Trade Extensions Results – And Might Technology Threaten the 3PL World?

complex sourcing

Privately owned firms don’t have to say too much about their performance publicly, unlike those with a stock market quote. But most will make some announcements in order to give their customers and others confidence in their stability, and sometimes to position themselves for future corporate activities (making acquisitions, being acquired themselves, etc.)

We will see a number of reports issued relating to the 2016 calendar year over coming weeks, and one of the first is from Trade Extensions, the leading complex sourcing / optimisation software provider. The technology uses advanced mathematical techniques and processes to analyse complex sourcing tasks with many different variables, constraints and options. Having started out being used mainly in logistics, this is now used in everything from complex multi-tier print outsourcing contract to food raw materials, or even buying advertising space or time.

The firm has grown steadily over recent years, and 2016 was another good one, with revenue growth of 17%. According to their statement that means “the company has increased revenue by 180% in the last five years”. The USA has become of greater importance, and now represents some 45% of total revenues, and grew faster than the Europe (22% last year). There were over 20 new clients in 2016, and the firm was “particularly successful in retail, but also gained major clients from the shipping, beverage and automotive sectors”.

The order book looks strong too moving into 2017, which is going to be an important year for the firm. Its strategy is to “make users more self-sufficient” and to that end, the new TESS™ 6.0 platform will be launched at the end of April. This is “Trade Extensions’ most comprehensive recent update to its platform and makes extensive use of automated user guidance and ‘TESS Apps™’ to ensure the power of TESS is accessible to all users, whether they are running complex sourcing events or simpler projects involving routine bid collection or even auctions”.

The firm also plans to establish its first permanent Asian office during 2017, appoint a new regional sales manager in North America as well as new strategic sourcing consultants in Europe and the Americas.

In a seemingly unrelated announcement, giant UK retailer Tesco has said it is re-configuring some of its warehousing, and bringing some aspects of logistics management back in house, with logistics providers DHL and Wincanton losing contracts with the firm. But maybe there is a link here. Tesco are known to be a Trade Extensions client (their logo is here), so perhaps the retailer has found that with the Trade Extensions platform, it can run competitive processes for its logistics and transport business very capably itself – perhaps it sees less need to use 3PL (third party logistics) “experts” like DHL and Wincanton to manage the delivery of that business?

Or maybe this is just some straightforward rationalistion; this is just our speculation really. But it raises some wider questions about the future of outsourcing in a world where software is becoming more and more powerful, easy to use and clever. Are there are indeed business areas (like this and perhaps others) where outsourced service providers, who have claimed a particular specialist skill, may find their clients saying “you know, we can do this ourselves now with the help of this smart software”?

An interesting thought …

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