A few months ago, my colleague Jack Keller raised a provocative question in his article “The End of Off-the-Shelf Software? How Every Company Will Empower Every Company to Build Custom Software by 2030”. There’s an adjacent, and equally provocative question floating in the logistics and transportation space regarding the evolution of AI that appears to have the market for packaged TMS on the brink of an accelerated transformation: will historical TMS incumbents stay at the top or will AI agents be disruptive to the point of displacing them as the new standard?
An overview of the landscape: the leading players.
Historically, tier 1 players like Blue Yonder, MercuryGate, CargoWise, and Oracle (OTM) have dominated the TMS market with their ability to scale. Their solutions are dependable, backed by the promise of a ‘one-stop-shop’ that can support even the wildest of growth aspirations. As executives faced the golden ‘build versus buy’ question, these solutions made a compelling case for the ‘buy’. Their one shortcoming was maintaining the flexibility to tailor their product to customers’ unique needs, a strength of proprietary, custom-built TMS.
The ’new tech’ generation of competitors
About ten years ago, private equity and venture capital firms recognized the gap in the packaged TMS market that gave executives pause about buying versus building. They sought to usher in a new standard hallmarked by a modern user experience and interface, better technological infrastructure, and more advanced engineers. The success stories from this generation, such as Project44 and Flexport, tend to be Logistics Service Providers who gained traction in a specific piece of the value chain to support expansion, not comprehensive end-to-end systems that went a mile wide but only an inch deep. To date, however, this generation still hasn’t upended the landscape as many expected. Logistics executives have not bought into the tech first, operations second approach, and without decades of data, these products have not delivered enough value to displace historical incumbents.
Enter the AI agents
The next paradigm shift in the TMS market is upon us as ‘AI agents’ are introducing the newest generation of software. This wave of solutions is looking to revolutionize how logistics leaders think about technology because their value is predicated on mastering very narrow segments of the value chain. This approach challenges past generations by solving a specific piece of the puzzle rather than marketing an end-to-end, one-stop-shop solution.
Two cutting-edge emerging entrants include:
- Manifold Freight, which offers a solution tailored specifically to spot freight. The solution scans email inboxes for spot opportunities, parses them, and aggregates these opportunities into a single location, enabling customers to bid on more freight in less time.
- HappyRobot, which incorporates voice AI agents to automate inbound and outbound phone calls to receive load updates, and check payment statuses.
This most recent generation of AI agents is rapidly evolving. AI agents have already gained significant traction and now serve as valuable complements to established players when integrated into enterprise-grade solutions. These solutions also introduce a new capability to the market: the ability to generate more sophisticated code in less time. Given the unprecedented revenue growth this generation has seen and the undeniable value vertical AI agents create, the newest generation are sure to be among the winners of the marathon race that is packaged TMS software, but it’s unclear to what extent. To harvest the full value of AI, it’ll be equally important for companies to strategically implement the software as it will be to pick the right solution, which has proven to be a sizeable hurdle for logistics companies to date.
How will the market react to this disruptive new AI in their sightlines?
Historical incumbents, aware of the threat that both the new tech and AI agent generations present, have been plotting ways to maintain their economic moat. The most likely path forward is either to build their own AI agents that can compete with the newest generation or build efficient integration with AI agents to ‘plug-in’ solutions within their enterprise software.
- Blue Yonder ramped up its M&A activity, investing over $1 billion in acquisitions since 2023. Some of the driving forces behind such investments was the opportunity to offer AI-powered agents to proactively monitor, identify, and remediate supply chain problems.
- MercuryGate is incorporating AI in their TMS, including as part of their carrier performance analytics that can predict which carriers are most likely to deliver a specific shipment on-time.
- OTM markets AI as part of their transportation planning, with enhanced ETA predictions and fully configurable, no-code machine learning models available to customers.
- CargoWise has been building partnerships with various technology companies, leaving open the opportunity for customers to keep the enterprise TMS and integrate additional solutions.
A new dimension of questions for TMS executives
AI agents are fast embedding themselves in the TMS landscape and are sure to be a critical long-term player. But just how much of the value chain can AI agents take on in the longer-term? More specifically, will the newest generation be able to displace the legacy leaders and monitor end-to-end enterprise processes? For the moment, logistics executives are scrambling to get ahead of the curve, asking themselves where to start and how to implement.
There isn’t a clear one-size-fits-all guide for introducing AI in logistics. The best approach likely depends on more nuanced details, such as current state processes, strategic goals, and technology posture, a topic deserving of a standalone article within itself. While executives are busy evaluating this picture over the coming months, tech pioneers are sure to keep painting away, constantly challenging the status quo. Before we know it, with the ability to generate premium code in little time, the latest generation may bring back the golden ‘Buy or build?’ question that just a year ago we thought had almost been settled in favor of ‘buy’.
This time, however, AI will take center stage and present an entirely different challenge for packaged TMS vendors to defend against.
