Interest in on-demand transportation management systems (TMS) continues to grow, as do deployments of the Web-based systems. The benefits over traditional TMS solutions include rapid deployment, lower upfront costs, quick time to value and supply-chain network connectivity.
As companies search for solutions that increase efficiencies in the face of higher operational expenses-such as surging fuel prices-on-demand, or software as a service (SaaS), TMS appears to be meeting great expectations.
Essentially, the on-demand TMS model allows companies to access TMS functionality via the Internet. The system resides at a vendor's location and generally consists of single-instance, multi-tenant software; it is a shared solution allowing multiple companies to access the same application. Firewalls protect the respective databases of each company within the network.
Vendors report little change management is necessary once a solution is deployed. Savings in overall transportation spend can range from five percent to 20 percent, depending on the efficiency of transportation management before an on-demand system is deployed. Higher savings are common for companies manually managing transportation activities before deployment.
Instead of paying a big licensing or purchase fee, companies pay a rental fee for SaaS or on-demand TMS, says Steve Banker, director of supply chain management for ARC Advisory Group in Dedham, MA. Generally, companies can choose from the single-instance, multi-tenant software placed on a vendor-controlled server or they can have the vendor software reside on their own server, behind the company's firewall.
Analysts report that companies with a transportation spend of under $100 million are well suited for on-demand TMS, which can deliver a higher ROI than traditional, on-site and in-house solutions.
"Oftentimes logistics is at the bottom of the priority list when it comes to capital investments," notes Adrian Gonzalez, director, Logistics Executive Council at ARC Advisory Group. "So even though the cost of traditional TMS installations has decreased over the years, on-demand TMS is much easier for logistics executives to get approved because the purchase is an operating expense, rather than a capital investment as a traditional TMS would be."
Companies are discovering a more significant and longer-term value proposition with this model because of the logistics network that is created, connecting customers with multiple shippers, carriers, trucking companies, 3PLs and suppliers, adds Gonzalez.
Companies can exchange information with all their trading partners via one connection. "In the past, a manufacturer might have been working with 100 carriers, 100 suppliers and 100 customers and it would have had to connect one-on-one with each of those parties, making 300-plus separate connections," explains Gonzalez.
Matthew Menner, senior vice president of sales and alliances for Frisco, TX-based Transplace Inc., says a good portion of the decision to deploy on-demand relies on the comfort level of a company's IT department. "It's also a matter of economics and considering a shipper's volume, what the economics look like in terms of an on-demand solution versus a traditional solution on their hardware and how they will treat the associated expenses."
Although on-demand TMS is growing faster than traditional and licensed TMS, this doesn't mean the in-house licensed products are going the way of the dinosaur, notes Patrick Connaughton, senior analyst, supply chain, at Cambridge, MA-based Forrester Research Inc.
"One shortcoming of the SaaS hosted solution is evident when it comes to global, multi-modal optimization. They just can't compete with the licensed installed products," says Connaughton. "This is why there will always be a place for licensed solutions for optimizing millions of shipments across multiple modes and across multiple geographies."