The Advantages of Strategic Procurement
A sound strategy is important in every industry. It's even more important than ever when the prevailing theme includes major changes to the regulatory landscape. A driver shortage, competitive rate market, and reduction in productivity will make it more difficult for shippers to secure capacity as we progress into 2018 and beyond.
Strategic procurement practices complement and provide increased emphasis on capacity generation, carrier management and promoting shipper of choice initiatives to bring customers and carriers together in a challenging environment. Continued conversations with shippers bring consensus and clarity to forecasts: the leading obstacle they face is securing competitive capacity and finding a provider who offers effective continuous improvement to their supply chain.
Deciding if This is the Right Time for a Procurement Sourcing Event
Procurement sourcing decisions can be difficult. Most commonly, the pain of no change will be greater for a business than the pain of change. To do nothing in an unpredictable market is a risk many shippers are not willing to take. It is proven that shippers who have made the decision to not bid and address rate increases individually have experienced higher rate increases compared to strategic procurement sourcing.
What should a shipper evaluate to determine if a procurement sourcing event is needed? Below is a list of procurement bid considerations:
Network changes: For most transportation modes, shippers can follow a 12- to 18-month procurement cycle. Other indicators may include network growth, shrinkage or a new product launch. All of these could impact the landscape of your network and open the door to potential optimization options that did not exist before.
Securing and realigning capacity: Similar to shippers experiencing network changes, a carrier's network can also change. A carrier's network changes may impact its ability to provide committed capacity or sustain rates.
Right-size your carrier base: Providing carriers the opportunity to view the entire customer network tends to reduce the number of overall carriers needed and allows them to align with the lanes that complement their operational network. It also ensures the shipper is vested in a sourcing strategy that isn't solely about rates.
Standardize agreements and supporting programs: Reduces business risk, positively impacts pay terms and overall carrier relationship.
Mitigate rate increases: Both shippers and carriers are aligned within the network, allowing for competitive bidding and secured capacity.
What to Look for in a Procurement Sourcing Provider
Transportation expertise: A project team experienced in the transportation industry, market trends, carrier relationships and optimization technology is critical to sourcing success and aligns your transportation solution to your supply chain strategy.
Technology: Optimization algorithms quickly produce scenarios and identify network options. This work incorporates carrier information to weigh your results based on incumbency, capacity commitment, regulatory, safety, historical performance and financial stability. When done correctly, the procurement sourcing provider will systematically engage carriers and provide feedback through a dynamic communication platform.
Process: Proven procurement sourcing processes will enable a scalable, optimal solution. Process is imperative to successfully obtain a shipper's supply chain objectives and ensure there is alignment on a shared strategy that builds the foundation to improve operations execution and network compliance.
Take the fear out of procurement sourcing by finding a provider who can deliver all three of the necessary components: transportation expertise, technology and process. It is the only way to effectively balance your service and cost objectives with a scalable and sustainable solution.