Procurement Practices That Pay Off

Transportation is a significant expense, which is why procurement is such an important process. Whether you’re shipping food, electronics, heavy machinery, consumer packaged goods, or anything in between, you want to maintain the highest levels of service at the best possible price.

Today’s teams solve complex problems daily, and the right business intelligence ensures they produce sound strategies that deliver on core business goals.

Choosing the Right Strategy

There are a wide range of approaches to pricing and procurement, each with their own set of benefits and drawbacks. At the end of the day, it all comes down to the same question: How do you know you’re paying the right price for the right level of service?

Option 1: Internal Analytics. Many shippers today have internal transportation analysts who review historical performance, creating forecasts and budgets based on supply and demand trends. This analysis can often get delayed for weeks or even months, depending on bandwidth and the number of available resources.

The biggest drawback to this approach is it doesn’t provide a holistic view of the freight markets, so you may miss important market dynamics that are changing the business environment around you.

Option 2: Conduct a Bid. No matter how well you plan, preparing for a bid can take a lion’s share of your transportation and procurement department’s time and resources.

While you will get a good reality check on where the markets are, these bid-specific freight rates and capacity estimates represent only a cross-section of all available freight rates. They also only reflect your supply chain network’s volumes and needs at that point in time.

By and large, conducting a bid is a good thing, but it does not guarantee you’ll secure the best possible freight rates and service levels, or help you adapt to changes in your network.

Option 3: External Benchmarks. Hiring outside analytical services can help you augment or even bypass internal analysis, but not all benchmarks are created equally. Many can be expensive, so when choosing a benchmarking tool, you’ll need to take special care to make sure the data isn’t biased.

If the benchmark is based on a small subset of market rates or heavily weighted by a particular industry, then the data will not improve your company’s decision-making—in fact, it could do the exact opposite.

But robust, accurate benchmarking solutions created by DAT iQ are key to getting a clear, 360Ëš-view of the freight markets, providing intelligence that wouldn’t otherwise be available through internal metrics and bids.

Option 4: A Hybrid Approach. To get the best of each approach with minimal drawbacks, DAT iQ finds that a hybrid strategy—one that combines analysis of your own service requirements and carrier performance with a broader freight market view that uses credible, competitive business intelligence tools—helps most companies thrive.

The Freight Market Intelligence Consortium (FMIC)—formerly part of Chainalytics—offers external benchmarking and forecasting based on regular and timely econometric modeling of transactional markets and their underlying components, revealing the true cost drivers that influence freight rates.

Combining this information with your own internal data gives you a clear view of how your transportation operations compare to the market and your competitors.

This deep visibility into the freight markets allows you to take the guesswork out of your transportation budgets, with clarity that serves your core business strategies.