In a two-way at our recent Transporeon Summit, held in Barcelona, our own Jonah McIntire chatted with carrier professional Jason James about the benefits – and the challenges – of digital procurement tools.
- Jason James
Global Ground Rail Procurement Head, CEVA Logistics Group
- Jonah McIntire
Chief Platform Officer, Transporeon
Jason kicked off with an overview of CEVA’s scale, highlighting a ground and rail spend of approximately €4 to 5 billion globally covering some 95 countries in five territories. Procurement challenges therefore differ widely across cultures and geographies, much depending on CEVA’s own people, their experience and their interaction with carriers. With a procurement team size of roughly 50-60 heads of Ground+Rail Procurement, across approximately 95 countries, digital tools clearly have a role to play in supporting the procurement process, including sourcing, compliance, tendering, bidding and in fostering first-class supplier relationship management.
When you’re spread as widely as CEVA, sourcing methods differ from region to region. In Europe it’s a lot easier to find available and appropriate carriers using platforms such as Transporeon, and Jason’s teams use it to explore new carrier profiles and to help decide whether to tender or interact directly with a chosen carrier. Africa, on the other hand, where the company has a presence and many offices, lacks such a digital resource so needs a more local approach based on personal interaction and relationship-building.
Jason then laid out how the Transporeon platform helps in the compliance process, which traditionally might be seen as challenging, particularly in geographies inconsistent with others. Compliance, involving documentation, insurance, and also other paperwork such as ISO certificates, is a necessary pillar to a strong shipper-carrier relationship. Here, the Transporeon Trust Center, under development is planned to have a big role to play, to enable CEVA to categorize carriers also according to documentation, profiles, thus becoming a key supplier management relationship tool and facilitating the decision-making process.
CEVA’s sourcing exercise may or may not go through online platforms, according mainly to geography, but where appropriate it will look at connecting via Transporeon Solutions to be able to categorize by selected criteria including region or type, ensuring carrier compliance expectations are not only met but renewed, and alerted if necessary, on an ongoing basis.
Jonah chipped in to ask how Jason and his team bring this important data to bear with regard to both strategic buying events and mini bids.
Again, activities vary by region, so profiling can on occasions be harder in some areas than others. In Europe, when using a regular carrier, the company objective is to have documentation available via the Trust Center in future, and to use platforms where data available, but in areas further afield, where they might have a new route for which they need to find a carrier, they will be looking to use other tools or to match with profiles they already have.
Jonah was keen to explore the tendering process. Is Freight Marketplace helping CEVA explore more carrier options.
Jason pointed out that the market has changed in 2023 – with inflation high globally and volumes down, he suggested that it’s “a good time for procurement”. He confirmed that digital procurement solutions provided by the platform are a big help in choosing carriers. “We recently ran an event in France where we utilized the RFI functionality of the platform to engage carriers in a national tender for the country. This initiative proved highly fruitful, particularly in expanding our carrier network. We've used the insights and results not only for strategic tenders but also for smaller, more agile tenders involving single lanes using the Freight Procurement and Freight Marketplace,” he recalled.
“We’re a big business, we’re global, we need to find more carriers and we need to maintain excellent relationships with the good ones. Digital solutions such as Trust Center, the Freight Marketplace or the Carrier Database will help us do that.”
CEVA works with many carriers. Jason did not have the exact figures at his fingertips to quote the number of carriers the company works with, but pointed out that the official figure of 20,000 probably rises to 40,000 considered as a whole with those working on an ad hoc basis. Statistically, around 20% are regular carriers.
The big international parcel carriers and FTL suppliers are often managed centrally, while each country or local market also has its own arrangements for relevant carriers. This separation adds another layer of importance to the digital solutions, because it gives CEVA precious visibility. Jason is confident that the visibility can contribute to making sure teams make the correct decisions.
The Transporeon Solutions have become a key plank in that visibility journey. Yes, it’s about formalizing the compliance process, but transparency is a vital pillar of that process. Jason agreed with Jonah’s point: with such strong visibility capability, there is no way that a shipper (or other stakeholder) could mistake the correct compliance (or otherwise) of a given carrier.
The session was not intended simply as a positive showcase for Transporeon’s solutions; Jonah also wanted to hear about any challenges associated with assimilating sleek and transformational digital innovation into businesses with long-established systems. A question from the audience was a great example:
“Dynamic procurement sounds great, but how do companies overcome the challenges associated with paying new companies quickly and implementing them into existing ERP systems?”
For Jonah, this is definitely a question often asked by companies, and Jason wasn’t surprised, admitting that effort is unavoidably required. Finance, new partner forms, credit terms all have to be agreed and signed off. “It is a question of looking at the carrier, the business model and making the right decisions,” he elaborated. Again, flexibility is required according to geography; in Africa, for instance, it’s not uncommon for CEVA carriers to require payment either up front or in 14-day terms. Options including factoring are always under consideration.
Jonah took the challenge further – with so much administration required in onboarding, is it actually worth the trouble involved for shippers to spend valuable time seeking out new carriers? Jason had no doubts, because new capacity and constant agility are watchwords. “We need new capacity, plus we want to be prepared, we want to be first when the market changes. The way the market goes affects the decisions you make; for instance, last year there was a lack of capacity with carriers, so tendering important to check the market with risks of a price increase rather than a decrease. This year market is down, so more opportunities to align more pricing levels, hence, we have tendered even more this year.”
Ultimately, transportation is a dynamic business, therefore it’s not sufficient or acceptable to try to avoid this process just because it’s tricky. “It’s important to get carriers set up quickly, having balanced that carrier against the business necessity and then that carrier has to be able to do what they promised to do, to cover the capacity.”
From Jonah’s Transporeon perspective, the key sourcing and procurement question for a shipper – ‘How much would I save if I was working with the ideal carrier?’ – is a data science question. Market Insights now provides the answers to those questions, meaning carriers are no longer potentially wasting time by responding to tenders that they are not going to win; that initial stage is eliminated, meaning shipper and carrier can get to actual offers quickly and reliably. He revealed that Market Insights is now definable as deep as local postal code level, where previously it had only been at national level. Such forensic detail means you know if you’re going to be challenged on your contracted rates.
As CEVA is already using Market Insights, Jonah probed to discover if the company is doing deals with customers at fixed prices or if a more dynamic arrangement might be in place, given the quality of the data price learnings now available. Jason lamented that the real challenge is now in not having Market Insights to use in other geographies: “It’s not easy to find one as good as Transporeon’s for example in Africa region, and in some other geographies!”
Spot v. Strategic
Then came a question about the spot/contract procurement mix – is it simply a case of switching fast to the spot market when a carrier cannot fulfil a lane, or is CEVA strategic in its contracting down to a micro level? Jason conceded that in the past a carrier who did not deliver on a given project might be replaced, and with the market now a lot more dynamic, it is far more likely to look at offers to see what can be arranged. Then there are spot patterns in certain sectors; with the recent acquisition of GEFCO, increased also automotive business, a sector with a history in looking frequently at the market.
Loyalty to Carriers
When incumbent carriers do not appear to be competitive on price, CEVA gives them a chance to lower rates, rather than being replaced outright. “This can certainly occur with a good incumbent carrier which has been loyal to the business for a significant period of time,” stated Jason. He added that there is far more effort involved in seeking an adequate replacement than in sticking with a good supplier, so to maintain a good partnership is important.
Supplier Relationship Management
Then followed an important question from Jonah on the factors Jason and his team are looking at to score or judge carriers in the company’s supplier relationship management conversations. Clearly spend is a prominent factor, but the type of business CEVA does with the carrier is another. He looks to assign them into Strategic or Core categories. The former are those with which CEVA wishes to grow in the future, perhaps in new types of business or in new or complex geographies. The latter are those with which the company is accustomed to working with in its established fields.
The Carrier Trust Center is being developed to have a role to play here, so to include supplier relationship management capabilities.
Jason stressed that CEVA is working to reward carriers who interact and collaborate towards its goals. He acknowledged that it’s impossible to build binding personal relationships with over 20,000 carriers, but he believed a good company can start with the main ones and build from there – in transportation, a great relationship with suppliers is paramount, because it means you support each other through the bad times as well as the good.
Jonah offered the suggestion that in large global corporations, a top-class carrier might be very well known to one branch of the business, but not another. More transparency allows more positive ‘discoverability’ simply within the walls of one company.
Jason nodded his affirmation. “Sometimes you find out as much or more from your carriers than from your team.” He revealed that it is one reason why, in the monthly calls between procurement teams in Europe and the rest of the world, supplier relationships are always discussed, in terms of other factors beyond price alone.
Transportation contracts can be index-linked if appropriate to the type of business. CEVA does a lot of 4PL business in the Netherlands, for instance, where the company is paid on its contribution to the business rather than the profit on each job.
Fuel surcharge mechanisms are also in place, given the regular global fluctuations of recent times. “A price mechanism is fair for both sides because it notes the fluctuations on both sides,” he noted. Local indexes are relied upon in local territories and offices, for instance the EC Index in Europe. Meanwhile, emissions are very high on the agenda for CEVA, with substantial company-wide investment in targeting sustainable goals.
Finally, Jonah wound up a wide-ranging discussion by asking Jason to name any tips or advice he might have for other transportation shippers and carriers seeking the benefits of digital transformation.
It is about working as a team, Jason advised. “View a reliable carrier as a strategic partner. Collaboration is a two-way street, and the benefits are mutual.”
In making that final point, Jason actually nailed the core philosophy of the whole Marketplace concept;
"Freigh Marketplace is about providing an impartial platform where both parties receive equal treatment. It is a space designed to foster win-win outcomes for everyone involved."