Three Tips for Improving Freight Procurement in the Supply Chain Logjam
Originally posted on SupplyChainBrain.
No part of the supply chain is immune from the turmoil currently plaguing the supply chain industry — especially not freight procurement.
Even when things are going well, freight procurement is critical to the success of the supply chain. But during these trying times, its importance can’t be understated. Following are some procurement-related areas for shippers to consider during this period of disruption, along with a few tips on how best to manage them.
Implement modern technology tools. The the industry’s overall uncertainty has made life complicated for shippers, with pockets of open capacity cropping up unexpectedly. Today, many shippers are using outdated technology that doesn’t allow them to adapt to market changes. As a result, they may be missing the boat on less expensive procurement opportunities.
Fortunately, tools like artificial intelligence and machine learning are becoming stronger and more reliable each day, providing shippers with greater agility and allowing them to respond more quickly to market conditions. In the process, they can better adapt their procurement strategies to know ahead of time when capacity becomes available. They can also optimize their expenditures and ensure that idle shipments are going out.
Embrace digital transformation. Historically, logistics has been slow to adapt to changing technology. And today’s market climate is exposing just how far behind the industry is on this score. It’s common for logistics teams and shippers to be without the data infrastructure necessary to manage any disruptions that take place. And any data they do have isn’t comprehensive, since third-party procurement partners tend to operate as a reporting black box. This fragmented view of data is worsened by the internal operations of shippers, creating unnecessary roadblocks to the sharing of information.
All this means it’s up to shippers to accelerate their digital transformation efforts and acquire the necessary data for real-time decision-making. To be sure, shippers and logistics companies have their plates more than full these days. Nevertheless, acquiring new data capabilities should be a top priority if they want to survive current crisis.
Eliminate brokers to get past capacity congestion. At the forefront of today’s evolving supply chain issues is port capacity and operations, with trucking capacity not far behind. Whether it’s finding the right carrier or dealing with the driver shortage, shippers can’t get the capacity they need. At the same time, primary carrier rejections rates are skyrocketing. This is leading to an uptick in procurement costs, since shoppers are increasingly having to rely on brokers. U.S. Bank found that freight spending by shippers jumped 32.6% from the same time last year, and is up 5.6% since last quarter. It’s going to be tough for shippers to sustain this state of affairs, especially with the heightened stress from the pandemic.
I’s time for companies to move beyond their established procurement processes to gain better visibility into the capacity market. That means learning the processes necessary to eliminate brokers and other partners that make decision-making a more complicated affair.