Shippers Discuss Freight Procurement Strategies and Concerns at Chainalytics’ Annual FMIC Summit

| By Kevin Zweier | Vice President, Transportation | Chainalytics |

We recently concluded our Freight Market Intelligence Consortium (FMIC) Summit in Denver in late April. During the event, I had the opportunity to moderate a panel with three experienced and very knowledgeable transportation professionals focused on “Transportation Procurement in Challenging Markets.” While I had a more colorful name for our session that involved a “fan” and its ability to create a horrible mess, we still managed to have a lively discussion with a wealth of great insight being shared between the panel and the audience.

One of takeaways I had from our panel discussion was the myriad of different strategies that shippers can employ to be successful. Each company presenting had different takes on even some of the most basic transportation procurement decisions such as how often to go to bid and how to engage new carriers. It reminded me of the different factors that drive procurement strategies that I discussed in a previous summit, namely:

Network factors:

  • Is the network one directional or more out and back?
  • Are the volumes and lanes highly variable or more steady state?

Carrier/Shipper Sophistication:

  • Is there a good TMS in place to provide strong historical data?
  • Can carriers respond to an RFP with a large amount of data?
  • Does the shipper know the many business requirements that the network, vendors, customers, etc. impose?
  • Are carrier relationships and communications centralized?

Service and Risk Tolerance:

  • If there is a carrier service failure, what is your business risk tolerance?
  • Do you have the people, process and systems to manage service failures?

Market Standardization:

  • Is there a high level of equipment variability for the same activity?
  • Is there a unified standard for communication and legislation across the market?

Depending on how a shipper answers these kinds of questions will change the strategies they are likely to employ from a procurement standpoint. Shippers possessing dynamic and stringent service requirements for a high-value product will of course need to approach the market differently than someone shipping lower value goods that have little to no time sensitivity.

One of the other topics receiving a lot of discussion during our panel and in all our customer interactions during the summit was being a “shipper of choice.” This is a familiar trope that always resurfaces when transportation markets tighten and the carriers (and drivers) now have choices of which load to haul and which shippers they want to work with. No doubt it is understandable why this ebbs and flows with the market. We polled the shippers in attendance to what they thought were the most important “drivers” of being a shipper of choice. The top 3, by fairly significant margins, were:

  1. Lane density and consistency (or complementing a carrier’s network from a seasonal or backhaul standpoint)
  2. Freight efficiencies (ample order lead time, schedule flexibility, consistent feedback, “no touch” freight)
  3. Treating the relationship as a PARTNERSHIP vs. transactional (i.e. value incumbents).

I heard numerous shippers utilize the saying “never let a good crisis go to waste” as they have used current conditions to help convince others in their organization for the need to become more efficient in transportation operations and to smooth customer demand when possible. With the Electronic Logging Device mandate being more strictly enforced since April, drivers’ hours have become a more precious commodity. So, it makes sense that many shippers have a renewed focus on efficiency.

We also asked those same shippers what they thought made a carrier a “carrier of choice.” Their responses included:

  1. Performance, reliability, and service
  2. Best value proposition (rates, payment terms, “total cost of ownership”)
  3. Capacity availability on shorter lead times / increased tender acceptance

Service and value are always the top two when this question is asked, but they often flip positions depending on what the market is doing. Increasing tender acceptance and securing capacity were not surprises either given the earlier discussions of how to make one’s freight attractive to carriers in this environment.

Overall, it was another successful summit with a lot of great conversations and presentations. We got to experience typical Denver weather (70 F temps, followed by 30 F temps, followed by snow and rain). We even got to see a baseball game for once (well, some of us were watching the NBA playoffs – “Trust the Process!”). A productive and educational time was had by all and we look forward to hosting it again next year (Hawaii? Fingers crossed but not likely).

Kevin Zweier is vice president of the Transportation compotency at Chainalytics. In this role, he manages the delivery of projects related to transportation procurement, fleet modeling, and systems and operational assessments.

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