The previous decade has seen many companies, mainly those handling manufacturing operations, change how sourcing of direct materials is executed – from an administrative function to a somewhat strategic procurement approach that has seen the creation of a new position “the Chief Procurement Officer.” .
Similar transformational patterns have also been seen in the transportation industry. There’s been a shift from executing daily freight transactions to integrating top-level corporate planning and procurement strategies.
Both Large and Mid-sized shipping companies rely on procurement personnel. But lack of proper coordination across shipping locations still poses a big challenge, and has since forced smaller companies to maintain lean shipping departments, giving them ability to focus on transportation of products while utilizing available time; hence, the remaining time is utilized for contract negotiations and conducting freight spend analysis.
Considering the instability of prevailing market conditions, a strategic shift of transportation procurement from a tactical to a more strategic approach is vital. A recent study by American Shipper found that, only 40 percent of manufacturing and retail shippers plan on expanding ocean carrier bases, while only 60 percent plan to expand their trucking carrier bases this year.
To build a competitive chain supply management, here are strategies you may need to incorporate if you’re looking to elevate freight management in your organization.
- Demand Driven Attitude
Demand forecasts coming from sales and operations planning is important, and should link to centralized transportation planning services that embrace a holistic view of demand and supply requirements across every business unit. This is helpful for transportation planning as more focus is placed on future happenings.
- Hire an Exceptional Team of Data Analysts
A team of data analysts with ability to understand the evolution of transportation and bid responses are better placed to draw insights that result to additional leverage in contract negotiations. Tech savvy data analysts could possibly envision future scenarios, and use them to stimulate the impact of carrier bid responses by utilizing live shipment data.
- Adopt Performance Metrics for Carriers
With a structured monitoring approach, carriers have the ability to make sound decisions based on recently available data instead of depending on anecdotal evidence.
- Watch Out for Market Realities
To create a supply chain advantage over your competitors, you need to watch out for, and capitalize on current factors that seem to positively impact transportation rates. This requires flexibility and positioning to quickly negotiate discounts with carriers.
- Seperate Your Freight Spend Data
When running an analysis on freight spend, ensure no hidden charges are left out. Information Systems help do this because they evaluate modes or equipment individually, so that every category of charge (fuel accessorial charges/line hauls) can be displayed separately.
- Use Technology to Streamline Operations
Technology is vital for running day-to-day business operations since it improves decision making processes. By utilizing technology, you will free procurement personnel from the mundane activities they have to cope with everyday thus letting them focus on the development of other important strategic relationships with logistics acquaintances. It also helps automate any other administrative processes, simplifying the processes.
- Provide Flexible Bidding Options
In the process of negotiating, carriers may come forward and suggest favorable options for bid packages, which in the long run work in favor of both parties through better decision-making.
All in all, using technology and a defined sourcing process goes a long way towards providing benefits for companies that constantly seek to cut on operating costs.
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