The Evolution of Transportation Buying Practices
It is interesting to witness the changes that have occurred in transportation purchasing. For one, the annual bid mentality is gone. With access and visibility to posting boards, SaaS transportation networks, and optimization technologies, transportation procurement has evolved to the point where it is truly a continuous management function.
Q: How has innovation affected the purchasing of transportation services over the years?
TIMMER: After 20 years in the transportation industry, it is interesting to witness the changes that have occurred in the mentality deployed for transportation sourcing. I can remember the days working for a mid-sized truckload carrier developing pricing for the sales team. Tariffs and discounts, rate sheets and napkins— it was a lot different then. It took months to participate and obtain results from the customer. In most cases, the way to get business was to ask for a few lanes to prove your capabilities, then hope to grow with more volume.
Having participated in those processes, it is interesting to see the evolution of behaviors of the market. As the late 1990s approached, we saw more of a trend to participate in annual network bids. These were also very complex, manual, and time-consuming. The mentality of the buyer was to put more on the table for the carrier to see the bigger picture when pricing and committing capacity. As the century turned, technology began to play a role in streamlining these processes. Software companies began to see the industry paying for this type of technology and developed high-end, logic-based tools to manage the process.
Today, we see another shift in the mentality of the transportation buyer. In a recent LeanLogistics survey, 52 percent of all shippers are now bidding freight on a local, regional, and lane basis, with 70 percent putting freight out to bid multiple times a year. This is a dramatic change from the network annual bid mentality that was prevalent since the late 1990s.
But what does this tell us about our market? I believe we are witnessing an evolution that reflects cultural influences. Today’s buyer has stepped into transportation in an age where technology and access to transportation networks is commonplace. The user is accustomed to having technology handle administrative and logic-based decisions.
Additionally, the access to potential suppliers is less about a golf outing and more about a cost-plus-service equation. Don’t get me wrong, relationship is the backbone for all business transactions, but relationship doesn’t keep people’s jobs and increase their bonuses. Savings do. With access and visibility to posting boards, SaaS transportation networks, and optimization technologies, transportation procurement has evolved to a point where it is truly a continuous management function.
Times sure have changed. I believe that these changes will help sustain a vibrant critical industry.