Managed Procurement Services Allow Companies to Optimise Transportation Investments

Since the majority of transportation expenditures are typically incurred through long- term carrier contracts, strategically sourcing transportation services is fundamental to successfully managing supply chain costs.

Transportation sourcing is a significant challenge for many companies. Typically, the procurement process to identify potential new carriers and award business requires a major investment of resources. The transportation team must develop a request for proposal (RFP), follow up on carrier responses, evaluate multiple award scenarios, and implement new carriers into the mix.

In many cases, companies do not have a dedicated resource to manage the freight procurement process, resulting in usage of key personnel from other areas to support the sourcing event. This is disruptive to current operations, and prevents the development of functional expertise to drive continuous improvement in the transportation network.

Lack of carrier profile data, vetted capabilities and industry benchmarks are also common issues for many companies. Without comparative data points, companies do not know if carriers are costing too much or if lanes are inefficient. Capacity can become an issue but it remains unclear if that is due to the current carrier’s inefficiencies or if more carriers are required to meet demand.

Managed procurement services that combine transportation procurement skills, knowledge of carrier capabilities, and supply chain expertise, can optimise a company’s transportation investment. These types of procurement services provide industry benchmarks and technology to more efficiently and effectively handle transportation procurement.

Typically the managed procurement process begins with a holistic review of a company’s lanes and rates to determine which need attention to best deliver on overall corporate goals. By comparing performance internally against external industry benchmarks, managed procurement service providers focus on out-of-tolerance conditions, identify new carrier opportunities and discover strategic cost and service improvement opportunities. Once a company’s current performance is analysed, a transportation procurement project plan can be created.

With the latest advances in Transportation Procurement technology, companies can:

• Measure the effectiveness of procurement events by evaluating the financial impact of proposed rate changes before business is awarded
• Determine the scope of the procurement event - entire network, select regions, or particular lanes
• Streamline and shorten procurement cycles using repeatable and automated processes
• React faster to changing business conditions
• Support collaborative relationships with carriers
• Enhance productivity for sourcing professionals
• Know if carrier bids compete favourably against market rates
• Improve carrier performance and freight cost management due to fewer tender declines
• Monitor procurement event activity in real-time
• Receive faster, more accurate responses with carrier-friendly web application
• Significantly reduces cost exposure

In addition to unlocking savings, transparency into carrier routes and pricing drives overall improved bid response quality. And with improved quality comes the likelihood of achieving expected results from your procurement awards.

This shift from a manual to a technology-driven process have saved companies up to 80% of their typical transportation procurement event costs. More importantly, it can result in rate savings of between 4% - 8%, if not more, which translates into significant savings for the bottom line.

Managed procurement services offer fast realisation of awarded rate reductions, introductions to new carriers and best-in-class cost performance across all lanes.

Contributed By: Eric Gower-Winter, Managing Director, Transnova