Transportation issues are in the spotlight today, with congested ports, capacity constraints, and trucker protests among the current headlines. As shippers, carriers, and logistics service providers look for ways to innovate and eliminate waste and inefficiencies from transportation management, one area that is starting to get more attention is transportation procurement. For example, an October 2020 survey of our Indago supply chain research community, who are all supply chain executives from manufacturing, retail, and distribution companies, found that 91% of the respondents either “Agreed” or “Strongly Agreed” that the time has come to transform the transportation procurement process.
How do you transform transportation procurement? What are the barriers? And how can technology help? Those are the key questions I discussed with Mark McEntire, Senior VP of Operations at Emerge in a recent episode of Talking Logistics.
Freight Is In the Boardroom
I began our discussion by asking Mark his thoughts on the Indago survey results. He comments that not only are they not a surprise, he thinks the percentages would be even higher today.
“Freight is in the boardroom,” is how he put it. “Looking at most companies’ P&L, freight is often one of their biggest expenses. Shippers tell me their transportation decisions are critical, yet a lot of them are still using old, antiquated ways of procuring transportation; they will do an annual bid, set it, and then forget it.
“Leading shippers are creating signals that let them know when the routing guide is starting to deteriorate,” Mark continues. “But then what do you do about it? Do you have the technology to take action, because in this market, speed matters. If you’re not reacting immediately, dollars are going out the door, service is impacted and shelves are empty. It’s a domino effect and it all starts with procurement. I compare it to college athletics where it all starts with recruiting. In transportation, it all starts with procurement.”
Barriers to Success
Why aren’t more companies trying to transform their procurement processes in the face of today’s challenges? Our Indago survey found the biggest barriers (at 30% each) were a lack of data sharing/transparency and a lack of technology. I asked Mark to comment on this.
Mark notes that it is surprising more companies aren’t moving ahead with this transformation. “Companies have to become comfortable with being uncomfortable. But it’s relatively low risk. You can pilot a new process and system. You can look at the results and adjust. You can adopt slowly, take a crawl-walk-run approach. Data-sharing, transparency, and visibility are all benefits of adopting technology.”
In short, the old barriers of multi-million dollar, multi-year implementations are no longer relevant with the availability of network-based, software-as-a-service systems that can be implemented quickly at relatively low cost and risk.
Does transforming the freight procurement process go beyond having a transportation management system (TMS)?
“There are TMS solutions that have their own procurement modules, but there are other technology solutions that you can integrate with your TMS or can be used without having a TMS,” says Mark. “I don’t think they’re mutually exclusive.”
“If you add a procurement system you get a network effect that opens you up to a wider view of untapped capacity beyond the same carriers you’ve been working with for years. It gives you access to thousands of carriers you’ve never had access to before that you can vet and add to your network. In a marketplace enabled by technology, you have visibility to optionality that doesn’t exist for you today. There is so much value in finding capacity in a marketplace, including small and medium-sized carriers, as well as niche carriers. It eliminates friction and increases speed in the process.”
How can companies get started in transforming their freight procurement process? In addition to starting small and taking a low-risk, low-cost approach, Mark offered other ideas and recommendations. “Again, freight is in the boardroom now and careers are made or broken on this,” he says. Therefore, I recommend you watch the full episode for all of Mark’s insights and advice on this topic. Then keep the conversation going by posting a comment and sharing your own thoughts and experiences on transforming transportation procurement.