Did you know that large companies need continuous improvement to stay ahead of the competition, increase customer satisfaction, improve efficiency, reduce waste, and increase profitability? Whether it is personal or professional, the start of a new year is a perfect time to look back and reflect on successes and failures. Once failures are identified, opportunities to improve will surface. When it comes to business, understanding the latest trends and technologies and embracing the need for change and innovation are key ingredients. Take logistics, for example, many transportation management professionals still believe that decades-old processes work just fine, so why upset the apple cart? This type of mindset is stagnant and toxic, especially knowing that transportation can account for 10-15% of a company’s total expenses. Here are some of the core issues we’ve uncovered throughout 2022, which can help large shippers evolve the critical freight procurement process in 2023.
#1: Don’t Treat Freight Procurement As A Commodity
Freight procurement is a critical part of a company’s supply chain and has major implications for overall success. Unfortunately, many executives still believe freight procurement is a commodity, like purchasing office supplies. Leaders must realize that freight procurement is more than buying a product or service. It involves strategic planning, sourcing, and analysis that could lead to tens of millions of dollars in wasted costs and lost revenue every year. If a company’s freight procurement mindset, processes, and tools have not been evaluated or have not changed in recent years, there’s a high probability the company is missing out on substantial performance improvement opportunities.
#2: Using Static Freight Procurement Processes
Traditional supply chain processes were built for a world we no longer live in. To effectively manage disruption, and marketplace fluctuation, freight procurement must evolve from static to dynamic. For example, when truckload rates are locked in through the transportation RFP process, the objective is to create reliable capacity for shippers and demand for carriers. It’s supposed to be a win-win for both parties. But in reality, volume changes regularly, which means the value of trucks increases and decreases often. As this fluctuation happens, shippers lose by either overpaying on the contracted rate or being under-serviced as contracted carriers reject loads to find more lucrative business elsewhere.
#3: Perception That Implementing Freight Procurement Automation Is Costly & Difficult
Knowing how daunting it is to launch a new transportation management system (TMS), most logistic professionals believe that changing the freight procurement process would be too costly or complex. What most don’t realize is that 2022 brought us innovative technological advancements and cutting-edge TMS plugins that can be up and running quickly. Award-winning software, Optimal Transportation Spend (OTS), integrates with popular transportation management systems, such as SAP and Oracle, and works 100% behind the scenes to dynamically match compliant carriers with loads. This innovative software has advanced the critical freight procurement process by reducing labor costs, reducing truckload costs, and improving on-time delivery (OTD) for many large shippers.
#4: Not Obtaining 100% Freight Cost & Service Transparency From Partners
Unfortunately, shippers have not been granted full data transparency from providers, so they often rely on historical data or market averages. To quickly pivot when volumes fluctuate, they need a real-time, 360-degree view of transportation costs and service levels. If they understand the exact cost of each shipment, including fuel surcharges, accessorial charges, carrier pay, and hidden 3PL/ broker fees, they would understand the true market cost for each load at any given time. With this intel, shippers can accurately predict and compare rates while selecting the best possible carrier for each shipment. Additionally, they can monitor the costs over time and make necessary carrier network adjustments to ensure they are getting the best value for each truckload. This level of visibility allows shippers to make informed, data-driven decisions on how best to optimize their freight spend. New tools, such as TL360, provide 100% data transparency in the form of real-time, executive-level reporting that helps shippers prepare for RFPs, and know which carriers to add, drop or keep.