2020 Logistics IT Market Research Survey
What are the must-have logistics technology solutions? What challenges do software vendors and users face? Find the answers in our annual logistics IT market research report.
More to the Story:
Efficient supply chain operations are more crucial than ever. As the world combats COVID-19, hospitals, governments, and suppliers work overtime to get respirators, masks, test kits, and other medical products to facilities that need them, as fast as they can. Whether they staff up to meet this unprecedented challenge, or they get the job done with an existing workforce, companies rely on IT to manage their supply chains as productively as possible. Those that use technology to support demand-driven planning and execution have a leg up in today’s volatile environment.
To help logistics professionals plan for the future, Inbound Logistics conducts an annual survey of logistics technology providers. Assembling data on current logistics IT trends, we paint a picture of the capabilities available today and the technology investments shippers are making to gain a competitive edge.
Along with this report, it's helpful to look at the annual Inbound Logistics Top 100 Logistics IT Providers list, our guide to the leading logistics IT solutions providers in the market. Next time you're ready to add to your company's logistics IT tools, you'll find our guide an invaluable resource.
What industries do your solutions serve?
Transportation service providers such as carriers, third-party logistics providers, and freight forwarders have traditionally composed a big market for logistics IT. That’s true in 2020, as well: 81% of respondents tell us they sell to the transportation service industry. But that number has fallen since 2019, when 93% of respondents counted transportation service providers among their customers. This year, three other industries play just as big a role in the market as transportation services: manufacturing (81%), wholesale (81%), and retail (80%).
VERTICAL SPECIALIZATION: What verticals do your solutions serve?
Within industries such as manufacturing, transportation, and wholesale, logistics IT vendors serve a wide range of vertical categories. The largest among them—those that provide a market for more than 70% of respondents—are: agriculture (85%), consumer packaged goods (81%), automotive (78%), food and beverage (74%), and electronics (71%).
PLATFORM: How do you deliver your solutions?
If anyone had doubts about the ascendance of cloud computing in logistics IT, this year's survey clears them away once and for all. In 2019, 55% of respondents told us their solutions were cloud-based, Software as a Service (SaaS), or hosted. But in 2020, 100% of respondents report they offer such solutions. Forty-two percent give customers a choice: they may implement solutions in the cloud or on a customer's own premises—the same as in 2019. The number of vendors who offer on-premise solutions only—already a mere 1% in 2019—dwindled to zero this year.
SUPPLY CHAIN SOLUTIONS OFFERED
Beyond solutions for logistics functions, many respondents also provide technology to address broader supply chain concerns. In 2019, 47% of survey takers said they offered solutions for managing vendors or suppliers, and 41% offered supply chain control tower solutions. Those two applications remain at the top of the list in 2020, becoming even more prevalent. This year, 53% of respondents offer supplier/vendor management solutions, and 51% provide control tower capabilities.
One especially striking increase comes in the area of modeling/forecasting/predictive analytics. In 2019, 23% of vendors offered solutions in that category. This year, the number jumped to 47%. Several other areas have seen significant gains as well: demand management (31% in 2020 vs. 25% in 2019), global trade management (23% in 2020 vs. 17% in 2019), and product lifecycle management (19% in 2020 vs. 12% in 2019).
COST BASIS: How do users pay for technology solutions?
Just as some vendors let customers choose whether to implement a solution in the cloud or on premise, some offer a choice about how to pay for their solutions. Among our respondents this year, 71% provide solutions by subscription, slightly down from 75% in 2019. Sixty-one percent will sell a system at a flat rate, an increase from the 48% who named that option last year. In 2020, 45% of vendors offer a per-seat or per-user payment option, and 8% make at least some of their solutions available to users at no cost.
Customer Base: During your last measurement period did your customer base grow? By how much?
Customers' concerns about transportation and logistics challenges are driving healthy sales for logistics IT vendors. Nearly all respondents—95%—say they have recently seen their customer bases expand (only 5% report zero growth). For 37% of vendors, that growth topped 20%; for 11% of vendors it was by more than 15%; for 19% of vendors it exceeded 10%; and for 28% of vendors it was by more than 5%.
Vendors find new customers in a wide variety of quarters. Asked where they have seen growing demand for logistics technology, respondents offer answers such as: "USA, Latin America, Asia"; "cross-border visibility in Mexico"; "managed services, European markets, retail, food, 3PLs/LSPs, manufacturing"; "zero-touch automation and visibility"; and "U.S. cannabis market." Whatever drives those customers to seek technology solutions, they have certainly made a positive impact on the balance sheets of logistics IT providers. Among our respondents, almost half report robust sales growth of more than 20%. Only 5% report zero sales growth or decline. Eighty-eight percent tell us they'd seen profits grow in the most recent measurement period. For 31%, profits went up by more than 20%.
LOGISTICS SOLUTIONS OFFERED
Given customers’ concerns about cost reduction, visibility, and transport optimization, the list of logistics solutions our respondents are most likely to offer should come as no surprise. As in 2019, the top three applications in 2020 are optimization (cited by 68% of vendors), transportation management systems (TMS, cited by 57%), routing and scheduling (54%), and load planning (51%). One category reported by half of respondents in 2019—rate and bid solutions—seems to be slightly less prevalent in 2020; only 43% of this year’s respondents say they offer those products.
ADDITIONAL SOLUTIONS OFFERED
The survey also asked vendors about additional solutions they offer, beyond logistics and supply chain capabilities. The most popular among those is electronic data interchange (EDI), available from 59% of respondents. Other popular offerings include order management (cited by 54%) and process improvement (53%). In addition, some cutting-edge technologies are starting to gain a foothold in the market. Forty-one percent of respondents say they offer technology for big data management, and 37% say their solutions incorporate artificial intelligence (AI) or machine learning.
Which transportation/logistics challenges are most critical to your customers?
When shippers implement logistics IT, they tend to have two big goals in mind: reducing costs and gaining visibility. This year, 85% of respondents named cost reduction one of the most critical transportation and logistics challenges for their customers—the same proportion as in 2019. Seventy-six percent of this year's respondents cited visibility, up slightly from 73% last year.
Other challenges that more than half of respondents called important are transport optimization (60%), data management (59%), capacity (57%), and customer service or customer experience (57%).
Surprisingly, only 37% of logistics IT vendors said their customers consider e-commerce and omnichannel enablement a critical challenge. This comes in spite of the fact that 80% of respondents serve retail customers and 69% serve customers engaged in e-commerce.