one point in time, companies had to choose how much of an investment to make in
a transportation management
system (TMS) to
move freight. Rapid advancements in technology, though, have increased the
likelihood that in a few years, that investment will be outdated, replaced by a
more powerful TMS that gives competitors an edge.
Companies used to face a choice – invest in an expensive, customization-heavy TMS, or attempt
to continue to get by with spreadsheets, faxes, and phone calls.
In 2019, though, shippers no longer
have to make that choice – they can
leverage the expertise of a 3PL and benefit from a modern TMS that is flexible
and scales with their business, all while maintaining control over their supply
Enter the managed transportation
“The primary driver of growth in
the managed transportation services market is the strong return on investment
these solutions provide,” said Chris Cunnane, senior analyst at ARC Advisory
Group and key author of ARC’s report, Managed Transportation Services Global Market Research
of the MTS providers with the largest amount of freight under management are
seeking to leverage this opportunity to improve backhaul capabilities and
locate new, lower-cost carriers on a lane on behalf of their customers.”
MTS offerings fall under the
purview of a 3PL, but not all 3PLs offer managed transportation services.
According to ARC’s report, many shippers are turning to MTS providers so they
can focus on their core competencies. Logistics, it turns out, can be quite
“But there are shippers that are
reluctant to embrace managed transportation,” the report noted. “Among some,
there is the fear that service-level failures could put their business at risk.
Others have decided to improve transportation operations by implementing a
transportation management system [themselves].”
At the same time, the explosion of
Software-as-a-Service (SaaS) solutions has pushed TMS system innovation to new heights. “SaaS solutions are becoming increasingly popular
in the industry, and this does not just apply to smaller companies that are
targeting Tier 2 and Tier 3 customers,” Cunnane said in a separate ARC report
on SaaS solutions, Transportation Management Systems Global Market Research
2018-2023. “A robust
SaaS solution offers the same features and functionality as an on-premise
solution but can be deployed quicker and generally more cost-efficiently.
Companies need to build a SaaS offering into their near-term growth plan to
remain competitive in a crowded market.”
The MTS technology advantage
One of the biggest advantages of
working with an MTS provider, rather than going it alone, is the opportunity to
benefit from its scale and access to the latest technology. These providers are
able to leverage their scale to continually update and invest in technology,
meaning the shipper does not have to. This gives shippers the chance to
leverage the benefits of the latest tech while remaining focused on their core
That technology investment leads to
greater visibility within the supply chain and reduced costs for the shipper
and its end customers, among many ancillary benefits. Integration with
enterprise resource planning systems, warehouse management systems and customer
relationship management systems offer new levels of transparency and reporting
to further drive costs lower.
The use of the latest technology
also provides companies insight into greater efficiencies, such as collecting
data for transportation spend analysis or identifying bottlenecks in the
logistics operation. The investment needed to take advantage of these
cost-saving and efficiency improvement opportunities is not something every
company can make on a yearly basis.
There is another benefit to
contracting with a managed transportation services provider – customization. When a shipper invests in a TMS, it gets the
whole package, even if it doesn’t use all the functionality. An MTS provider
should be able to switch on only those features which are needed and configure
business rules to align with a shipper’s specific needs.
MTS providers, ultimately, offer opportunities for cost
saving and technology upgrades that have
ripple effects throughout organizations. Cash saved from investing in new
technology and the people to operate that technology may be reinvested in areas
such as developing manufacturing innovations which are critical to the
long-term success of the company.
Then there is the question of
capacity. MTS providers have access to large networks of carriers to move
freight, often at lower rates than the spot market. Increased visibility into
the movement of that freight is another byproduct of the MTS provider’s
technology investments. That increased data collection further aids the
provider and shipper in a quest to improve service and reduce costs.
The many benefits that MTS
providers can offer companies make the old choice of whether to invest in a TMS
or outsource obsolete.