have settled into basic brokerage operations rather than broader logistics operations that can include carrier management and transportation optimization.
Dallas-based Transplace works both sides of the aisle, and Tom Sanderson, company president and CEO, knows managing 3PL and 4PL relationships is much more technologically demanding than brokering freight loads.
“More and more carriers will go down the brokerage path when they understand what being a 3PL involves,” Sanderson said.
3PLs stand to benefit from a narrower marketplace and the rising costs and scale of data and technology requirements. TMS data requirements are so massive and the costs of purchasing and installing software so high — never mind consulting fees and ongoing maintenance — the installed software model is waning, said Doug Waggoner, CEO of Chicago-based Echo Global Logistics.
SaaS solves those problems with low upfront costs, quick turnaround times, custom configuration and services on demand.
The market for TMS is so big Waggoner doesn’t worry about the competition. According to AMR Research, only about 38 percent of shippers now use TMS even though users cut an average of 10 to 25 percent from their annual freight costs in the first six to 12 months of a TMS deployment.
“We find out what our clients want and build it for them,” Waggoner said.
The reality is, many choices have emerged in the marketplace, said Jordan Kass, executive director of TMC, a division of C.H. Robinson Worldwide that manages more than $1 billion of freight for about 30 global clients. Shippers now have access to hybrid models for managing transportation that combine the best TMS functionality with new SaaS delivery models and technologies for leveraging scale and providing business intelligence.
Side Bar: Greening Up.
C.H. Robinson’s managed TMS was designed to align the benefits of SaaS with cloud computing scale.
Cloud computing-based SaaS delivery models aim to extend the global reach of SaaS and broaden its scope. Managed TMS falls squarely in the middle of the spectrum of transportation management services, with installed software at one end and outsourcing to a 4PL at the other. Shippers with limited technology resources who aren’t ready to cede control of carrier relationships to 3PLs can keep their carrier management program in-house while utilizing SasS technology for other transportation management functions.
Supporting the technology are dedicated teams of engineers who provide fast start-up times and ongoing expert support. “We see managed TMS as addressing a gap that previously existed in the marketplace,” Kass said.
New business intelligence tools include “in memory” technology for instant enterprise-level data analysis. Because data does not have to be pre-aggregated, users can analyze huge volumes of data on a transactional level and support evolving goals and metrics.
Persistent filtering — flipping data for analysis from multiple angles in relation to numerous other factors — occurs almost instantaneously on an enterprise-wide level. It’s an example of the capabilities provided by the new TMS business analytics, said Ryan Pettit, director of technology strategy for C.H. Robinson.
The C.H. Robinson cloud houses a vast data infrastructure that includes data from more than 30,000 global trading partners. It handles about 9 million trade messages per month. New technologies exist there that have only recently entered the TMS lexicon, including highly available storage area networks, internal log shipping, standby servers and server virtualization.
Virtual snapshots of the entire infrastructure are sent to the company’s disaster recovery center in Chicago. In the event of a catastrophic failure at the data center, the entire infrastructure can be restarted in a few hours.
Carrier portals have evolved significantly from as recently as 2007, when their primary function was to find brokerage freight and manage tenders. Today’s portals increasingly are used for document exchanges and management of freight payment and transactional records.
“We support the entire life cycle of shipments with tools delivered through the cloud, which has facilitated tighter integration and allows us to harness the power of scale,” Pettit said. “We do this for all modes.”
Truck transportation accounted for three-quarters of C.H. Robinson’s $290.5 million net revenue in the fourth quarter of 2010, up 16.2 percent in the quarter and 3.4 percent for the year.
Still, skepticism over tight alignment with single-provider technology has shippers looking for other entry points to the benefits. Carriers and shippers are integrating more closely through portals as they overcome their initial reluctance to sharing data online. “If you think back to late 1990s, there was incredible reluctance and concern over sharing data over the Internet,” Kass said.
Shippers are more likely to share data if it produces results, such as exceptions being flagged, routed and managed and processes improved continually.
“If you do not have strong processes, TMS becomes a receptacle of meaningless information,” Kass said.
Taking the concept further are companies such as Descartes, a Canadian provider of global supply chain management services that has developed a cloud computing model for delivering TMS.
The new model takes Web-based connectivity between trading partners to process-level collaboration through multi-enterprise business process platforms, said Frank Hamerlinck, executive vice president, research and development at Descartes. The cornerstone is the Descartes Federated Global Logistics Network, which includes more than 35,000 companies, including transportation carriers, 3PLs, non-vessel-operating common carriers, freight forwarders and motor carriers, as well as manufacturers, distributors and retailers.
The Descartes model represents an evolution in delivery of software-as-a-service. The first enterprise systems were enterprise-centric and internally focused, with little external connectivity. The next phase saw cautious integration between shippers, carriers and suppliers for limited data exchanges. That was followed by hosted software that provided operational cost reductions by using standard applications in a shared model.
New delivery models for supply chain execution feature expanded configurative and customization capabilities and improved scalability and collaborative functionality. This is made possible through a process Hamerlinck calls SODA, for Service Oriented Development of Applications. It allows companies to leverage cloud computing for global connectivity and to reuse and share data for a host of service, operational and cost improvements.
The SODA process is in keeping with Descartes’ collaborative vision of supply chain strategy and execution technology that is service-driven rather than driven by a traditional developmental approach. “It is more like composing rather than developing an application,” Hamerlinck said.
To support such complex multiparty processes — which involves more than 35,000 global trading partners and regulatory agencies — Descartes leverages Microsoft cloud-based capabilities that enable companies in the vast federated network to process billions of transactions annually and easily connect and collaborate with each other.
“By using SODA, logistics-intensive organizations have an unprecedented opportunity to bring incredible agility to integrated business processes as application changes can be quickly and easily integrated as needs arise,” Hamerlinck said.
The model has strong potential in trucking, where SaaS and online carrier portals are widely used. SaaS models allow smaller carriers the same level of integration as larger carriers, opening up business opportunities. Rate management, freight audit, delivery management, routing and scheduling and other services are available as SaaS modules, Hamerlinck said.
Transplace offers a Web-based proprietary, on-demand TMS that allows shippers and carriers to collaborate on transportation logistics strategy, planning and execution through a wide range of transportation management services.
The technology can be customized, is highly scalable and is upgraded monthly, giving carriers and shippers the benefits of added functionality with no added costs.
Transplace has a data center in Dallas that houses its hardware processing power for driving its TMS application. It isn’t a cloud-based computing model, which taps into unused computer cycles on other people’s hardware. Sanderson doesn’t see the benefits of that model for Transplace.
“Hardware is relatively inexpensive, and we like having complete control over our processing cycles,” he said.
Carrier portals are a boon to smaller carriers in the fragmented truckload industry, where access to a TMS brings them the connectivity and networking scale of their bigger peers. In the highly concentrated LTL sector, Transplace had direct EDI links with most carriers.
Sanderson believes SaaS delivery models will evolve, facilitating deeper collaboration between shippers and carriers. “It makes no sense to buy and install TMS software,” he said. “SaaS is cheaper, just as good and much faster to implement.”
Echo Logistics’ FlexTMS is delivered as SaaS via a self-service cloud-based model that gives shippers advanced functionality without the large capital investment necessary to acquire and implement their own software.
For Echo Global Logistics, the cloud label means the 3PL has its own data center, routers, servers and backup. “All the things that a data center has we make available through the Internet,” Waggoner said.
Small to midsize shippers are more likely to seek single-source solutions for transportation management, but bigger shippers usually opt for some services while keeping others in-house. Many want to retain their carriers, but want access to Echo’s technology.
“Big shippers can manage their own carriers,” Waggoner said, “but we can improve the program with our data, market knowledge, scale and buying power.”
Contact David Biederman at email@example.com.