TMS comes of age

TMS comes of age

The software niche known as transportation management systems, or TMS to techies, has for years operated in the shadows of the software world. The TMS market is relatively narrow, valued at about $1 billion in annual sales and served mostly by specialist, or so-called best-of-breed, software firms. A few things have happened in recent years that have changed that, and last week's announcement that one of the leading specialist TMS providers, G-Log, would be acquired by the enterprise-software company Oracle, can be seen as a kind of coming of age for the sector.

What has mainly happened is that companies are globalizing like never before, extending their supply chains to the far corners of the world. What enables these networks of suppliers, factories, distribution points and ultimately customers to function effectively and profitably is logistics - specifically the multi-modal transportation that actually gets stuff from one point to the next.

Simultaneously, these logistics activities are being carried out in an environment of ever greater uncertainty and instability. Port congestion, labor actions, trucker shortages, terrorist strikes, spiking fuel costs and natural disasters are all becoming routine. Managing this process has become a serious, core business for global companies. Last week I sat in on part of an internal worldwide logistics meeting of Emerson Electric in St. Louis. The chief operating officer of the corporation gave a lengthy speech in which a clear underlying theme was, "You guys are beyond important. You're critical."

Thus, the process of procurement, contracting with carriers, managing those contracts, achieving optimal routing, modal selection, in-transit visibility and customs compliance has taken on huge importance within companies. That's required the systems they rely on to become more sophisticated - and they have. Add on the need for supply-chain security and accounting systems worthy of Sarbanes-Oxley, and the bar is raised to an entirely new level.

This has led in recent years to a major shift in focus within logistics software toward supply-chain execution - basically, making goods move - and away from the broader strategic issues addressed by supply-chain planning systems. Companies that traditionally dominated the supply-chain planning field, such as i2 and Manugistics, now offer execution software. And enterprise-software companies such as SAP have put significant effort into enhancing their transportation offerings, while technology/consulting firms such as IBM are similarly engaged, as its acquisition of Maersk Data last year underscored. Now with globalization in full gallop, that trend is only intensifying.

It was in that environment that G-Log emerged, having been founded in 1999. It's a measure of how important this technology has become that stand-alone TMS software is increasingly at a disadvantage. "As transportation be-comes more integrated with other business processes, it's become increasingly difficult for stand-alone TMS vendors to compete," Adrian Gonzalez of ARC Advisory group noted. This trend has led to consolidation in which specialist firms have been acquired by larger ones with broader reach, with examples including SSA Global's acquisition of Arzoon in 2004 and Manhattan Associates' acquisition of Logistics.com in 2002.

"It was only a question of time be-fore ERP (enterprise software companies, like Oracle) focused their efforts on logistics," Gonzalez said. "ERP vendors first targeted supply-chain planning, and they effectively closed the gap with the best-of-breed players. Then it was CRM (customer relationship management), culminating in Oracle's recent acquisition of Siebel. Now it's logistics' turn. "Considering the constant volleying between Oracle and SAP, it wouldn't be surprising if SAP ups the ante and acquires Manhattan Associates. Any-thing is possible these days."

G-Log will be a big boost to Oracle in the area of transportation and logistics, with Oracle set to become the No. 2 provider of transportation planning and execution software ahead of SAP, according to Gonzalez. G-Log's customer base includes Big Lots, Brown Shoe, DuPont, Exel, Family Dollar Stores, Giant Eagle, Halliburton, Kuehne & Nagel, Rohm and Haas, Tesco, Toll Solutions, UPM and Volvo.

Gonzalez says G-Log's customers are typically ones that operate in multiple regions, have multiple divisions and work in multiple modes of transportation. Many of them are 3PLs. Half of them already use Oracle applications, according to Oracle. "With G-Log's proven transportation-management platform and Oracle's leading technology infrastructure, ERP and supply-chain applications, customers will now have an integrated offering for the lean enterprise," Rick Jewell, Oracle's senior vice president of applications development, said after the G-Log acquisition.

The transportation industry is likely to be hearing a lot more from Oracle.

Peter Tirschwell is vice president and editorial director of Commonwealth Business Media's Magazine Division. He can be contacted at (973) 848-7158, or at ptirschwell@joc.com.