Editor’s Note: The following is an excerpt of a research report published recently, “No More ‘Set It and Forget It’ – And Other Important Lessons Learned in Transportation Procurement Management.” The research, conducted by Adelante SCM and commissioned by Emerge, explores how shippers and carriers can transform their approach to transportation procurement moving forward and highlights several lessons learned transportation professionals should apply to succeed in the year ahead. Please visit the report page for more information about the research and to download the full report.
When it comes to the transportation market, there are some fundamental truths. First and foremost is that the market is cyclical. Rates, capacity, and fuel prices rise and fall — sometimes quickly, sometimes over extended periods of time — in response to economic conditions, consumer demand, and a variety of other factors. Another fundamental truth is that exceptions are the norm in transportation management. “Everything is going exactly as planned” is rarely (if ever) said by transportation executives.
Over the past two years, triggered by the Covid-19 pandemic and its ripple effects, these two fundamental truths have been supercharged: the transportation market has been highly dynamic and volatile, and exceptions are more frequent than ever.
Therefore, one of the key lessons learned for transportation professionals is that the days of “setting and forgetting” your transportation strategy and routing guide are over, at least if you want to remain competitive. In fact, in an Indago survey of supply chain and logistics executives conducted in October 2020, the vast majority of the respondents (91%) either Agreed (61%) or Strongly Agreed (30%) that the time has come to transform the transportation procurement process.
How can shippers and carriers transform their approach to transportation procurement moving forward? What other lessons learned should transportation professionals apply to succeed moving forward?
In September 2022, we surveyed members of our Indago supply chain research community — who are all supply chain and logistics executives from manufacturing, retail, and distribution companies — to get their perspective on the important lessons learned over the past two years that will help them successfully navigate the transportation market in 2023 and beyond.
Lesson 1: Need to Conduct Procurement Bids Throughout the Year
A majority of our Indago member respondents (62%) are conducting more freight procurement bids/engagements throughout the year compared to before 2020.
This practice of conducting more frequent procurement bids started to gain momentum in 2021. For example, in a survey we conducted in September 2021 (“Trucking Spot vs. Contract Rates”), the following comments were submitted by Indago supply chain executive members:
“2020 was the weirdest freight market I had seen in 25 years; 2021 said ‘Hold my beer.’ All joking aside, it has been a challenge to figure out how to price and procure freight this year…We have not been able to get a pattern to capacity availability because it is constantly changing…We are looking at 3-to-4-month windows for mini-bids and trying to monitor and mitigate cost as much as possible.”
“Previously, we benchmarked our rates once per year during our annual contract negotiation process. Currently, we have moved to a more dynamic monthly rate adjustment model pegged to DAT data.”
This trend will likely continue moving forward, as this comment by a VP of Logistics at a leading wholesale distribution company suggests: “We plan to begin more formal periodic transportation procurement events in 2023.”
For other important lessons learned related to transportation procurement management, please download the full report.