Outlook for 2021: Shift integrations are a sign of the development of a broker-TMS relationship

Native integrations between transport management systems (TMS) and brokers give senders direct access to immediate offers to supplement the existing contract tariffs. Photo credit: Shutterstock.com.

This story appears in the print edition of the Journal of Commerce Annual Review and Outlook January 4, 2021.

The number of native integrations between widely used transportation management systems (TMS) and domestic freight brokers skyrocketed in 2020, as JOC.com predicted earlier this year.

According to software vendors, these integrations point to a new phase in TMS usage where the system a cargo owner uses to plan and execute their shipments acts almost like a motherboard rather than a finished product to which additional connectivity and functionality are added can continuously. In other words, a TMS will no longer be just a static system, but a living platform on which various procurement channels, real-time and predictive cargo visibility and analysis can be overlaid.

While the value of a TMS to a shipper has traditionally focused on the ability to lower freight costs and improve connectivity to freight brokers and carriers, direct TMS broker connections have shown the power of instant access to capacity. They enable senders to get direct access to instant offers from digitally oriented brokers in order to supplement existing contract rates through rental companies or other locally dependent relationships with brokers.

The integrations provide two main advantages for shippers. They use readily available capacity, a critical need in 2020 when the COVID-19 pandemic drove up freight rates, and serve as a digital real-time benchmark that shippers can use to compare contract rates or offline spot rates on a longer-term basis.

For brokers, the advantage of the connections is obvious: direct access to dozens of shippers who are hungry for capacity and tariff information. The integrations serve these brokers almost as autonomous inbound sales pipelines and continuously make their brand and service capabilities available to large shippers.

Just the beginning

More of these connections are expected to exist in 2021. Santosh Sankar, founding partner of supply chain-focused venture capital firm Dynamo, compared the trend of broker-TMS partnerships to the supreme streaming service environment in the entertainment industry. After all, Sankar says, every smart TV will be natively integrated with every streaming service, and to continue the analogy, every TMS will have connections to myriad brokers.

There are too many brokers for anyone to natively incorporate into any TMS, not to mention that after building a certain number of such integrations, returns would go down. The next iteration of this approach, however, may see middleware emerge that allows brokers, especially those not particularly well suited to delivering digital offerings, to route their capacity directly to a basket of TMS that their shippers use.

The shippers could then essentially build their load planning view based on the existing or new brokers from whom they would like to receive instant quotes. The extent to which the shipper is the driving force behind this approach should not be underestimated.

It is the task of logistics service providers (LSPs) of all kinds to meet customers on the terms of those customers. That has been true for a long time, but the spectrum of these « own terms » has expanded. The number of procurement tools and TMS in the market has exploded while the number of preferences for freight delivery from end users has increased. The permutations are huge.

Essentially, this means that for all clients, brokers have to be naturally everything without investing in technology in parallel, as it would be prohibitively expensive. In short, they have to do more with less.

Integration into a widely used TMS is one way of achieving some of these economies of scale. However, a more efficient approach would be one-time integration and access to an even wider distribution among senders. This level of connectivity for multiple TMS doesn’t exist yet, but software providers have brought such an idea to JOC.com as the next evolution in TMS broker integrations.

The danger for brokers is that they refuse to create environments where their business is consolidated into a single tariff, and that a single hub to which they are all connected could be seen as just that. The challenge for brokers is to automate a greater reach of their customers without compromising the service elements that make them stand out. Integrating with TMS increases the distribution of a broker, but these relationships are typically not as difficult as traditional direct service relationships.

TMS broker integrations were the beginning of this development. The more automated brokers deploy their capacity availability and quoting tools, the more options shippers have using TMS.

Brian Glick, CEO of systems integration specialist Chain.io, told JOC.com, “You cannot function as a company if the connections between your systems are not automated. That’s what drives automation – not that [the absence] costs me money, but that it costs me business. « 

Contact Eric Johnson at eric.johnson@ihsmarkit.com and follow him on Twitter: @LogTechEric.

Outlook for 2021: Shift integrations are a sign of the development of a broker-TMS relationship
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