TMS Market Fragmentation Is A Good Thing
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According to a recent ARC study, companies spent over $804 million on Transportation Management Systems in 2001 and ARC forecasted that the market would more than double by 2006. These are impressive numbers that suggest a well-established and rapidly growing segment within the supply chain execution systems market with significant potential for driving value to the bottom line. However, it is important to remember that the term TMS covers a lot of ground. ARC's numbers include not only systems with comprehensive functionality, but also "point" solutions that include international trade logistics systems, parcel shipping applications, fleet management and transportation-focused Supply Chain Process Management (SCPM) systems. There is no question that the TMS pie is large and growing, but the individual slices remain relatively small.
ARC defines TMS as "software solutions that facilitate the procurement of transportation services, the short-term planning and optimization of transportation activities, and the execution of transportation plans." This definition describes a footprint that covers the transportation game from start to finish in broad terms and many products on the market today meet this standard to varying degrees. Notice, however, the word "all" is not a part of this definition. The likelihood that one system can address all transportation procurement, planning, and execution needs across all modes, activity silos, inbound and outbound within a single company and do it to a high standard is suspect. Add the complexity of providing best in class solutions across industry verticals to serve organizations that vary wildly in size and you will begin to understand one thing: the TMS market is fragmented and there are good reasons for this fragmentation.