Shippers better understand the value of automating shipment execution.
There’s a straightforward equation when it comes to how the bulk of global shippers think of transportation management: TMS = freight forwarders.
Simply put, freight forwarders generally act as the transportation management systems for most companies moving freight to or from far-flung origins. There’s a perfectly rational reason for this—planning and executing shipments involving foreign suppliers, foreign transportation providers and foreign ports is a complex and often relationship-based process. It takes local knowledge that can’t necessarily be systematized.
The forwarding industry is based on making that process easier.
But in the background, tools to help shippers manage global shipments themselves (or empower their forwarders to do it on their behalf) have been steadily evolving. And more than that, shipper attitudes toward these tools—essentially truly global TMS—have also changed.
The mixture of experience with the power of domestic transportation management systems, the maturity of more globally-oriented TMS, and the rise of cloud-deployed, browser-based tools has created a shipper community more open to the idea of using technology to underlie their global supply chains.
That’s not to say adoption of so-called global TMS has risen dramatically in recent years. American Shipper has researched global transportation management patterns extensively the past seven years, and very little has changed in terms of two dynamics: the number of companies using a vendor-supplied or home-grown global TMS and the number of companies that rely on their 3PLs to provide such a system.
But the change is happening under the surface, where a handful or so of TMS vendors have been able to sell both shippers and forwarders on the idea that there can be a third party involved in the execution of their global shipments. That involving software doesn’t mean excluding the logistics provider.
This is generally happening in one of two ways:
- The shipper uses a global TMS internally for certain functions, and leaves its 3PLs to handle other functions. For instance, a shipper might use a TMS for booking ocean capacity and lane optimization, and leave the arrangement of foreign domestic transportation (i.e. drayage at the origin port) to its 3PL.
- The shipper uses a global TMS to coordinate the activities of its 3PLs, giving it a neutral platform to homogenize data around things like in-transit visibility and carrier on-time performance. In this scenario, the blocking and tackling of transportation management (tendering, planning, and execution) may still be undertaken by the 3PLs, but the shipper has oversight into how those logistics and transportation providers are serving its supply chain.
There are so many dimensions to a global TMS decision that it’s difficult to categorize them all, but in general, they can be grouped into a few key buckets:
- Connectivity to outside partners (i.e. 3PLs, carriers, and suppliers).
- Connectivity to internal departments and systems.
- Overlap into trade compliance or other upstream activities.
- Integration of domestic and international transportation management.
- Robustness of optimization engine.
- Ease of use.
- Whether the system will be managed internally, by a 3PL, or by the technology vendor.
- Deployment model (cloud vs. on-premise).
A shipper considering a foray into global TMS software needs to know where they stand on all those issues, because different businesses will have different drivers. And that includes possibly the most important one—is international transportation even important enough within an organization to merit technology investment?
“You have to consider how important your freight is, by value, by transit time, by how hard is it to replace a lost sale, and by what else relies on it,” said Jim Blaeser, vice president with the consultant AlixPartners, and founder of American Shipper’s annual Global Transportation Management Benchmark Study series. “International TMS is planning, booking, and managing the transaction between procurement and payment, and shippers largely rely on forwarders to do that.”
More than 50 percent of shippers surveyed in an American Shipper report last year, Falling Short: Where TMS Fails to Meet Global Shippers’ Expectations, said they outsourced some aspect of their global transportation management activity to 3PLs. And of those shippers, nearly 90 percent are relying on the 3PL’s TM technology.
As the report noted, “that outsourcing of the transportation management function means a shipper can never really be at the center of its own network.”
“It’s complex dealing with parties in other parts of the world, so a lot of companies say, ‘Let’s hand this off to the forwarder and let them do that,’” said Walt Heil, vice president of multimodal transportation solutions with the transportation management and global trade management software provider Kewill. “There’s always been a lot of value in that mainly because there were no alternatives. It’s still far more common to have companies throwing their transportation over the fence to a third party.”
So, are things really changing?
“What’s driving global TMS is people have seen the value of directing all their business with all carriers through one portal with track-and-trace visibility,” said Tom Madzy, chief information officer with SEKO Logistics. “What was holding back global TMS usage was forwarders and their ability to integrate with global TMS products.”
Lisa Kerr, director of commercial intelligence at the cloud-based TMS provider LeanLogistics, said sales cycles are getting shorter because TMS is a better-understood concept.
“There’s been enough coverage around business cases and success stories, that shippers have such access to pre-vetting providers,” she said. “The evaluation cycles are more around cultural fit and ease of use.”
What’s driving shippers to use a single source for global TMS is often to avoid the perennial vulnerability that can exist when a shipper becomes overly reliant on its 3PL’s technology.
“Shippers typically rely on forwarders for origin management,” said Nathan Pieri, chief product officer at the global trade management software provider Amber Road. “The question is, how do you relate this so it cuts across three or four different systems? Forwarders either use our visibility system and integrate, or they can use our software. A lot of our customers want their forwarders to use our system to avoid switching costs.”
There are other factors at play, of course, like overall platform standardization.
“More companies are going to a single instance of [enterprise resource planning] software,” Heil said. “In parallel with that, it makes all the sense in the world to have one standard for TMS. It doesn’t have to be SAP, but it could be one connection to SAP, rather than having different platforms for every part of the world.”
More than anything, “change” could be the operative word. The global shipping industry has always been seen as one that is slow to change, but technology is becoming so pervasive that it’s harder to ignore than before.
“TMS is a pretty mature market in general,” said Greg Kefer, vice president of corporate marketing for the cloud-based supply chain software provider GT Nexus, a name that has become synonymous with the development of the global TMS market. “Supply chains have become so global, they have to have that international dimension to have a sense of control. We have lots of customers that still use forwarders and 3PLs, or ones that have five 3PLs. To me it’s still a hodgepodge—they have the tools and systems, they have more they can do, but at the same time, it’s hard to remove a vital organ, especially if you’re a big company. It’s about how willing are you to adopt technology and then get it up and working. It’s a change management challenge.”
Pragmatically, it’s also a challenge of internal importance. The international shipping market is a fraction of the size of the North American domestic market, Blaeser pointed out, and with that math comes the reality that technology investment isn’t always a high priority, particularly when there’s an established forwarder industry to essentially ease whatever burden a shipper might have.
So with all that said, let’s examine more closely why we may be nearing the age of global TMS.
Connectivity To Partners. GT Nexus has been at the forefront of selling the global shipping market on a simple concept: a supply chain is only as good as the information that is shared between partners is accurate and real-time. And most of the multi-tenant, cloud-based global TMS offerings tell a similar story these days, something that’s helped ingrain in shippers the idea that connectivity to companies outside the organization (be they suppliers, logistics companies, carriers, or banks) can be quick and pretty painless.
“How you interact outside your four walls is vital,” Kefer said. “Eighty percent of the data you need resides with your partners—and a lot of that is shipment data. That’s the dark that you need to shine the light on. The market is now beginning to get it. If you don’t have a good network communication system. If you’ve put installed systems all over the place that don’t talk to each other, whether it’s a TMS or a 3PL in Hong Kong. A big company may have 100 ERPs, and a huge number of TMSs. There are no economies of scale because they’re handling everything regionally.”
That’s a diminished economy of scale from a freight buying perspective, but also from a management perspective. Past American Shipper research has found that fewer than 50 percent of shippers handle their global transportation management in a centralized manner.
“If I have a single platform, I can get control of the data,” Heil said. “A consulting firm will say we can gather the data from the TMS in Europe and the domestic TMS here, but cobbling that stuff together is hard and expensive.
“This is a system that allows you to, in a [software-as-a-service] environment, establish connected relationships with trading partners. Global TMS before SaaS was viable was tough, and never really came to fruition. Even if you could wrap your head around planning, then to connect to all your domestic trading partners was a massive B2B project,” he said.
Kerr said cloud-deployed TMS has become more palatable as security concerns have dwindled.
“Shippers are seeing the advantage of participating in large, open, and neutral logistics and transportation networks, where you have built-in connections to suppliers and service partners,” she said. “In the past, when customers adopted a TMS, they used it as an opportunity to change their business processes. Today, customers, especially large ones, are changing their business processes and wanting a solution to support it. And because we have a large contingent of those types of shippers, that’s driving innovation among our network.
“The business process is driving the technology, not the other way around.”
Disparate Systems. More than half of shippers surveyed in last year’s American Shipper Global Transportation Management Benchmark Study said one of the biggest challenges with global TMS is integrating an international transportation platform with other internal systems.
Indeed, global TMS or visibility projects often get bogged down at the stage where companies consider connecting previously disparate systems and departments as too resource-intensive.
Madzy of SEKO said global TMS customers generally have a couple key areas they look to from a vendor—the ability to integrate quickly with their carriers and the speed of integration with their internal ERPs.
“Large shippers, by nature of being global and having multiple North America locations, need to get better horizontal connection before they even connect to external partners,” she said. “They need to have that backbone. The cloud enables you to make those connections so easily, so it’s not a mandate to choose a single provider.
“We’re seeing a number of TMS customers replacing their current TMS solutions. Thirty percent of our customers 18 months ago had previous TMSs, and now it’s up to 50 percent that are in a replacement cycle. Those are enterprise, $2 billion shippers. In many case, they are moving from on-premise to cloud deployment. Systems will break down silos as much as organizations are ready for that to happen,” she explained.
Steve Banker, vice president of supply chain management for the consultant ARC Advisory Group, who studies the market intently from a user and vendor perspective, noted that the two biggest providers of TMS by revenue—SAP and Oracle—have had to adapt to a world where SaaS providers have made inroads and changed the way shippers think about the category.
“I’ve always been a fan of the public, [business-to-business] network type of approach,” he said. “If I’m doing global TMS without that kind of network, I have to set up [electronic data interchange] with carriers I want to work with. It’s not clean and there are different dialects. The network approach is better from a connectivity and visibility point of view.
“I think that SAP and Oracle understand this. Their thinking is that they need to build a network of networks. To pull data out of all these networks, not just for transportation, but for the [sales and operations planning] process, for short-term response to disturbances. This is going to be a journey. They get the value of B2B networks. There are B2B networks out there that they aren’t going to be able to displace, and now they’re going to have to work with them. They have to do semantic mapping with their apps and the apps of these networks. It’s not going to be easy and quick. But both big enterprise players realize they have to go down that road,” Banker said.
Kefer said internal connectivity can even extend to companies that might ostensibly be viewed as competitors.
“We’ve been integrating to [Oracle Transportation Management] for years,” he said. “You need international ETAs to trigger the planning cycles [on the domestic side]. The way they did it before is to call the carriers. That’s where it’s going with TMS. Stitch this together with one view so that process design decisions are made holistically. It’s more possible now than it’s ever been.”
Trade Compliance Overlap. One of the recurring points global TMS skeptics have made through the years is that international shipping is so much more complicated than domestic shipping. And a large part of that complexity gap comes from the customs and security compliance functions that operate in tandem with the movement of the physical goods.
Put more simply, no matter how effective your global TMS is, if a container gets held up by a compliance issue, the cargo isn’t going anywhere.
So there’s also a global TMS play where shippers can consider directly linking their shipment execution software with trade compliance software. That can be done either through a software company that offers both sets of solutions (like Amber Road, Kewill, Oracle and SAP), or through a TMS provider that partners with a global trade management software provider (SEKO and LeanLogistics, for instance, both integrate Amber Road’s compliance tools into their TMS offerings).
3PLs that have technology and act as customs brokers can achieve the same effect, of course. But the idea that a TMS can automate planning, tendering, visibility on one side, and classification, free trade agreements, and restricted party screening on the other, that’s a powerful notion for shippers wanting more control over their supply chains.
“A lot of TMSs don’t have factory management solutions,” Amber Road’s Pieri said. “They’re not good at creating [advanced shipping notices]. When you can’t do those things, you can’t link orders and shipments, and that makes it difficult for logistics people to figure out what to expedite. There’s potentially a gap there. Most TMS providers won’t have those assets to draw upon. Most haven’t figured out ocean like we have. Anyone can handle an all-in rate. But we handle the most complex ocean rates.”
It’s in these ancillary areas at origin—supplier management, sourcing optimization, and trade finance—where companies like Amber Road are trying to extend the notion of what supply chain software can be.
A basic global TMS can help book capacity on a vessel, manage that shipment, and track it from factory to DC, but what if it can be integrated into the order management, quality control and trade compliance aspects tied to that shipment?
“We’re trying to get as upstream as possible—some things are logistics-related, some are compliance-related and duty-related. You can find better opportunities to consolidate at origin. When you’re a hammer, everything looks like a nail—I’m ready to ship, let’s go. But if you look around and see there are other shipments that could be consolidated, to save cost on transportation. There’s better organization from the source up,” he said.
Pieri noted the three building blocks of Amber Road’s global TMS solution are collaboration, visibility, and rate management and planning.
“We approach it a little differently,” he said. “We’re working with companies that have suppliers, forwarders, and want to get closer with factories and production. These are not just logistics concerns. Our solutions help people build supplier networks. They give visibility of production to pre-shipment planning.”
This end-to-end view of what a global TMS could be is starting to take shape among the upper echelon of technology-oriented shippers.
“Global TMS gives you end-to-end data on your transactions, from your touchpoints with customers and suppliers, and your internal customers [DCs and third party DCs and 3PLs] having access around that data and driving analytics to understand real total landed costs,” Heil said. “That never really was a reality, because there were some big holes.”
Banker noted that one of the advantages the enterprise software providers have is they can tackle transportation and trade compliance functions in an integrated manner.
“Oracle’s TMS and [global trade management solution] sit on the same database, so it’s not an integration,” he said. “Part of going global is that this trade compliance is just not easy stuff. Bringing TMS and GTM together is another thing that’s starting to change the game around global shipping.”
Integrating Domestic TMS. American Shipper’s 2014 Global Transportation Management Benchmark Study found that barely a third of shippers were using a single system to manage domestic and international transportation. A further 30 percent were using different systems to manage the different components of their transportation networks.
Increasingly, however, shippers are seeking to combine their transportation on a common platform.
“Traditionally, you’d have a global multinational that maybe had a North American transportation group in Pennsylvania, an international group based out of the U.K. and a European transportation group based in the Netherlands,” Kewill’s Heil said. “This is a common type of environment. They talk to each other, and they do things collectively, but at the end of the day they’re running things in silos. The systems don’t provide access to each other, so you’re creating silos in your own supply chain.
“There are two ways to break that down—use a global TMS, or add a supply chain visibility layer over how you’re doing it today. That sounds great, but that’s really hard to do,” he added. “With global TMS, you have control. The visibility layer sits over your supply chain, and gives you access to data, but it doesn’t give you control. It’s a stopgap. Global TMS is supply chain visibility, if you do it right. All your carriers and LSPs connecting to one platform, you’ve done it. There’s supply chain visibility.”
LeanLogistics in late February formally launched its LeanGlobal model, an
extension of its flagship domestic TMS that was years in the making. Kerr said
a big driver for the development of
the global module was customers wanting to take their domestic TMS experience
and bring that to global tendering and execution.
“Enterprise shippers still don’t have everything centralized under one platform,” she said. “There’s a weird dichotomy. The driver with larger accounts is that they see there are platforms to move all their transportation under one platform, to really have that control tower capability built in.”
Madzy at SEKO has noticed a similar pattern.
“That’s changed tremendously over the past five years,” he said. “All the international people are asking us for the benefits that the domestic people have. Consolidation, spot quoting. They want all the benefits, but they have to understand it’s more sophisticated over here.”
“The biggest folks in the TMS market have gone toward tying domestic and international,” Banker said. “Initially they got a contract to manage [less-than-truckload] and [truckload] in the U.S. Over time, they get global modes, and start running it out of a regional control tower.”
Blaeser, meanwhile, said there’s an alternative way to think about the blurring of the lines between domestic and international transportation. Domestic transportation practitioners are more apt these days to outsource components of their network to 3PLs or managed service providers, which bundle the software and management of that software into a single package.
The idea is to act as the customer’s transportation department, and it’s more common on the domestic side than the international side.
“There are companies that offer [software-as-a-service] TMS and managed TMS,” Banker said. “[C.H. Robinson’s TMS division] TMC, Transplace, LeanLogistics, they have truly built command centers and are using their own software to manage global flows. They eat their own cooking—that’s a proof point that there are global solutions.”
Optimization Robustness. In talking with software companies over the years, there are a couple of kernels that stand out. For one, customers always ask for more features than they’ll ever use. This is especially true in visibility, where a company (in the vendor evaluation phase) might ask for a dozen milestones to be tracked when only three are critical to their supply chain.
On the flipside, many software companies market the power of their optimization engines, knowing full well that most customers only use a fraction of that engine’s capabilities. It’s like the guy who buys a Ferrari—he knows it can go 200 mph, but there’s no way he’ll ever get to that speed.
To some degree, global transportation management falls into this bucket. The software companies that have made hay on the domestic side by winning over customers with the prowess of their engines find that international shippers don’t really have the same optimization needs.
Yes, shippers with lane complexity and maneuverability of sourcing could benefit from a robust engine, but in general, an ocean shipper isn’t going to benefit from that engine the same way a domestic shipper would in trying to determine whether a shipment should go full truckload or less-than-truckload, and the thousand different ways that shipment could move over the road.
“Historically, shipping globally, you’re shipping full-containerload, so the consolidation opportunity goes away,” Banker said. “So the definition of TMS was a little different. The providers of global TMS were more about execution. Sending the tender, accepting the tender, getting visibility. If your definition of TMS was optimization, you weren’t even getting that.
“Oracle, for instance, part of their differentiator is optimization. But it’s a different kind of optimization. The optimization is not that I need to book out of the Port of New York into Hamburg. The optimization becomes the whole chain. Do I truck it to a railhead in Louisville or Cincinnati? Do I take it to the Port of New York or Norfolk? Do I go into Hamburg? When you look at it end-to-end rather than port-to-port, you find certain routings can save you money,” he said.
Heil said companies like Oracle and JDA are more known for their optimization capability than the SaaS providers, but the Saas providers reach markets that would have never even considered to invest in a global TMS in the first place.
“We tend to make this stuff sound more complex than it needs to be,” he said. “In the weeds, it can be complex for some companies, but it’s not necessarily so complex for a lot of shippers.”
Pieri said that optimization is an important component for a global TMS—sometimes there is a need to optimize between ocean and air—but the optimization isn’t nearly as complicated as on the domestic side.
“Air is 20 times more than ocean,” he said. “It doesn’t take a statistician to figure out which one is better for you if time is not a concern. It’s not even hard to understand whether it’s better to pay 20 times more to get the goods there in three days versus 13 days.”
Ease Of Use. Like any software market, there’s a spectrum of sophistication when it comes to global TMS. There are providers that specialize in robust optimization, with tools that target analytics departments that prefer spreadsheet-like fields of data to analyze.
And then there are the providers who focus on clean interfaces that mimic consumer apps. Kerr, for instance, said a focus of LeanLogistics across its product development is ease of use.
Madzy said domestic TMS is based on sophisticated tariff management systems, with carriers’ tariffs contained in the system. So SEKO’s TMS, which it took global three years ago, is based solely around web services, an alternative to EDI that lets systems update in real-time.
“On the international side, it’s tougher to manage and understand how to input those tariffs,” he said. “That’s the beauty of where web services have created value. EDI is too slow. It’s really taken away the burden of having to manage tariffs.”
Certainly, cloud-deployed, pay-as-you-go, browser-based applications have realigned companies’ expectations around what a global TMS is. A system can be as functional and easy-to-use as it needs to be, or conversely, as feature-rich as a capable and experienced shipper demands.
It can be tied to domestic transportation, or connected to upstream functions that were previously far removed from a shipper’s control. It can be used to provide a platform to measure 3PL and carrier performance, or it can be a network into which those partners and others feed data to allow a shipper to manage its transportation tendering, planning and execution.
The different dimensions of global TMS provide an opportunity for nearly every shipper to automate functions that have previously been handled manually or turned over to a third party. Investing in global TMS doesn’t mean getting rid of forwarders—it means changing the nature of those relationships.
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