“We close our eyes and the world has turned around again.” That’s a lyric from one of my favorite Oingo Boingo songs, and I think it perfectly describes the world of supply chain management — and the transportation market in particular, which has taken many turns over the past few years. With each turn, shippers (and carriers) need to adapt to new market realities, and this often means adopting new processes and technologies. This is certainly happening in procurement. How are shippers upleveling their real-time procurement strategies? What makes real-time procurement possible today, and what are the benefits? Those are some of the key questions I discussed with Bill Driegert, Head of Operations and Cofounder at Uber Freight, on a recent episode of Talking Logistics.
Changing Procurement Strategies
I began our discussion by asking Bill what has changed in transportation procurement that requires shippers to uplevel their strategies. Bill explains that although what shippers care about the most hasn’t changed — that is, ensuring service to customers and feeling they are getting a fair price — the world and technology have changed.
“COVID shocked the system,” Bill says. “We’re coming out of the pandemic with twice the amount of spot freight in the market as before. It accelerated the rate of new technology getting adopted. Shippers have to uplevel their strategies because there will be future shocks to the system and the technology has dramatically evolved. That has changed how the freight mix has played out and changed the carrier mix. Shippers must understand how to apply those changes to their own procurement networks.”
Another change is that CEOs and CFOs are much more aware of the impact transportation has on the business and they want real-time information about what’s happening. This puts a lot more pressure on transportation executives.
What is real-time procurement?
Bill notes that, “What’s changed is that shippers can now get real-time pricing information and tender loads instantaneously. All the major TMS vendors now offer real-time pricing information and tendering capabilities through APIs. Shippers can go online through their TMS or our portal to see real-time pricing with guaranteed capacity behind it, tender their load, and within seconds it’s available to the carrier marketplace for booking. That wasn’t possible a few years ago. It gives shippers (and carriers) more information and options.”
What are the biggest constraints to implementing real-time procurement? Watch this minute clip for Bill’s response.
What Makes Real-Time Procurement Possible Today?
What has changed behind the scenes to make this possible today? Bill explains the basic building block is the incorporation of APIs into transportation management systems to enable real-time data exchange.
Another cultural and technology shift is that 96% of people in the U.S. between the ages of 18 and 50 now own a smartphone, and 86% worldwide. That puts real-time technology in the hands of people executing transactions, which can happen anywhere, anytime. “It has allowed us to fundamentally reengineer the process to put the technology in the hands of the user,” Bill states.
Another big change in the past 10 years is the accessibility and quality of tools that support data science, machine learning, and AI to gather and analyze real-time data to generate real-time pricing models. This has enabled real-time analysis of a wide range of variables that go into both carrier and shipper pricing models across various time horizons. “While this isn’t a new concept, getting all of the technology together and getting widespread adoption is what’s made this possible today,” Bill says.
What are the challenges of generating real-time prices? Watch this minute clip for Bill’s response.
Bill comments that a recent survey indicated that 96% of shippers invested in new transportation procurement technology and strategies to deal with the very volatile freight market during the pandemic. Having real-time access to the market to answer the question of whether they’re getting a fair rate for every lane and load is a huge benefit.
“For shippers, it’s the empowerment to get their loads covered at a fair price,” says Bill. “The real-time information that is available in the marketplace gets rid of the information asymmetries that allowed brokers and carriers to increase their margins.”
How can shippers get started on upleveling their real-time procurement strategies? How can logistics partners help? What is the carrier’s perspective on real-time procurement? I encourage you to watch the full episode for all of Bill’s insights and advice on those questions and more.Then keep the conversation going with your questions and comments.