The Unviable Proposition of a “TMS for Everyone”
Welcome back to the eighth edition of The LogTech Letter, a weekly look at a particular aspect of the impact technology is having on the world of global and domestic logistics. Last week, I touched on how hard it can be to properly categorize logistics tech startups, especially in relation to incumbents they may be competing with. Today, I’m going to dive into whether TMSs can truly be the meeting point in domestic logistics that they are sometimes purported to be.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.
This week I had an interesting conversation with a TMS provider that caters to the small truckload carrier market. The provider told me he and his team have designs on addressing other segments, specifically brokers and shippers.
My feedback: I don’t think multi-party TMSs work, but I’m happy to be proven wrong. I say this because a TMS, despite any marketing you may see to the contrary, is not seen by the freight market as an inter-company collaboration system. It is seen as a tool to reduce freight spend, more efficiently plan freight networks, optimize among modes, and minimize hours spent tendering loads.
As Bart De Myunck of Gartner put it in a research note on TMS that came out this week: “When asked what the end-user companies were most looking for when evaluating TMS technology, respondents placed a high premium on internal/operational efficiencies, visibility and cost management. These have been the top three factors consistently for the past three years.”
It is the very essence of a system designed to be optimized for the party using it.
In a theoretical sense, yes, a TMS that is used by a shipper, broker, and carrier would heighten the relationship between the three to some sort of freight nirvana. But there are two problems with this happy picture. First, it’s an inescapable reality that a TMS designed for a shipper will have different strengths and functionalities than one designed for a broker or carrier (the same goes for a carrier-focused TMS and all the other various permutations).
Second, even if there were a system that served each of those parties equally well, the other inescapable reality is that there are some 1,000-odd TMSs in the market. The chances of one shipper using a platform that is also used by all its key brokers and all its primary carriers is infinitesimal. So the cater-to-all-sides-of-the-transaction TMS approach falls down quickly in that scenario.
The fact that there are different TMSs for different folks isn’t really the problem in 2020 that it once was though. System connectivity and synchronicity is in an entirely different place now than it was in the past. A multi-tenant shipper TMS can build a native integration to a multi-tenant carrier TMS, solving the need for a single TMS provider to invest in a sales function broad enough to capture parties in all three segments.
I can hear the criticisms of my argument now. Some TMS providers already have customers in two or three of these segments. Others strong in one segment have acquired companies strong in another segment. This is happening, right?
Maybe. But I remain unconvinced that an enterprise shipper will be more convinced to invest in a TMS because it is the same system its service providers, asset-based or not, also use. The shipper will be convinced because the system serves its needs. In fact, there are likely shippers who would be worried about being in such an open, collaborative environment, despite the idea of collaboration between commercial partners being so publicly sacrosanct.
Put it this way: if I’m buying a house, would I use the same real estate agent as the person selling the house? I certainly could. Maybe that joint relationship gives me an edge. But I also have to trust that the real estate agent is optimizing value for both relationships it has. That the agent is simultaneously as adept at negotiating a good price for the seller as for the buyer.
Obviously, a system is better positioned than a human to be that neutral arbiter, but the problem of optimized functionality for both (or all three) parties remains. It’s not enough to be a common data platform.
In any case, I’m waiting to be proved wrong, and happy to say I was if it ever truly happens.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
I interviewed Ruthie Amaru, CEO of Freightos.com on the role marketplaces play in global logistics today: https://www.joc.com/uncharted/uncharted-episode-17
I also wrote about it: https://www.joc.com/technology/freight-procurement-systems/joc-uncharted-small-shippers-flocking-freight-marketplaces-during-covid-19_20200917.html
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And here are some recent discussions, reports, and analysis I found interesting:
https://simonowens.substack.com/p/is-there-a-large-market-for-super
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.
Great post, man. Have to agree with you. Too many mid-tier players have invested too much into their own systems already and now are stuck.