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TMS or MTS? Why shippers no longer have to choose

At 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 Rapid advancements in technology, though, have increased the likelihood that in a few years, that investment will be outdated, replaced by a more powerful TMS that gives competitors an edge.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 chain.

Enter the managed transportation services (MTS) provider.

“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 2018-2023. “Several 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 complex.

“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 competencies.

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.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes Transportation Services (No. ).

Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and fleetowner.com. Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at bstraight@freightwaves.com.