When procuring freight, companies invariably focus on rates and capacity. This is especially true when freight demand exceeds available capacity, which was the case most of 2021 and early 2022. But market conditions are different today. Is this affecting the way shippers are approaching freight procurement? What factors are most important for companies when selecting the “right” carriers for their network? And how does a freight procurement technology platform take all these factors into consideration? Those are the main questions I discussed with Joe Piazza, Director of Customer Strategy at Emerge, in a recent episode of Talking Logistics.
Market Conditions and Procurement
I began our discussion by asking Joe for his take on the current changes in the market and what that means for how companies procure freight. Joe comments that the market is still in flux and struggling to find consistency for carriers and shippers. He says, “Companies are shifting their focus to service quality and where they can find consistency in rates and capacity.”
Joe notes that planning and consistency are extremely important for shippers as they use data to identify the best carriers for their needs. He likewise points out that carriers are also using data to better understand their business and how they can best serve their customers.
Selecting the “Right” Carriers
Recent research with our Indago supply chain research community (who are all supply chain professionals from manufacturing, retail, and distribution companies) found that shippers are looking to expand their carrier base. So, I asked Joe what factors are companies using to identify the “right” carriers to add.
Joe indicates that large enterprises with established carrier bases are focused on maintaining that base, or even reducing it based on quality-of-service data. Meanwhile, smaller, growing companies are looking to expand their carrier base to obtain capacity, increase consistency of service, and reduce costs and variability from the spot market. But in both cases, maintaining strategic partnerships with their core carriers is critical to their success.
Joe also notes that many carriers, most of which are small or owner/operator businesses, want visibility to broader shipper networks, and are trying to become trusted partners through quality-of-service metrics.
Beyond Rates and Capacity
Coming out of the pandemic-fueled scramble for capacity and absorption of higher rates, what other factors are shippers considering in procurement? Joe says, “Carrier vetting processes have become a lot more robust. Besides the service factors just discussed, shippers are looking at safety records, unresolved claims against carriers, and even how carriers transmit data – paper invoices versus EDI, for example. Shippers are using data to incorporate all these factors into their selection process.”
How Technology Can Help
So, how does a freight procurement platform support the inclusion of all these factors in the vetting process, and where does the data come from? Joe explains that existing data on safety and service records that may be stored in a company’s TMS or ERP systems can be transmitted to their freight procurement platform to augment the procurement data.
“That powers up the analysis process after the bids are completed so a shipper doesn’t have to go through the effort of stitching their data together with the prices they received, in addition to the other factors they’re going to consider, before making an award,” he says. “In addition, being able to model the business rules to mirror the strategic decisions a human would make is a critical factor in this process. Examples of these rules might be allocating a certain percentage of capacity to asset-based providers versus broker-only providers, or meeting certain KPI goals such as reducing total transportation spend by X%.”
Joe also points out that the platform can help shippers find the “sweet spot” between conducting more frequent procurement bids to take advantage of rate changes versus creating carrier fatigue and confusion from too many procurement requests. He says quarterly or bi-annual bid processes are becoming more standard to adjust rates while maintaining carrier relationships.
Best Practices in Freight Procurement and Carrier Selection
What are some best practices for freight procurement and carrier selection regardless of market conditions? Joe had some great insights on using data to facilitate analysis and transparency to enhance shipper/carrier selection and partnerships. Therefore, I recommend that you watch the full episode for all the details. Then keep the conversation going by posting a comment and sharing your own experience and perspective on this topic.