The economic boom in India is spurring the growth of number of industrial sectors leading to increased demand for Transportation Management Systems (TMS). The TMS market in India is on a growth trajectory capitalizing on the rising foreign trade and riding on a wave of strong economic growth. Expanding retail segment, infrastructure growth, buoyant manufacturing sector, and such others spur the demand for vehicle fleet, door-to-door logistics, high value low bulk shipments; these in turn have led to proliferation of domestic Logistic Service Providers (LSPs).
Logistics companies in India have begun investing in TMS solutions to improve their visibility across the supply chain. TMS suppliers, both global and homegrown, are finding India an important destination for their businesses. According to ARC study the Indian ERP market, wherein TMS solutions are inclusive, is expected to grow at a Compounded Annual Growth Rate (CAGR) of 25.2 percent over the next five years. ARC also recently published a global study on TMS that established the market crossing $1billion revenues in 2006 and growing strong. The growth indicators clearly point towards countries such as India.
The scope and value proposition of a TMS extends beyond the transportation department and is reckoned an essential part of the supply chain. As manufacturing and retail segments scale up their operations, it is imperative for them to increase the outsourcing content to complement in-house capabilities. TMS solutions offered by 3PL (Third Party Logistics) solution providers is being recognized as a viable option for the retail and manufacturing companies.
In today's competitive market the prices are dictated to a large extent by the elements of total supply chain activities particularly logistics, e.g., long-haul transportation, local cartage, labeling, packaging, warehousing and handling at the transportation terminals. The transport constitutes the basic linkage between the supply and demand centers. Rising transportation cost has the ability to offset all supply chain economic gains. Globalization has introduced additional cost elements, such as duties and broker fees, in different currencies and rate structures. Another issue is Fuel Surcharge and accessorial fees. These surcharges can increase the total cost of logistics (TCL) by at least 15-20 percent of the cost of goods sold. An exporter has to discover ways to nullify these additional costs, and this brings TMS to the center stage. With many companies having no systems in place to adequately capture, track, allocate, and analyze these costs, companies are beginning to deploy Transportation Management solutions (TMS).
TMS works with one or more transportation modes, including ocean, air, rail, truckload, less-than-truckload (LTL), parcel, and private fleet. In addition to managing the physical flow of goods, they also manage the flow of transportation-related data, documents, and money, and include performance management and collaboration capabilities. Transportation management is moving out of the shadows and into a strategic role in driving supply chain excellence. ARC believes that we are entering an intensely challenging time for supply chain managers to deliver on the transportation expectations of both their internal and external customers. To achieve immediate and long-term benefits, transportation service providers should take a holistic, enterprise-wide approach to IT modernization and reevaluate their transportation management processes, organizational structure, and technology.
Demand for TMS is growing because companies are realizing that cost increases and service level failures are inevitable unless they gain greater visibility and control of their transportation operations. Hence, optimization of transportation has been gaining importance due to higher impetus on reduction of cost in operations by major organizations. As manufacturers and retailers migrate to "demand driven" supply chains, in which suppliers manufacture products in the shortest possible time with reduced inventory levels, transportation service providers would need to improve visibility across the supply chain. Inventory-reduction initiatives and improving demand response through higher collaboration with partners across the supply chain push companies toward leaner, just-in-time operations. Astute logistics service providers are now seeking a more agile transportation enterprise. By adopting a service-oriented, alliance-based strategy to reach that objective, service providers can gain a competitive edge in today's transportation sector.
Reengineering business processes and information systems to industry best practices will require a strong commitment at the highest levels. Systems in the years ahead, such as next-generation supply chain event management solutions will provide end-to-end visibility across multiple supply chain applications. Transportation Management Systems will interact directly with automated Materials Management or Inventory Management System, while advanced order management solutions will enable LSPs to manage every detail of their customers' product, supplier, order, and shipment processes.
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