On Wednesday 9/23 I attended American Shipper Magazine webinar on transportation procurement. Working for food and beverage shippers for over 30 years and being responsible for transportation procurement for over 20 of these years, I’d give this presentation 4.5 out of 5 stars. Speakers were: Vikram Balasubramanian  of MecuryGate; Andreas Katsaros of Blue Grace Logistics; Steve Banker of ARC Advisory Group; moderated by Eric Johnson of American Shipper.  A few key takeaways:

  • American Shipper Magazine’s survey of shippers for the last 7 years reveals that most shippers still conduct RFP’s manually using a hodgepodge group of systems. However  automated procurement is growing  whether conducted in house, by a consultant, or by a 3PL.

Key areas/buckets in which automated procurement and TMS use reduce freight spend:

  1. Increase use of preferred carriers  most common savings: 2-4%
  2. Better procurement negotiations   most common savings: 2-4%
  3. Lower cost mode selections             most common savings 2-4%
  4. More fully loaded equipment          most common savings 2-4%
  5. Better routing                                      most common savings 2-4%
  6. Reduction in carrier overcharges   most common savings < 2%

Best practices in freight procurement:

  1. Establish a centralized freight procurement practice
  2. Be demand driven  align planning cycles with S&OP process
  3. Evaluate market benchmarks and assess your relative position
  4. Use of optimization tool to identify opportunities for cost savings
  5. Adopt performance metrics
  6. Develop process excellence over time

Leveraging technology in freight procurement:

  1. Automate:     bid generation;bid response;award notification;contract creation
  2. Analyze:         baseline benchmark;market intelligence prevailing rates;contract compliance
  3. Collaborate:  consolidation across all business units;iterative bidding process;carrier portal bid response; public and private load boards
  4. Optimize:      Evaluate bids with real shipment data; identify least cost provider, carrier mix, modes, and routes;what if simulation, consolidation strategies, and network design

Blue Grace Logistics Procurement Process

  1. RFP preperation
  2. RFP execution
  3. RFP analysis
  4. RFP implementation
  5. Measure and monitor

My comments on the above procurement process: most shippers spend most of their time and effort on steps 2 and 3. execution and analysis. For a successful RFP steps 1, 4, and 5 are the most critical albeit not the most glamorous. Spend enough time and resources on:  up front preparation( date cleansing, stakeholder buy in, location profiles, carrier invite strategy, etc); Implementation( contract administration, freight payment set up, on site visits with carriers, loading rates into TMS) and Measure/monitor( performance, pricing, documented savings, carrier and location report cards, carrier relationship management)

I would encourage shippers to sign up for future webinars by American Shipper Magazine.

 

Joe Lombardo, NGNF  (nice guy, no freight)

 

 


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