Given the importance of controlling freight costs, you would think that every company would have deployed a robust transportation management system (TMS) by now. Unlike five years ago, when that type of application had to be purchased and installed on a company's own servers, the software today can be "rented" in the form of a cloud-based solution from a variety of venders. Not only does that make deployment a breeze, but the payback in freight savings easily justifies the rental costs.

Surprisingly, though, not everyone has a TMS yet. That's about to change, according to a new study. ARC Advisory Group is predicting that the TMS market, currently valued at more than $1 billion, is set to "explode," with year-over-year double-digit sales gains through 2017. "A key driver of growth is the renewed interest of large companies in TMS solutions," says Steve Banker, service director of supply chain management at ARC. Banker is the principal author of the report, Transportation Management Systems Global Market Research Study.

Although you might expect that purchases by small- and medium-sized companies would be driving TMS sales growth, Banker says that's not the case here. Rather, it's big companies with more than $1 billion in revenue. What's happening, he says, is that large U.S.- and Europe-based companies have successfully deployed a TMS in their home region and are now hoping to replicate that success by rolling out the software throughout the world. In addition, a number of multinationals based in Asia and Latin America are buying their first TMS for deployment in their home regions. One side effect of this surge in interest in TMS solutions is that vendors are not having to discount their applications in order to sell them in Latin America or Europe.

Banker expects that large shippers planning multiregion rollouts will be particularly interested in TMS solutions that can facilitate global shipping. These programs, which have become increasingly available in recent years, are designed to effectively optimize international shipments in addition to their domestic counterparts. On top of that, many offer specific functionality for a designated region as well as analytics that can deal with currency fluctuations that occur during a process that extends from planning to booking to settlement.

It's not just shippers who are reloading with TMS solutions, however. Banker says there's a new wave of buying by third-party logistics service companies (3PLs) who want to upgrade their legacy software with more modern versions, particularly modules offered by the enterprise resource planning (ERP) vendors. "SAP is gaining traction here," Banker reports, adding that the German ERP vendor offers "logic that might be called '3PL order management' as well as other logic for specific billing and cost allocation [tasks]." The modular approach to software has proved particularly popular with this market sector, largely because of its ease of use, he says. "3PLs don't want to piece together solutions."

Will small and medium-sized shippers be at a disadvantage to their large brethren when it comes to managing freight costs? "Not necessarily," says Banker. "Any shipper has a choice, do transportation management in-house or outsource to a 3PL. If they are trying to do it in-house without a TMS, then, yes, they are putting themselves at a competitive disadvantage."