Supply chain and logistics leaders across industries face a dilemma. Should they manage their transportation operations internally? Or should they outsource operations to a third-party? Making that decision is not easy. On one side, technology vendors offering transportation management software (TMS) make compelling cases. They have plenty of examples of companies that have chosen to use software to successfully manage things internally with positive return on investment. On the other side, there's no shortage of 3PLs or managed transportation services that tell similar success stories of companies that turned their operations over to them.

What is the right choice for you and your organization? How do you make that decision? If only it were as simple as flipping a coin. The decision is dependent on many factors, including skill and availability of talent, IT resources and how senior leadership views transportation (something we must do vs. a strategic advantage). Let's look at what Gartner is seeing other supply chain leaders do.

Gartner has seen an increasing number of companies that have traditionally relied on an outsourced partner for transportation who are now considering bringing that capability back in-house. In Gartner's Logistics and Contract Manufacturing Outsourcing survey we found that 70% of those surveyed planned to bring at least one portion of outsourced logistics services back in-house. Leading the way was managed transportation services with more than 20% of those surveyed planning to bring it back in-house over the next two years (see Figure 1).

What is driving this movement? When asked the reasons for bringing logistics services in-house respondents cited a variety of reasons (see Figure 2).

When I speak to supply chain organizations looking at deciding on transportation management, they often cite many of the same responses. They refer to performance, resiliency and financial benefits as the most frequent challenges that are causing them to look at managing transportation internally.

In addition to the reasons cited in the survey, there are other reasons that I hear consistently from organizations who are debating the decision to in-source transportation operations.

In the past, especially for small and mid-sized shippers, the cost of TMS technology was often prohibitive from in-sourcing transportation. Over the past several years the variety of TMS solutions on the market has increased, along with the capabilities of those solutions. This variety means that companies have more choices and the opportunity to find and select a "best fit" solution based on their level of complexity and transportation use cases. At the same time TMS solutions made the move to SaaS and cloud-based solutions. This shift has helped to remove some of the higher upfront costs and implement solutions in less time. In turn, this has helped to improve the ROI. It also means that you will be receiving future capabilities and functionality on a regular basis (sometimes monthly) vs. the traditional upgrade path of on-premise solutions.

As transportation costs continue to increase, many company executives cite that they feel there is a lack of transparency with their chosen managed transportation provider. Some of this can be attributed to a lack of strong SLAs set forth at the beginning, but many company executives feel that the exchange of data and information is lacking. They feel that the levels of reporting that their partners are providing are not dynamic enough in the current environment or fail to accurately capture the organization's key performance indicators.

As transportation capacity challenges continue, many shippers are looking to take back or increase their level of ownership in their carrier relationships. They express growing concern that they feel there is a disconnect between themselves and their primary transportation providers. The idea of being a "shipper of choice" and gaining more capacity commitments from their preferred carriers has become a major talking point in many conversations. Organization leaders fear that if they rely on an outsourced partner that they miss out on the opportunity to create and cultivate long-term carrier relationships.

Does this information mean that you should in-source your transportation operations? Maybe. There are compelling reasons on both sides of the debate. There are even options that take a hybrid approach. For example, you may maintain and own more of the carrier relationship while the vendor handles the actual planning and execution of the transportation operation.

If you are a supply chain leader facing this decision and looking at in-sourcing, then I recommend you start by reviewing the Gartner Magic Quadrant for Transportation Management Systems and Critical Capabilities for Transportation Management Systems. These research reports provide an overview of the TMS technology market, relevant vendors and provide insight into the core and extended capabilities that these solutions offer. And if you would like to discuss your current situation in more detail, our team is always happy to assist via inquiry or by meeting in person at our upcoming symposium in Orlando.

Brock Johns
Senior Principal Analyst
Gartner Supply Chain
Brock.Johns@gartner.com

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