Time to Transform Transportation Procurement?

Earlier this year, in a presentation at the Manhattan Momentum Connect conference, Dr. Chris Caplice from MIT argued that “the dominant design in transportation procurement is now outdated and it’s time to transform the process.” I encourage you to read my brief summary of his presentation for more details, but here’s a key quote from his comments:

“The big thing that’s come out of the 2017-2018 timeframe is this whole idea of a call to action. Shippers and carriers have gotten the OK to experiment. And that’s really exciting because everyone has recognized [the limitations and drawbacks of the dominant transportation procurement design] and that there is no ‘one-size-fits-all’ solution.”

The theme of “transforming the transportation procurement process” came up again last week, with C.H. Robinson’s announcement that it is “reinventing the way transportation is purchased with its launch of Procure IQ™, a new tool that leverages data from the world’s largest shipper and carrier community to disrupt the decades-old tradition and one-size-fits-all annual bidding approach to buying freight transportation.” Here are more details from the press release:

Designed for large shippers of U.S. truckload freight, this free tool disrupts the traditional transportation-buying process by providing an opportunity to analyze each specific freight lane through a comparative pricing, volume and service analysis rather than solely purchasing transportation lanes in bulk during an annual bidding process. It allows a shipper to discover the most efficient way to buy with the ability to analyze each individual lane. For example, it is often more cost-effective and reliable to purchase less frequently traveled lanes with real-time pricing engines, while other more frequently traveled lanes are best purchased through a proactive contract in order to optimize savings and service.

Procure IQ works by inputting customer shipping needs and data, such as lane origin and destination and volume estimates, and then integrating that with C.H. Robinson’s unmatched dataset filled with billions of transactions from a community of 200,000 unique carriers and shippers and 18 million annual shipments. Using this information advantage along with predictive analytics and artificial intelligence, Procure IQ provides shippers a custom visual analysis with tailored recommendations for optimal procurement and capacity strategies for each shipment.

This is yet another example of the power of the network effect in logistics, in this case applied to transportation procurement. As I described it earlier this year in “Network-based TMS: How Connected Platforms Will Transform Transportation Management in 2020 and Beyond,” a research e-book produced by Adelante SCM and published by Kuebix (a Talking Logistics sponsor):

In the travel industry, you have online platforms like Expedia that effectively break down the silos between airlines, hotels, and car rental companies. While each of these industry stakeholders have their own software applications to manage their operations, they also connect to Expedia. This shared connectivity to a common platform provides users with aggregated visibility to available capacity (seats, rooms, and cars) and costs (airfares, room rates, and car rental fees) — not only for today and tomorrow, but further into the future too. Users can also plan and execute transactions across these stakeholders (“plan a vacation”) via the common platform. 

If you replace airlines, hotels, and car rental companies with shippers, carriers, and brokers, and you replace Expedia with a network-based TMS platform, you create similar synergies and opportunities in the transportation market.

Network-based TMS platforms can eliminate many of the inefficiencies and waste in the industry, and enable smarter and more synchronized processes, by breaking down the data and workflow silos between shippers, carriers, and brokers. That is, by aggregating and providing real-time and forward visibility to loads, capacity, rates, service metrics, and other data, and coupling it with machine learning, optimization, and automated workflow capabilities.

As Billy Beane said in his keynote presentation at the Food Shippers of America Conference this past February, “You can’t run your business in 2020 like it’s still1999.” Considering the market realities of today, along with the advancements in technology, you probably shouldn’t run your transportation procurement engagements today like it’s still 1999 either.

Do you believe the time to transform transportation procurement has arrived? Are you leveraging network-based benchmarking data to inform your procurement process? Post a comment and share your perspective!

For additional commentary on this topic, please read: