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.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.