Regardless of operational size or geographic scope, most shippers worldwide are grappling with how to ensure they’re efficiently procuring the best freight rates in all given markets – from a network of core carriers – while maintaining current levels of service. So naturally, transportation procurement teams choose to answer this complex logistics question in a variety of ways.
Many choose to use a “bidding process” involving their core carriers, with mixed results. Some simply want to make sure they don’t exceed their annual transportation procurement budgets. Most invest in some degree of research and freight market monitoring to navigate this space with more confidence. Others subscribe to and learn from published research, then work with their core carriers to strategically adjust their freight rates with the ebb and flow of economic swings. And even more, many others involve external transportation consultants and benchmarking providers to support them in conducting and interpreting market analyses. The question then becomes: How much is too much?
At the end of the day, many shippers are left to ponder these same questions:
- How can I continuously secure the best freight rates and service levels from my carriers?
- How can I be confident in knowing that I’m not leaving money on the table when procuring freight rates?
- How do I choose the best mix of transportation procurement approaches to meet my unique business requirements today and in the future?
In this complex, fragmented freight market with constantly changing regulations, it’s essential to pick an optimal mix of transportation procurement approaches to ensure your company is efficiently securing optimal freight rates and services.
Assessing Your Transportation Procurement Options
Shippers consistently take similar approaches to try and solve their transportation procurement puzzle. Each transportation procurement approach has its benefits and drawbacks:
Relying on Internal Analytics
- Today, most shippers employ dedicated transportation analysts to review historical performance, forecast, and budget, providing some idea of their transportation demand and supply trends and costs. Unfortunately, this analysis can often get delayed for weeks or even months, depending on the number of available resources and bandwidth.
- The downside to this approach is that it does not provide a holistic view of the freight market in a broader context.
Conducting a Transportation Bid
- No matter how well you plan, preparing for a bid can take the lion’s share of your transportation and procurement department’s time and resources. While you will get a good market reality check, as carriers respond with information that is tailor-made to meet your business needs, these bid-specific freight rates and capacity estimates represent only a cross-section of all available freight rates and only reflect your supply chain network’s volumes and needs at that point in time. In other words, bidding does not guarantee you’ll secure the best possible freight rates, secure adequate service levels or help you adapt to changes in your network or requirements over time.
- Don’t get us wrong: Annual transportation bids are a good thing. But, what if you could go out to bid when the market is soft? While you may be able to save some time and stress associated with regular bidding, not to mention taking advantage of market opportunities, this approach requires that you actually know when the market is soft or that it will soften. Not so sure of your crystal-ball reading capabilities? Then the real question to ask yourself regarding bidding is, How can I not only be reactive but proactive and prepare for changes early enough to reduce bid-related costs and extract maximum value for my operations?
Utilizing Research and Consulting Services to Gain a Holistic Perspective
While using external analytical services may help you augment or bypass internal analysts’ capabilities, this transportation procurement approach may or may not give you access to more information beyond your company history. For example, many agencies and companies provide access to bidding databases and “average market rates.” But ongoing use of these services can be expensive, especially if you want to maintain the effect over time. The answers you get today will be less relevant tomorrow. They’ll be even less relevant in three years, so that you may be looking at a series of expensive ongoing engagements. Likewise, you have no way of knowing whether these services provide valid rate estimates for your specific needs. Are they 100 percent applicable to your operations? Is their analytical methodology, when applied, actually making sense and leading to clear and actionable insights?
At Chainalytics, we find that a hybrid approach that combines analyzing your service requirements and carrier performance with a broader freight market view using credible, competitive business intelligence tools helps most companies thrive over time. Chainalytics leverages its exclusive access to freight market intelligence sources that offer external benchmarking based on regular and timely econometric modeling of transactional freight rates markets and their underlying components. This intel reveals the cost drivers that actually influence carrier rates. These sophisticated transportation benchmarking services are available to transportation teams across multiple modes and across numerous international markets.
In the 21st century, transportation procurement teams are not just answering the simple questions of getting from A to B. Instead, they solve complex business problems every day, employing the right mix of transportation procurement approaches that deliver for their organization.
Chainalytics accelerates fact-based transformation for supply chain leaders around the globe delivering market-leading consulting and managed services. We bring unparalleled passion to our core purpose: to help leaders realize maximum value from their supply chains. Our top supply chain talent enabled by our proven and innovative digital assets – methods, tools, and content – deliver actionable insight and measurable outcomes to some of the world’s largest and most complex enterprises. With locations across North America, Europe, and Asia-Pacific, Chainalytics serves companies globally in a borderless fashion. To learn more, contact us and follow us on LinkedIn.
