Executive Briefings

Transportation Procurement Has Come a Long Way, But It Still Has Far to Go

The idea of auctioning freight transportation services in an electronic bidding environment remains elusive in most modes. While the concept of automated procurement - which includes, but is not limited to, bidding and awarding transportation services via purely objective online auctions - is pervasive in modes like domestic truckload, there isn't a lot of similar activity in modes like ocean freight and rail.

Whether automated procurement is prevalent in a certain mode often boils down to a couple key factors: the level of competition, and the strength of shippers versus their service providers.

High levels of competition (re: fragmented markets with few key large players) and (buzzword alert) "substitute-ability" are clear indicators that e-procurement acceptance levels will be high. Alternatively, in modes where a cadre of large players dictates how service contracts will be negotiated, e-procurement acceptance levels will be low.

A note of caution: It's neither fair to say shippers alone are driving automated or e-procurement initiatives, nor that transportation service providers in any mode are hindering their development. But in speaking with supply chain consultants who see the process in a neutral way, it's clear that e-procurement - and procurement bidding auctions in particular - is far more prevalent in certain modes.

Read Full Article

The idea of auctioning freight transportation services in an electronic bidding environment remains elusive in most modes. While the concept of automated procurement - which includes, but is not limited to, bidding and awarding transportation services via purely objective online auctions - is pervasive in modes like domestic truckload, there isn't a lot of similar activity in modes like ocean freight and rail.

Whether automated procurement is prevalent in a certain mode often boils down to a couple key factors: the level of competition, and the strength of shippers versus their service providers.

High levels of competition (re: fragmented markets with few key large players) and (buzzword alert) "substitute-ability" are clear indicators that e-procurement acceptance levels will be high. Alternatively, in modes where a cadre of large players dictates how service contracts will be negotiated, e-procurement acceptance levels will be low.

A note of caution: It's neither fair to say shippers alone are driving automated or e-procurement initiatives, nor that transportation service providers in any mode are hindering their development. But in speaking with supply chain consultants who see the process in a neutral way, it's clear that e-procurement - and procurement bidding auctions in particular - is far more prevalent in certain modes.

Read Full Article