Most supply-chain professionals would agree that the traditional annual, full-network carrier-procurement process has inefficiencies. Access to better data is changing the way organizations operate, and it’s time transportation strategies changed as well. Yet many transportation departments continue to go through the same motions.
Historically, the carrier procurement process has been time-intensive. Shippers spend a substantial amount of time preparing and reviewing requests for proposals (RFPs) to identify the right carriers based on price, service, reliability and network compatibility. In turn, carriers spend time responding to those RFPs. After what is typically a long and laborious process, agreements are made and contracts are signed.
Over time, unforeseen challenges and changes in both parties’ transportation networks can cause agreements to fall apart. This results in shippers scrambling to find new carrier partners in the spot market or through brokerage, or carriers looking for additional truckloads to fill capacity.
With the right data driving procurement strategies, better RFP practices will lead to more stable and productive networks, and stronger shipper-carrier relationships.
Building a Stronger Transportation Network
What’s holding shippers back from conducting a better transportation RFP? A lack of visibility beyond their immediate networks and their own freight footprints. The information available to a shipper is that of its own network footprint, but that’s only one small piece of a much bigger picture. When shippers are limited by incomplete datasets, they’re unable to understand how carrier networks interact with the broader freight ecosystem.
With the right transportation partner, shippers can use more accurate and robust data to achieve a broader view of carrier networks outside their own, as input to their freight-procurement strategies. They can evaluate the freight footprint of similar shippers across the U.S., and narrow the numbers down to lane-level performance so as to consider all factors influencing rate outcomes.
A traditional supply-chain consultant might provide shippers with a data dump ahead of the RFP. That information offers snapshots from certain points in time during the prior year. The problem is that this kind of data is far too episodic, and can be distorted by its limited scope. It might help shippers to identify macro trends, but more inclusive transportation data with increased granularity and open up strategic potential specific to a shipper’s network.
Last year’s data is limited in its ability to help a shipper navigate uncertainty following a natural disaster, provide guidance after unexpected economic changes, or show that carriers are complying with the latest freight agreements.
Instead, shippers should analyze the living data behind constantly evolving transportation networks, bringing information and insights much closer to real-time. This adds agility to supply-chain strategy, and allows transportation leaders to make ongoing, calculated adjustments throughout the year.
Identifying the Right Carrier Mix
The legacy approach to a carrier RFP involves simply putting a shipper’s network out to bid. Unfortunately, anecdotal evidence is often used to conduct carrier RFPs. Supply-chain professionals hear stories from industry peers and predecessors about which carriers they can trust, but that anecdotal information can be unreliable. This bias influences which carriers make the short list.
Considering a carrier’s reputation is certainly a wise move. But backing up stories with hard numbers is a much stronger way to determine which carriers to include in RFP events. Reputation aside, shippers should still examine whether the carrier is a good fit for their network. Evaluating trustworthy data is how that determination must be made.
Shippers tend to have a core group of carriers with which they’ve developed longstanding relationships. In many respects, this is ideal. Strong relationships are needed to support the supply chain. Yet because markets are always changing, it’s imperative that shippers review data and regularly reevaluate carrier partners to determine if they still represent the right fit for the shipper’s transportation network.
Traditionally, many shippers operate RFPs under the mindset that the carrier with the lowest bid wins the work. But too many low-cost carriers that provide poor service and unreliable capacity introduce additional risk to the transportation network.
In some instances, for example, these partnerships fall apart because the carrier doesn’t have natural alignment to the shipper’s shipments. That low-cost bid now costs the shipper extra, as it heads to the spot market to find new carriers to fulfill shipments at the last minute. That likely means the shipper pays higher freight rates than initially expected.
This can be avoided if the shipper uses the right data to identify a stable partner at the outset of the RFP, then consistently monitors performance and fit. Identifying carrier partners who are the best fit for a network beyond typical expectations provide substantial benefits for shippers and carriers alike.
A commonly missed opportunity among larger shippers is considering small to mid-sized carriers. Though “top carriers” own majority market share, partnering with carriers that operate smaller fleets, provide freight specialization, or service a specific region provide unique advantages.
A smaller carrier might not have a large sales team or extensive marketing budget, but it could still be an ideal fit for a shipper’s transportation network. Carriers that are concentrating on regional service can make good partners because they have active networks surrounding key lanes. While national carriers might send trucks to these areas, that could come with the added cost of pulling a driver out of denser network volume. Smaller carriers can also be strong partners because they’re motivated to prioritize a shipper’s needs, rather than only
providing a transactional relationship.
Building a healthy portfolio of carriers is challenging. Shippers need a base of reliable partners, but they should also assess those partnerships and remain open to working with less known carriers — the hidden gems. These smaller growth carriers can complement the core carriers in a shipper’s network. The best way to accomplish that balance is using reliable transportation data.
Looking Beyond the “Savings Number”
For most transportation executives, savings and cost avoidance are the bottom line when working with consultants and partners: How much money will you save me? What’s the ROI? Savings numbers are based on old data, representing what a transportation network looked like last year, sales forecasts, and the level of expected production at manufacturing facilities. Everyone involved knows these are only estimates, and that things will certainly change in coming months. Savings in this context are never guaranteed.
There are stronger metrics that can provide more insights and greater value to a transportation strategy. Is the shipper meeting the on-time pickup and delivery requirements of its customers? Is the shipper working within the budget set for its transportation network? Those goals should be just as important as reducing transportation costs, based on a subjective savings number that’s defined at the beginning of the RFP process.
The Need for Accurate Transportation Data
In a time when e-commerce and direct-to-consumer shipping is becoming increasingly vital to many supply chains, transportation is an essential part of executing an effective strategy.
Ensuring that shippers set up and operate the best networks possible will help transportation teams stay within budget, while differentiating their companies from competitors. Being able to access as much data as possible, interpreting that data, identifying key trends, and using it to identify the best partners is critical for an agile supply chain.
The significance of this data extends beyond the RFP process. For example, data visibility could identify the most advantageous place for a new distribution facility, based on inflow and outflow of trucks in a particular area. Such knowledge positions the shipper to easily access vehicles that have just delivered freight and need to pick up a new load.
The first step toward a more efficient and effective transportation network is to find supply chain partners and expert consultants who can provide access to a breadth of valuable data. These partners can help shippers apply that information to an effective transportation strategy, while monitoring performance and providing guidance on continuous improvement initiatives.
Relationships are important. Stories and experience surrounding service and reliability help with decision-making. But the data has its own story to tell.
Heather Mueller is chief operating officer of Breakthrough Supply Chain.
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