Transportation Spend Management in 2023
As inflation and costs rise, enterprise organizations are impacted on a massive scale. So how can leaders gain the right insight to make strategic decisions? A core practice is to implement transportation spend management systems.
A study about transportation management system adoption showed that approximately 72% of TMS users reported cost management as a primary function of the system (Griffis and Goldsby, 2007).
Over 15 years later, transportation spend management remains a top concern for logistics companies, though the tools and techniques utilized to achieve transportation spend management maturity have evolved.
Read on to learn more about transportation spend management in 2023.
Trax understands that transportation spend management directly impacts operational efficiencies, cost savings, and business optimization. As a leading 3PL partner, we empower companies at all stages of TSM maturity to achieve supply chain excellence.
Transportation Management System Market Growth
According to Stratview Research, the transportation management system market is expected to grow at a rate of 15% from 2022 to 2028, reaching a $25.6 billion market size. The significant growth can be attributed to several core factors, including technological developments and increased collaboration between 3PLs and suppliers.
However, despite the market’s expansion in recent years, many end-user industries remain uncertain about TMS adoption, serving as a barrier to further market growth. To combat this, businesses must understand how transportation spend management has changed over the years, with a specific focus on shifts from before to after the COVID-19 pandemic.
Transportation Management Trends Before the Pandemic
Before the COVID-19 pandemic, key transportation management trends included adopting cloud-based systems, automation, and outsourcing logistics to 3PLs. By leveraging a software-as-a-service (SaaS) model, companies experienced a lower barrier to scale. This prompted a surge in the TMS market before the pandemic as enterprises adopting cloud-based platforms saw increased profits and gained a competitive advantage over on-premise TMS.
As software capabilities became more sophisticated, supply chain leaders focused on incorporating automation techniques into their transportation spend management processes. Specifically, load tendering automation played a major role in transportation spend management in 2020, ensuring contract compliance and automated payments.
The largest shift in transportation management leading up to COVID-19 was the propensity for outsourcing logistics to 3PLs and 4PLs. A Gartner study of 80% of supply chain professionals reported an intent to increase logistics outsourcing budgets in 2020. However, some organizations remained resistant to change because of the risk associated with outsourcing. These trends changed during the pandemic.
TMS Market During the Pandemic
An article by Forbes sought to explain the continued growth in transportation spend management throughout the global pandemic and landed on several contributing factors. First, the TMS market was protected from the negative aspects of the pandemic as a whole, and specific industries like CPG and food and beverage experienced a growing need for advanced TMS applications.
Because eCommerce performed so well during this time, companies needed to meet the growing demand, which required more attention on transportation spend management. Leveraging TMS software and/or outsourcing logistics allowed companies to mitigate rising freight costs.
Sustainability also played a role in the TMS market during the pandemic. Leaders found ways to optimize operations as the supply chain began incorporating renewable energy, electric vehicles, and reducing single-use plastics. Route optimization and load consolidation were crucial for reducing carbon emissions, but also reduced unnecessary fuel costs and cut down on the miles traveled for each delivery.
Transportation Spend Management Trends for 2023
As the market begins to soften, it’s more important than ever to understand how the change in demand impacts transportation spend management. Trends for 2023 differ from those of the past in their sophistication and innovation. Consider the top transportation spend management trends for 2023:
- The Network Effect - According to Logistics Viewpoints, “the network effect exists when all components of the supply chain technology ecosystem work together to improve the performance of the end-to-end supply chain.” The key is communication between systems, applications, and logistics providers. Additionally, as new components are added to the network, the supply chain as a whole increases in value, enabling seamless operations across all stages of the supply chain. Finally, by digging into big data, companies can better execute decisions that lead to profitability.
- Autonomous Vehicles - While autonomous trucks aren’t making an appearance yet, this is a trend that many supply chain leaders can prepare for. Because the market is currently experiencing a driver shortage, autonomous trucks would provide a partial solution. While they wouldn’t replace drivers, autonomous vehicles can collaborate with human drivers to improve the performance of a crew that might not be able to succeed on their own.
- AI and Machine Learning - Complete visibility into the supply chain is necessary, but more is needed to achieve transportation spend maturity. Companies are expected to have access to real-time data at all stages of the supply chain. Still, taking it a step further, providing a more extensive analysis and application in artificial intelligence and machine learning is more important than ever. As referenced in Logistics Management, artificial intelligence and the internet of things (IoT) are core drivers of TMS software innovation this year. The key to AI is that it allows the systems to learn how to drive efficiencies. For example, training ML models on the existing data enables companies to make more accurate estimated arrival times (ETA) or predict which shipments will experience delays.
What's Next for Supply Chain Leaders?
This year promises to be an important one for transportation spend management and logistics as a whole. From the increased emphasis placed on AI to the network effect in general, the transportation spend management trends of 2023 represent a shift from years prior.
Start the year with a logistics partner you can trust. Contact Trax today to better understand how to navigate your company’s journey toward transportation spend maturity.