Freight Procurement: A Contemporary Approach to Capacity Securing
Freight procurement is an important part of a shipper’s supply chain and has recently seen significant changes and revitalization. The shift from traditional annual big contracts to a more flexible spot freight procurement strategy has accelerated. Historically, freight procurement involved sourcing quotes from carriers via contract RFPs and biddable capacity in spot markets. But, this approach leaves human capital on the table and isn’t responsive to changing conditions.
It is becoming increasingly important for supply chains to have a flexible freight procurement strategy that enables them to react swiftly to market circumstances and changes in the present unpredictability and disruption environment. Traditional methods of procuring capacity – like spot buying and contract purchasing – lack the flexibility to support agile supply chain processes. However, new digital freight-sourcing solutions from Sleek Technologies allow shippers to automate routine and repetitive purchasing processes and free up time for teams to focus on more strategic tasks. These solutions use a robust and intelligent technology framework to analyze tender responses for each charge type and rank the best bids for each. It ensures that shippers can save costs through a more efficient and flexible procurement process. It also reduces administrative workload and eliminates costly rework caused by manual errors. It can lead to double-digit cost savings for a company. The specialized software solutions also enable greater visibility across all shipment-related information to reduce delays.
Freight procurement is a crucial component of logistics. It involves acquiring raw materials and finished goods to fulfill customer orders at the most affordable price. It includes three primary processes: transportation, warehousing, and storage. Effective freight procurement requires a comprehensive understanding of market trends, securing enough capacity, and navigating seasonal volatility. Despite the widespread digitalization of supply chain operations, the logistics industry has slowly modernized its freight procurement processes. Most logistics companies still use spreadsheets to tally rates from carriers, a tedious process that can be susceptible to human error.
Furthermore, market instability may render long-term contracts obsolete in months, making booking loads at an alternate cost-effective solution on short notice difficult. With automated optimization tools, shippers can optimize carrier mixes and routes to better respond to changing market conditions. This approach can help them save time, reduce costs, and improve their business.
In the logistics industry, securing enough transportation capacity is a major challenge. Effective freight procurement is an essential element of this process. However, traditional procurement processes can take time and effort. For example, sourcing, comparing, and analyzing bids in Excel spreadsheets can take weeks to complete and are susceptible to human error. Moreover, the lack of visibility into data limits businesses’ ability to respond to market volatility. These challenges have led to a new breed of digital freight solutions. The scalable algorithm allows businesses to create RFQs with just one click and instantly analyze tenders. By combining this with greater freight market insights, companies can gain better control of their freight costs and manage risk in their supply chains. These adaptable digital solutions also provide shippers access to dense capacity and vetted carriers on demand. This dynamic approach is more efficient than annual or bi-annual contract rates and avoids being trapped in fixed terms when market conditions change.
A key challenge for logistics companies is gaining visibility of data. The conventional freight procurement process is highly complex and time-consuming. As a result, logistics companies are leaning towards digital solutions that simplify the freight tendering process. These tools can help them save time and money while reducing risks. However, traditional methods are often inefficient and need more transparency. For example, RFQs rely on spreadsheets with thousands of data points and take weeks to prepare. These spreadsheets are also susceptible to human error, which can cause inaccurate quotes and pricing. Moreover, they do not provide the required data visibility to identify critical supply chain risk factors.
A more effective solution is a dynamic load procurement process that allows shippers and LSPs to access dense capacity with greater flexibility. This solution eliminates the administrative burden of RFPs and enables them to procure freight at optimized rates. It can also help them reduce risk and improve transportation cost management through a more dynamic approach to capacity procurement.