Need for visibility drives growth in TMS usage

The transportation management systems (TMS) market grew to about $910 million in 2004 and is forecasted to exceed $950 million this year, according to analyst firm ARC Advisory Group. The need for better visibility and control of financial performance is one of the factors contributing to growth.

According to Adrian Gonzalez, director of ARC’s Logistics Executive Council, “Chief financial officers (CFOs) are becoming better educated about the role and impact of logistics on financial performance, driven in part by the need to comply with the Sarbanes-Oxley Act. Many companies, however, do not have a clear and accurate understanding of their transportation costs. They’re often bundled together with other costs and reported at an aggregated level, thus preventing companies from allocating transportation costs to specific products, customers, or business units.”

ARC is forecasting the market to reach $1.2 billion by 2009, representing a Cumulative Annual Growth Rate (CAGR) of 6.4%.

Companies should no longer treat transportation as an “infinite resource” in their planning processes, Gonzalez suggests. Other than investing in a private fleet, you can’t build up transportation capacity like you can inventory; you have to plan for it like other constrained resources.

Converting demand forecasts into logistics and transportation capacity forecasts is one of the trends highlighted in the study. Gonzalez comments, “Companies often implement collaborative planning and forecasting with upstream vendors and manufacturing partners, but they rarely translate these demand and production forecasts into transportation capacity requirements and share them with carriers. But some shippers are now providing forward visibility to carriers and securing capacity in advance. These shippers are receiving priority in capacity allocation over shippers that do not if only because carriers appreciate the effort these shippers are making to keep them informed.”

www.arcweb.com

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