As we navigate ongoing supply chain complexities, the transport sector continues to face challenges shaped by many factors. Things like evolving capacity constraints, increased emphasis on expedited delivery, a push for heightened supply chain visibility, and the acceleration of digital transformation have made innovation a crucial element for shippers and carriers across industries, including chemicals.
However, with challenges come opportunities. In this climate, new and improved strategies for managing transportation operations are emerging, aiming to enhance efficiency and drive continuous improvement across entire supply chains. For companies ready to seize these opportunities, here are your top five transportation procurement and benchmarking trends to keep costs down.
1.Taking an Integrated Approach to Transportation
At the highest level, shippers are taking a more integrated approach to the supply chain. Shippers are no longer thinking about just inbound or outbound transport, ocean and rail versus over-the-road, or one business unit over another, but rather, are looking holistically and completely across their transportation operation to find more innovative ways to procure, manage, and work with carriers.
This holistic look lets shippers create a more accurate baseline before bidding by collecting and analyzing data across their entire transportation network and all modes. Most companies are already using a Transportation Management System (TMS) to do the heavy lifting of storing data from these categories. Still, shippers can take that data even further with deep analytics to clearly and accurately understand costs, services, performance, etc. The good news is that shippers have more access to data than ever, bringing us to trend number two.
2. Embracing Digital Transformation through AI and BI
Through your TMS and application program interfaces (APIs), which provides the ability to communicate with carriers and 3PLs electronically, you can bring all of your knowledge sources together to analyze and identify opportunities – enhanced by artificial intelligence (AI) and business intelligence (BI) tools — to positively impact cost and service. Digital transformation is streamlining the flow of information and making it easier to aggregate and analyze. In contrast, consider it a red flag if a carrier or 3PL still relies on paper-based processes, spreadsheets, and emails to share information. The technology component is becoming increasingly important in all aspects of logistics management, including procurement and benchmarking.
3. Hiring Data Scientists or Third-Parties to Analyze Data
Even with the latest and greatest technology, data’s value depends on how effectively it’s interpreted, and analyzing and extracting actionable insights from large datasets requires strong analytical skills combined with a complete understanding of supply chain logistics and the market. The “Data Scientist” role is emerging inside logistics operations and at 3PL companies to interpret information and develop insightful action plans for shippers to drive continuous improvement. One area where 3PL companies have an advantage is gleaning how shippers are doing compared to others in the market. Because 3PLs have data from many shippers across many lanes, they can provide a broader perspective and direct performance comparison.
4. Looking at Benchmarking as a Continuous Business Process
In the past, most shippers had contracted rates with carriers, but those rates became stale relative to where the market ended up. So rather than analyzing the market just once a year, shippers are looking at benchmarking as a continuous business process. External variables, like natural disasters, strikes, and governance, are always risks that can cause rates to rise. Just as changes in your facilities, customer base, or geography can cause your transportation needs to change. With so many variables that are typically out of your control, approaching benchmarking as a continuous process will ensure you have the most up-to-date understanding of the market and your performance and help you uncover new improvement opportunities to reduce costs and improve service. Additionally, keeping a pulse on rates and service performance in a particular region or lane, or if a carrier’s tender acceptance rate is going down, may influence you to make more targeted bids in specific regions and address issues more promptly.
5. Evening the Playing Field Between Shippers and Carriers
While the market is stabilizing and capacity is opening up, we’re moving away from a “feast or famine” mentality where shippers either thrive or fail to an informed, balanced, and strategic mindset prioritizing long-term shipper-carrier relationships. With each party coming to the table with comprehensive datasets, shippers and carriers can openly demonstrate their costs, how they’re losing or making money, and why. These candid conversations are the basis for long-term, mutually beneficial relationships focused on partnerships, not just transactions. Historically, shippers held all the cards with access to carrier scorecards. Now, carriers have unique optimization solutions that allow them to go to the negotiation table with more insights and information. The idea is not for each party to hold benchmark metrics over each other’s heads but rather to take a realistic approach to what each needs to be successful. For example, safety is of the utmost concern in the chemical industry. So, creating a mutually beneficial, long-term shipper-carrier partnership can mean that a shipper who contracts a higher rate should expect superior safety, impeccable delivery, responsiveness, and service.
Start on the Path to Transportation Procurement and Benchmarking Success
The name of the game in today’s chemical transportation marketplace is “collaboration,” no matter how you slice and dice it. Taking an integrated approach? You need collaboration from all departments. Embracing digital transformation? You need collaboration from all knowledge sources. Hiring data scientists? You need collaboration from analytical and industry experts. Continuously benchmarking and fine-tuning your operations? You need to collaborate with carriers. Evening the playing field between shippers and carriers? You get the picture.
Not every company, however, is ready to embrace collaboration. Collaborating effectively takes a strong foundation and the right mix of people, processes, and technology. If you haven’t achieved the right combination yet, make that your priority. If you have the structure, take action sooner than later.
Are you interested in learning about our Freight Procurement – Transportation Bids and Benchmark services? Contact CLX Logistics today.Back to Resources