Getting a Grip on Transportation Procurement
- Spend Analytics
- Transportation and Logistics
Few spend categories combine the broad impact and complexities of transportation. How can shippers optimize their carrier relationships, keeping quality high, risk low, and costs in line?
In the transportation context, spend optimization tools accomplish this delicate balancing act by comparing proposals from multiple carriers and logistics providers. Following business rules, they identify the best provider or, by using additional restrictions, narrow the choice. Note that lowest shipping cost isn’t necessarily the goal in every case. Sometimes, a premium price is justified, either because of the nature of the shipment or the particularities of a customer.
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Shippers who continually leverage their supplier relationships with procurement technology are best positioned to blunt the constant savings erosion in transportation. Companies who unlock these interactions can gain substantial incremental savings.
While many shipping companies use procurement technology today to optimize their transportation arrangements, few actually realize most or all of its value. Why? They aren’t fulling exploring all the available data and its complex interactions.
Multidimensional analysis, review
By using new and powerful analytics, shippers can now consider many more options from potential suppliers–varying routes, equipment, service levels, and even modes. When contingent pricing based on conditions is added, the analysis becomes even more complicated.
In this data-driven environment, contracts and rates must be adaptable. This is where modern procurement technology and automation excel. A best-in-class procurement tool will continually evaluate current and prospective partners, react to change, and always look to improve the supplier mix. For example, it will adapt to capacity and route updates from carriers, as these occur. As a result, the shipper’s carrier base and routing guides will be optimized on an ongoing basis.
In operation, transportation procurement technology reaches out to collect data from ERP systems, transportation management systems, freight forwarders, and other sources to build a single source of truth. This way, partners can be measured on their quality and performance, which leads to costs reductions and greater efficiencies.
Capturing data from multiple sources and funneling it back into the procurement platform means a closed-loop optimization. It makes shippers proactive rather than reactive. Indeed, these same transportation-optimization techniques can help companies elsewhere, such as their search for sources of raw materials, parts, subassemblies, and finished goods. This helps them optimize the rest of their supply chain and sourcing options, beyond their transportation needs.