Status quo – At what cost?

Status quo – At what cost?
Insight into the LSP industry and usage of TMS solutions.

Executive Summary
   For more than two decades, logistics service providers have been at the center of a modern coming of age story – transforming from the black sheep of the logistics industry into modern and professional business partners critical to players throughout the global logistics field.
   As the LSPs have battled their way to professional maturity, their choices of information technology have grown exponentially. Nowhere is this more pronounced than in the arena of transportation management systems, or TMS.
   During the third quarter, American Shipper reached out to the LSP community with a 34-question survey that sought to explore TMS usage among LSPs. Along the way, the survey also probed the LSP industry in general.
      From the wide cross section of respondents, it is clear LSPs are uniquely individuals with no one-size-fits-all description applying. The more than 200 firms responding covered a vast breadth of description, from large to small, from asset to non-asset, from freight intermediaries to motor carriers.
   Second, we learned that over the past three years, most LSPs have seen both gross profits and revenues increase, in some cases sharply, despite the softening economy and super-spike in fuel prices.

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   Nearly 70 percent of surveyed LSPs reported that gross profits over the past three years have increased. Another nearly 15 percent reported gross profits have remained static while 19 percent reported a decline.
   Nearly three out of four firms surveyed reported that revenues had increased over the past three years, with only 7 percent reporting no change and 11 percent reporting a decline in revenues.
   When it came to the topic of TMS, nearly all the firms surveyed agreed this technology is a critical strategic investment, and that LSPs have almost universally taken the plunge on this strategic investment at least once.
   Despite respondents' strong positive view of the performance and return on investment offered by their current TMS, firms have allowed their systems to age dramatically.
   More than 30 percent of current TMS systems were reported as less than two years old, while a quarter were two to five years old, and, perhaps most shockingly, nearly 40 percent were more than five years old.
   Juxtaposed to this, the survey revealed that LSPs are relying on these aging systems to provide essential nuts-and-bolts services to their customers. The vast majority of respondents listed 'tracking and tracing,' 'shipment booking,' 'electronic booking' and 'electronic shipping documentation' as the most critical transactional usages of their current TMS – all core foundational functions of TMS technology, or as one expert put it, 'TMS 1.0.'
   Worryingly, another key finding of the survey showed few LSPs have a long-term plan in place to upgrade or replace their current TMS.
   Less than a quarter of the LSPs surveyed have budgeted funds for a TMS upgrade or replacement within the next 24 months. Another 21 percent said funds have not been budgeted, but are addressed within their firm's five-year plan. A whopping 55 percent, however, said they have no plans to replace their current TMS within the next five years.
   At the same time, LSPs are finding customers' demands growing. The reason, as one industry expert explained, is simply the high-tech age in which we live.
   When an LSP customer can order a book on Amazon, pay for it with a few clicks, and track the whole transaction from store to door via the Internet, this customer's service expectations when it comes to its business shipments increase exponentially. Non-business world expectations are rapidly becoming business world demands that are being laid squarely at the door of LSPs.
   The ultimate question is how long can this laissez-faire attitude persist towards TMS investment – something even LSPs acknowledge is a critical component of their daily business?
   It is a challenge that LSPs, even with their freshly minted modern personas, must address with greater investment, more insightful long-range planning, and a commitment to current technology that places long-term customer satisfaction over short-term savings of simply doing nothing.
   Success, whether it be in technology investment or in the maturation of their own business, will only be afforded to those that are proactive, that aggressively look beyond the curve, and recognize the importance of embracing innovation for every ounce of advantage it can possibly give them.
   Darwin was right in more spheres of thought than he realized – only the strongest and the most intelligent will survive.
   The hard question each LSP needs to take away from this survey is, 'at what cost am I willing to risk not being one of the survivors?'