Connaughton notes a recent Forrester report naming nine top vendors of TMS. Seven offer licensed products, while the remaining two-LeanLogistics and Sterling Commerce-offer on-demand TMS services. The report, The Forrester Wave: Transportation Management Solutions, written by Connaughton, notes the vendors "share common characteristics in areas like carrier management, visibility and transportation procurement. However, there are significant differences among the solutions-most notably in product architecture, implementation services, fleet management, international capabilities and business intelligence."
The Forrester report included these two on-demand or SaaS vendors in its evaluation because some clients Forrester interviewed were looking for an alternative to licensed TMS that would allow them to move from paper-based systems.
"They wanted a TMS but were gun-shy because of the high-profile expensive projects that have gotten derailed for one reason or another with the licensed products," explains Connaughton. "So these solutions offer a great incremental step for them. They don't have to spend a lot on upfront licensing fees and then millions of dollars on implementation, only to wait a few years before they can really get going with the system."
Hidden Value Proposition
Although the two main attractions remain quick deployment and upfront lower costs, once customers are up and running they begin to recognize other areas generating value because of the power of the network, adds ARC's Gonzalez. "Certainly the analyst community has been writing about the potential of what I call the hidden value of on demand."
That hidden value is the information-rich environments in which these systems operate. Accessibility to the right data not only enhances your ability to be more efficient, but it also means you can monitor the efficiencies of your supply chain partners through benchmarking. For instance, the real story-the hidden story-in the March 2008 CHEP acquisition of LeanLogistics is the extraordinary value created in combining the respective networks of each company's data and information, notes Gonzalez.
The data collected within the network of the origins and destinations of thousands of shipments every day delivers network visibility resulting in network efficiencies. For example, say LeanLogistics has two clients, one with a shipment going from Boston to Chicago. The other client has a shipment going from Chicago to Boston. Neither of these companies talks with the other because they are competitors. From the standpoint of LeanLogistics, who sits in the middle and sees everyone's data, it makes network sense to use the same trucking company for both moves so the trucking company does not have an empty backhaul.
"It's this kind of situation that can be created from a network level because a provider like LeanLogistics sits in the middle and sees what is happening across thousands of shippers and thousands of moves every day," explains Gonzalez, adding that LeanLogistics manages upwards of $4 billion of freight annually across its shipper network.
"If each of these companies had relied on their respective TMS programs, there would be no network visibility overall. The combined information creates a more efficient and collaborative business process, in effect supercharging the amount of information available," he says. "This opens the door to resolve some issues that have been long-standing problems in the transportation industry such as how to eliminate empty backhauls and improve asset utilization."
The two shippers are sharing an asset at a lower cost than they would have to pay if each were to send out its own truck.
Here are examples of services vendors are offering their customers.
LeanLogistics: Reducing Empty Miles
LeanLogistics oversees about 20 million shipments flowing through its system annually. It knows where the freight is moving, at what price it is moving, if it is moving on time, which carriers are serving which lanes and when freight is moving according to plan, says Pete Stiles, vice president of marketing and strategy for the Holland, MI-based company with about 20,000 users. "It's fundamentally priced on a per-shipment model, with discounts for volume. We can offer fixed pricing for companies with fixed volumes."
Stiles notes that for years the key issue in transportation has been talk around technology-enabled reduction of empty miles. But nobody has been able to pull this off primarily because there hasn't been a large enough base of information on existing movements, he explains.