DC Velocity - January 2009

ping charges reflect contracted rates. “Small shippers can now justify a TMS on the freight payment and audit feature alone,” Klappich says. “Anyone spending $25 million or more on freight can now justify the cost of a TMS.”

Analyst Adrian Gonzales agrees that TMS sales will remain strong in 2009. “Companies will want to prioritize transportation initia-

tives to cut costs and improve profitability, considering business sales are going down or remaining flat,” says Gonzales, who is executive director of the logistics council at ARC Advisory Group in Dedham, Mass.

Gonzales says some of that demand is coming from a previously untapped source: companies that once outsourced their transportation management to a third-party logistics company but have since decided to do it themselves. “Companies need a TMS in order to bring that function back in house,” he explains.

to climb 11. 7 percent to $1.15 billion in 2009.

In the past year, much of that revenue came from sales to companies in Western Europe and the United States that were replacing their old systems. Sales of replacement systems will likely slow this year, but Klappich believes that weakness will be offset by growing demand for WMS from companies in Eastern Europe, the

Asia Pacific region, and Latin America. And while North American companies may put major systems upgrades on hold, he predicts that they’ll still buy add-on modules like labor and performance management.

WMS: Still the revenue leader

TMS may be the fastest-growing segment of the SCE software market. But in terms of dollars spent, the hands-down winner remains the WMS, software designed to oversee distribution center operations. Gartner pegged worldwide revenues for WMS in 2008 at $1.03 billion; it expects revenues

Customs regs spur GTM sales

Another growth area for supply chain software will be global trade management systems, which have a smaller user base than either TMS or WMS. Gartner expects that vendors will see worldwide revenues from global trade software jump 16. 7 percent to $238 million in 2009 from $204 million in 2008.

Although many companies still rely on their customs brokers, freight forwarders, or third-party logistics service providers to handle trade compliance, enterprises running global supply chains are likely to find it necessary to obtain software to deal with fast-changing customs regulations. “Even if they don’t want to, companies may have to invest in this software due to customs,” says Klappich.

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Five more good years?

Despite all the turmoil on the world economic front, at least one prominent analyst remained bullish on this category of software at the end of last year. In an e-mail sent a couple of weeks before his death on Nov. 30 (see related article on p. 16), John Fontanella of AMR Research in Boston predicted that sales for all types of SCE software would remain strong for the next five years. According to his company’s projections, the overall market for supply chain-related software will grow 7 percent annually through 2012.

As for why companies would continue to buy supply chain software in a period of corporate belt-tightening, Fontanella said it was a matter of cost control. The bailout of the financial industry expanded the money supply of major nations, he explained, leading to devalued currency and an environment favorable to inflation. “Supply chain managers will be expected to play an important role to protect product and company margins through cost control and increased efficiencies in their operations,” he said.

On top of that, he added, in times of financial turmoil, companies hoard cash. “For the first time, cash preservation will become a major imperative outside the corporate treasurer’s office,” Fontanella said. “Capital spending will come under great scrutiny in this environment, so technologies that increase the velocity of cash collection will become a critical component of initiatives going forward.”