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 is created.
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 may save 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.
Zehrah is a Supply Chain Analyst at Transnova. Her current work extends to data analysis, facilitating tender processes, commercial and rates management, as well as fostering customer and supplier relationships. Prior to joining Transnova, she graduated in Industrial Engineering at Wits University. Zehrah is interested in Supply Chain Management and Fast Moving Consumer Goods.