Discussing the Lessons Learned in Transportation Procurement Management

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 to successfully navigate the transportation market in 2023 and beyond. The results of the survey were included in a research report published recently by Emerge. We discussed some of the lessons learned with Brian Honer, Enterprise Sales Director at Emerge, on a recent episode of Talking Logistics

More Frequent Freight Procurement

In the survey, 62% of respondents indicated they are conducting freight procurement engagements more frequently than in the past. I asked Brian to explain why.

Brian comments that there was a lot of fluctuation in capacity and rates over the past two years that caught many shippers off guard. A number of shippers saw their routing guides deteriorate rapidly and they were forced to use the spot market more frequently to cover their loads, which proved to be costly. 

“This has forced supply chain professionals to be more innovative in digitizing parts of their supply chains so they can source capacity and rates more effectively,” says Brian. “Shippers are being more proactive in making sure they have resilience in their route guides. They are still doing annual bids but are then benchmarking them to see where they may be overpaying or underpaying. They’re also being proactive in doing mini-bids to take advantage of better rates when available.”

The result is that some practices shippers were forced into during the pandemic have become best practices that will help them navigate future market shifts more effectively.

Spot Market vs. Contract Carriers

Another major finding of the survey was that 83% of respondents said that going forward the mix between the use of the spot market and contract carriers will be more dynamic. Brian indicates that this makes sense because carriers, especially the smaller ones, see the spot market as a way to increase utilization and income while shippers use it to cover surges in demand. The shift is that shippers also now want to be more strategic in how they use the spot market to take advantage of favorable rates.

“Although spot market volume is down 30% since the pandemic surge, shippers want to be ready when market changes occur,” notes Brian. “They want actionable data to create rate competition among their carriers, they want real-time performance data, and they want to see how their teams are balancing rates and performance. Technology provides the data to take to the C-level and to manage their freight spend more strategically.”

Spreadsheets No Longer the Answer

With all of the change and disruption over the past two years, 79% of respondents agreed (with 41% strongly agreeing) that spreadsheets no longer are adequate for managing transportation. I asked Brian to elaborate.

Brian explains that using spreadsheets is time-consuming and error-prone. More importantly, they do not enable transportation analysts to do scenario analysis, which requires gathering data from a lot of moving parts across the enterprise. And doing more frequent procurement bids is nearly impossible with spreadsheets. “The ability to centralize that in a digital database can be very powerful.”

Keeping the C-Suite Informed

If there is one thing the pandemic did it was raising awareness within the C-suite of the strategic importance of transportation management. In fact, 79% of survey respondents said it is now important to keep the C-suite informed on what’s happening in the transportation market. But how can shippers do that effectively? Brian provides shares some insights and recommendations on this question (and more), so I encourage you to watch the full episode for all the details. Then post a comment and keep the conversation going with your questions and comments.