Transportation. You know about it, right? It’s that function in your organization that people often target for budget cuts. People complain about rising transportation costs and usually see transportation as a “necessary evil.” Well, that attitude is so 2020. The transportation function is really getting its time in the spotlight — some of it good, some of it not (well played Suez Canal, well played).
Regardless of how transportation was previously viewed in your organization, the fact is that transportation has become increasingly complex. Shifting business models, geographic expansion and increasing customer demands strain resources and technology. As a result, transportation management systems (TMS) are increasingly entering the conversations and budgets of supply chain leaders. In fact, the latest Gartner forecast on TMS, worldwide, estimates that the market is expected to grow from $1.32 billion to $2.11 billion (from 2019 through 2024). That is growth of 60% over a five-year period!
Leading supply chain organizations have been one segment driving the adoption. During the past three years, Gartner has asked organizations during the Gartner Supply Chain Top 25 process to share which technologies they have been investing in and implementing. TMS has been a key investment priority for many of those organizations. Over the last two years, that investment has held steady at roughly 75% of organizations we’ve surveyed.
This growth is not just being driven by the biggest supply chain organizations. There is continued growth in the TMS market for small and midsize organizations with less complex transportation management needs. These shippers often have specific needs that de-emphasize functionality as the top priority. For these shippers, the simplicity of the solution, the user experience, and cost and speed of implementation play a larger role. Historically, smaller shippers had fewer options for TMS solutions due to the high cost and complexity of the implementation. But as established and newer TMS vendors began offering cloud-based options that were faster and less costly to implement, the market has grown substantially. In fact, Gartner estimates growth of around 25% year over year.
Large or small, organizations have continued to realize that to effectively manage their transportation operations, they need technology. And for each one of them, there may be a variety of drivers to make the investment for a TMS. During the research process for the TMS Magic Quadrant, we ask companies why they chose to invest in a TMS. As seen in the figure below, there are numerous reasons ranging from creating efficiencies to improving supplier or partner relationships.
Regardless of the reasons a solution is needed or the size of the organization that needs it, the time has never been better to invest in a TMS. The market is full of well-known vendors that have been offering solutions for years while at the same time there are an increasing number of newer vendors who have entered the market looking to shake things up.
However, the sheer number of vendors in the market makes it difficult to determine which solution is the best fit for an organization. To help you get started, it is important to consider your overall level of transportation complexity. Gartner’s model for holistic multimodal TMS describes how different TMS capabilities are distributed among the different levels based on operational complexity and sophistication in transportation operations. Typically, the higher the complexity and sophistication of the organization’s transportation operations, the greater the degree of capabilities and support required in a TMS. In addition, the importance of integration or convergence with other supply chain functions increases with higher levels of complexity to maximize the required level of efficiency.
Gartner categorizes the complexity in operations in five levels when it comes to TMS technology, from simple “A to B” operations (Level 1), to intrinsic, multileg, multimode, cross-border operations (Level 5). As the complexity of the operations increases, the robustness and complexity requirements for the different capabilities increase from level to level. Organizations looking for TMS solutions should first assess where they stand within these levels of complexity to identify those solutions that are better positioned to cover their needs.
Once the overall level of complexity is understood, start defining the capabilities and functionality that your transportation team needs. Use those two things in conjunction to start identifying the right type of TMS solutions and vendors to include on your initial discovery phase. If you are a Gartner member, leverage the tools available to you to help you navigate the process (Magic Quadrant, Critical Capabilities and the Gartner BuySmart program).
Senior Principal Analyst
Gartner Supply Chain