New Kids in Town: 3PLs Move Into the TMS Market
If you want to manage transportation in-house, you contract with a software vendor for a transportation management system (TMS). If you want to outsource, you ask a third-party logistics (3PL) provider to handle transportation for you. Those have been the basic options for years.
Today, though, shippers enjoy another choice: some 3PLs have gone to market with TMS solutions of their own. Shippers who deploy such a TMS might also engage the 3PL for other services, including some that involve transportation. Or they might purchase the software solution à la carte.
“Working with a 3PL doesn’t have to be an all-or-nothing process,” says George Abernathy, executive vice president and chief operating officer at Transplace, a Dallas-based 3PL whose offerings include the Transplace Transportation Management System.
Transplace first developed its TMS for internal use, replacing an old mainframe system. The company then started to offer the software as a hosted solution— or Software-as-a-Service (SaaS)— as a way to maintain relationships with clients who were shifting logistics functions to in-house staff.
The next logical step was to seek a wider market. “We made the TMS available to shippers who had not used us as a 3PL before,” Abernathy says.
SaaS is an increasingly popular software delivery model, and many traditional IT companies offer that option as well. Most software vendors offer their TMS solutions in two formats: license-and-install, and SaaS, according to Transportation Management Report 2011, published by New York-based Capgemini Consulting.
From a technical perspective, it doesn’t matter whether a shipper gets a TMS from a traditional software company or from a 3PL, says Roy Ananny, senior manager, transportation practice at Atlanta-based supply chain consulting firm Chainalytics.
But getting a TMS from a 3PL offers flexibility. “Shippers who have outsourced to Transplace as a 3PL have moved to a more software-as-a-service relationship, and back again to a more outsourced relationship,” Abernathy says. Conversely, some shippers who come to Transplace for the TMS alone later decide to let the 3PL manage some or all of their transportation.
For most Transplace TMS customers, using the system is similar to using a TMS hosted by any software vendor. Not so for shippers who use Managed TMS, a SaaS solution from Eden Prairie, Minn.-based 3PL C.H. Robinson. Under C.H. Robinson’s model, the shipper and 3PL collaborate on transportation management.
C.H. Robinson launched Managed TMS in 1998 for shippers that wanted to outsource day-to-day transportation, but also wanted technology in-house to support carrier management and other strategic functions, says Jordan Kass, executive director of TMC, the C.H. Robinson division that provides Managed TMS.
“Shippers are realizing it’s difficult to be strategic when they’re also expected to run the tactical business,” Kass says.
Under the Managed TMS model, “power users” employed by C.H. Robinson, stationed at the shipper’s site or at one of the 3PL’s regional “control towers,” use the software to route shipments, tender loads, and conduct other day-to-day activities. Shippers use the system to obtain the business intelligence they need to make longer-term transportation decisions. “They develop the plan, and we execute it,” Kass says.
Managed TMS provides shippers the chance to save money by cooperating with other shippers. A single platform supports all C.H. Robinson customers— whether or not those customers also use the TMS themselves.
“They’re already integrated, and so are their carriers,” Kass says. “That presents a unique opportunity to collaborate on round-trips, LTL consolidation, or other efficient transportation moves.”
Better business intelligence
Like C.H. Robinson, Blue Grace Logistics in Riverview, Fla., has developed a TMS based on collaboration between shipper and 3PL. “Some of our customers only utilize the TMS,” says Bobby Harris, chief executive officer at Blue Grace. “They just want the technology piece, and they manage their own rates and shipping. But the majority of customers engage us to handle distribution, and our TMS is the centerpiece.”
Blue Grace provides its BlueShip system as a free service to customers who use it mainly as a visibility and business intelligence tool. For example, a purchasing manager might use the system to find out when a particular shipment is due to arrive. A chief financial officer might pull a report to learn what the company paid to ship product to a certain state in the past 60 days.
“The system allows us to gather data and compile a detailed review,” Harris says. For instance, the system could help Blue Grace and the shipper find opportunities to save money by consolidating shipments.
Whether they decide on a long-time TMS market resident or the new guy in town, the variety of choice increases the chance that shippers will find a solution to closely match their needs.
For a tour of TMS solutions available from traditional software providers, download the IL’s TMS Buyer’s Guide.