James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
When C. Dwight Klappich talks supply chain software—what's hot, what's not, where the market's headed—people tend to listen. That's no surprise. Not only has he followed the business for over a decade as a logistics technology analyst, but he's also spent time on the inside. Earlier in his career, Klappich worked for such software developers as Ross Systems (where he was vice president of manufacturing marketing), LPA Software (which has since been acquired by Servigistics), Manugistics, and Distribution Management Systems.
Today, Klappich serves as a vice president of research at Gartner, where he continues to keep a close eye on IT trends. He joined Gartner in 2005, when the Stamford, Conn.-based research firm acquired his then-employer, the research firm Meta Group.
Klappich recently spoke with James Cooke, DC Velocity's editor at large and TechWatch columnist, about emerging software trends, the leading players in the market, and the next big thing in transportation management systems.
Q: Are there any trends in the supply chain execution software market that bear watching in 2011?
A: As the economy hopefully starts to improve, we'll see continued sales growth in transportation management software (TMS), more in the mid market than the high end of the market, which we define as $100 million a year shippers and above.
We also believe that software-as-a-service (SaaS) revenues will grow in that segment. By definition, transportation is normally a multi-enterprise process that includes at a minimum a shipper and a carrier, but could also involve other parties, like forwarders, 3PLs, and suppliers. Because of this "network effect," SaaS-based TMS systems that have pre-built carrier and supplier networks are appealing to all shippers, but especially mid-market shippers that often lack the IT resources to build and maintain their own networks.
The other thing that will help the market grow is that systems are broader today than in the past. They bring together a number of capabilities—like load consolidation, routing, tendering, planning, and freight payment/auditing—in a holistic solution. Even a small shipper—as small as $25 million in annual freight spend—can find enough benefits to justify the investment in the technology.
Q: Last year, you said that fear of the future was driving sales of transportation management software. Is that still the case? A: Coming out of 2009 and into 2010, customers were looking at this technology mostly to plan for the future because they expected freight rates to rise and capacity to tighten. They wanted to have the foundation in place when that occurred.
Starting in the summer of 2010, we saw some of characteristics move into the carriers' favor. We also saw some capacity issues. And we saw some freight rates becoming a little higher. It wasn't dramatic enough yet to say, "Oh my gosh, I have to do something now." But it started to play on previous fears that shippers had better get ready.
I don't think we've gotten to the point where we're past the fear. We had a little glimpse of reality this summer, and it really confirmed to people that some of their concerns were legitimate and they had better do something.
Related: Market still strong for TMS and WMS: A conversation with C. Dwight Klappich
Q: Are TMS vendors adding any new features to their systems to encourage shippers to take the plunge? A: At all levels we've seen vendors building out their suites. One area is better support for additional modes and parcel. In the past, these systems mostly focused on over-the-road truck or less-than-truckload shipments. But they didn't manage the entire process. We've seen parcel added to a common platform. We've seen more support for international moves.
Q: How about business intelligence? A: We've had reporting on carrier performance in TMS for a while. But it was typically after the fact. The next cool thing in TMS is the inclusion of embedded analytics, which can be used as part of the decision-making process. For example, a shipper creates a carrier scorecard. Then, when it goes through the carrier selection process, that scorecard can be used to handicap a carrier. The low-cost carrier might turn out to have a high damage rate, so I would penalize him and go with a slightly higher-cost carrier that provides better-quality service.
Some of the SaaS vendors are also doing some pretty interesting things in this area. Now that they have enough data flowing across their network, they can provide benchmark information that shows the normal rate on this lane. They then provide that information to both the carrier and the shipper. That benchmark information was very difficult to get in the past because you had to do a survey and get people to share the data. Now it's all there on the platform.
Q: For what type of shipper does a software-as-a-service app make the most sense? A: It's inversely related to complexity. For complex shippers, at this time, the on-premise systems are still more robust [than SaaS models], particularly in the area of planning engines and optimization.
You note that I referred to complexity, not size. I've had really large shippers—a billion dollars in freight spend annually—that are not really complex; they just move a lot of goods. I can have a $70 million shipper who uses multiple modes and makes a lot of shipments per day and does a lot of LTL consolidation. That $70 million shipper would need more sophistication than a much larger shipper would.
Q: Who do you consider to be the leading TMS providers? A: Oracle continues to be among the leaders. I2—now part of JDA—is also in a leadership position. Leadership is not just product functionality; it's depth, market success, and support for multi-modes and multi-carriers. Manhattan Associates is starting to gain some traction, particularly in areas where fleets are really important. As for the SaaS providers, LeanLogistics, Sterling Commerce, and MercuryGate are some of the up and comers.
Q: What advice would you give someone who's looking to implement a TMS? A: I would do a self-assessment. With TMS, the success of an implementation will depend more on the user's ability to fully exploit the app than on the particular system it chooses—these are fairly mature, well-proven, high-quality systems. If I'm a shipper that's moving from an undisciplined ad hoc process to one that's more methodical and disciplined, I need to worry about change management. The change management aspects are more critical than just the application.
You need to look at your organization, the state of your users, and your goals. You need to set reasonable expectations. Don't go in saying "I'm going to reduce my freight spending 20 percent in the first year" if the implementation is going to require a complete overhaul of your operating process.
Q: Gartner has gone on record predicting that best-of-breed applications are going to make a comeback. Can you talk about how that will happen in the supply chain execution area? A: We do an annual supply chain management study, and we found last year that over 50 percent of the companies we define as leaders favor a hybrid application environment [using both enterprise resource planning (ERP) and best-of-breed applications]. They'll push commoditized processes—the things they don't see as a source of differentiation—onto an ERP platform. But they'll favor best-of-breed applications for processes they see as high value-add, differentiating activities.
Why? The best-of-breed [apps] have functionality. Best-of-breed vendors have domain expertise and an ability to innovate, and an ability to help their clients exploit their technologies.
We've seen a decline in the expectation that companies will someday be on a single ERP platform. Most companies recognize that ERP plays an important role. But if there are applications that are more cost-effective, they'll figure out how to make a best-of-breed solution fit.
The German forklift vendor Kion Group plans to lay off an unspecified number of workers as part of an “efficiency program” it is launching to strengthen the company’s resilience and maintain headroom for future investments, the company said today.
The new structural measures are intended to optimize Kion’s efficiency, executives said in their fourth quarter earnings report.
“While internal programs to continuously improve product, production, and services costs were already up and running throughout 2024 and will continue, further structural measures will address a more efficient setup for Kion in Europe. This is expected to have an impact on personnel requirements subject to consultations with the respective employee representative bodies as required by local laws,” the report said.
“The efficiency program is addressing developments in the macroeconomic environment. European economies are struggling to gain momentum – this affects key customer industries in the Industrial Trucks & Services segment, where Chinese competitors have been improving their market position in the aftermaths of the recent pandemics,” Kion said.
The move comes as Kion reported that it finished its 2024 financial year with slightly improved revenue of $11.9 billion (over $11.8 billion in 2023), and profitability (measured as earnings before interest and taxes (EBIT)) that significantly increased to $951 million (over $820 million in 2023).
The company now plans to pay $249 to $269 million in financial year 2025 to implement the cost saving measures. Following that one-time charge, it expects to achieve sustainable cost savings of $145 million to $166 million per year, beginning in 2026.
“In order to maintain headroom for investments ensuring our future, to further strengthen our competitiveness and our resilience, we must manage our cost base. This requires structural and sustainable measures,” Christian Harm, CFO of Kion, said in a release.
By the numbers, fourth quarter shipment volume was down 4.7% compared to the prior quarter, while spending dropped 2.2%.
Geographically, fourth-quarter shipment volume was low across all regions. The Northeast had the smallest decline at 1.2% with the West just behind with a contraction of 2.1%. And the Southeast saw shipments drop 6.7%, the most of all regions, as hurricanes impacted freight activity.
“While this quarter’s Index revealed spending overall on truck freight continues to decline, we did see some signs that spending per truck is increasing,” said Bobby Holland, U.S. Bank director of freight business analytics. “Shipments falling more than spending – even with lower fuel surcharges – suggests tighter capacity.”
The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment, which processes more than $43 billion in freight payments annually for shippers and carriers across the U.S.
“It’s clear there are both cyclical and structural challenges remaining as we look for a truck freight market reboot,” Bob Costello, senior vice president and chief economist at the American Trucking Associations (ATA) said in a release on the results. “For instance, factory output softness – which has a disproportionate impact on truck freight volumes – is currently weighing heavily on our industry.”
Volvo Autonomous Solutions will form a strategic partnership with autonomous driving technology and generative AI provider Waabi to jointly develop and deploy autonomous trucks, with testing scheduled to begin later this year.
The announcement came two weeks after autonomous truck developer Kodiak Robotics said it had become the first company in the industry to launch commercial driverless trucking operations. That milestone came as oil company Atlas Energy Solutions Inc. used two RoboTrucks—which are semi-trucks equipped with the Kodiak Driver self-driving system—to deliver 100 loads of fracking material on routes in the Permian Basin in West Texas and Eastern New Mexico.
Atlas now intends to scale up its RoboTruck deployment “considerably” over the course of 2025, with multiple RoboTruck deployments expected throughout the year. In support of that, Kodiak has established a 12-person office in Odessa, Texas, that is projected to grow to approximately 20 people by the end of Q1 2025.
Businesses dependent on ocean freight are facing shipping delays due to volatile conditions, as the global average trip for ocean shipments climbed to 68 days in the fourth quarter compared to 60 days for that same quarter a year ago, counting time elapsed from initial booking to clearing the gate at the final port, according to E2open.
Those extended transit times and booking delays are the ripple effects of ongoing turmoil at key ports that is being caused by geopolitical tensions, labor shortages, and port congestion, Dallas-based E2open said in its quarterly “Ocean Shipping Index” report.
The most significant contributor to the year-over-year (YoY) increase is actual transit time, alongside extraordinary volatility that has created a complex landscape for businesses dependent on ocean freight, the report found.
"Economic headwinds, geopolitical turbulence and uncertain trade routes are creating unprecedented disruptions within the ocean shipping industry. From continued Red Sea diversions to port congestion and labor unrest, businesses face a complex landscape of obstacles, all while grappling with possibility of new U.S. tariffs," Pawan Joshi, chief strategy officer (CSO) at e2open, said in a release. "We can expect these ongoing issues will be exacerbated by the Lunar New Year holiday, as businesses relying on Asian suppliers often rush to place orders, adding strain to their supply chains.”
Lunar New Year this year runs from January 29 to February 8, and often leads to supply chain disruptions as massive worker travel patterns across Asia leads to closed factories and reduced port capacity.
Women are significantly underrepresented in the global transport sector workforce, comprising only 12% of transportation and storage workers worldwide as they face hurdles such as unfavorable workplace policies and significant gender gaps in operational, technical and leadership roles, a study from the World Bank Group shows.
This underrepresentation limits diverse perspectives in service design and decision-making, negatively affects businesses and undermines economic growth, according to the report, “Addressing Barriers to Women’s Participation in Transport.” The paper—which covers global trends and provides in-depth analysis of the women’s role in the transport sector in Europe and Central Asia (ECA) and Middle East and North Africa (MENA)—was prepared jointly by the World Bank Group, the Asian Development Bank (ADB), the German Agency for International Cooperation (GIZ), the European Investment Bank (EIB), and the International Transport Forum (ITF).
The slim proportion of women in the sector comes at a cost, since increasing female participation and leadership can drive innovation, enhance team performance, and improve service delivery for diverse users, while boosting GDP and addressing critical labor shortages, researchers said.
To drive solutions, the researchers today unveiled the Women in Transport (WiT) Network, which is designed to bring together transport stakeholders dedicated to empowering women across all facets and levels of the transport sector, and to serve as a forum for networking, recruitment, information exchange, training, and mentorship opportunities for women.
Initially, the WiT network will cover only the Europe and Central Asia and the Middle East and North Africa regions, but it is expected to gradually expand into a global initiative.
“When transport services are inclusive, economies thrive. Yet, as this joint report and our work at the EIB reveal, few transport companies fully leverage policies to better attract, retain and promote women,” Laura Piovesan, the European Investment Bank (EIB)’s Director General of the Projects Directorate, said in a release. “The Women in Transport Network enables us to unite efforts and scale impactful solutions - benefiting women, employers, communities and the climate.”