Procurement Excellence 2020 – Changing purchasing processes through digitalization and industry 4.0
Purchasing departments that are challenged with defining Procurement Excellence may find that it’s difficult to come up with a universal statement applicable to all organizations. The goals and needs of procurement policy are too different and too dependent on industry, product or company size.
However, purchasing managers of all industries and company sizes certainly agree that the procurement of goods and services of many kinds has increased in complexity in recent years and is subject to continuous change. Among the fundamental changes along the purchasing process in the recent past are the rapidly advancing digitalization and the resulting disruption of existing forms of cooperation along the supply chain. In addition, there are other constantly changing and difficult-to-calculate influencing factors, including those of an economic policy nature, such as the recent Brexit process or the imposition of international protective tariffs.
Challenges in logistics
Procurement managers also face complex influences in the area of freight rate purchasing. What do air freight processing for a large corporation, container sea freight purchasing for medium-sized companies or distribution logistics on the other side of the world have in common? Perhaps it is precisely the fact that tenders in these areas are highly complex and not easy for non-specialists to understand. In addition to digitalization and automation, increasing competition among service providers and the rapidly growing demands on the transport of their own product, buyers must also cope with a highly volatile transport market. This no longer simply follows the familiar mechanisms of the pig cycle, but is also influenced by economic and geopolitical uncertainties.
Under these conditions, global freight purchasing has become a real challenge for logistics procurement managers, requiring broad market knowledge, professionally prepared freight tenders, negotiating skills and the use of smart tendering tools.
4 steps to Procurement Excellence in freight purchasing: Sourcing meets consulting expertise
In order to make the procurement process easier for freight buyers and to offer the full spectrum for best-in-class procurement, subject-matter experts at international consulting company Tim Consult and the cloud logistics platform Ticontract have combined and optimized their strategic and operational services. These professionals suggest that procurement managers should focus primarily on the following four steps in freight rate purchasing:
- 1.) Know the market and define the right purchasing strategy
- 2.) Prepare high-quality tender data
- 3.) Use the right tendering tool
- 4.) Create transparency and draw the right conclusions: Managing freight rates and reporting
Step 1: Know the market and define the right purchasing strategy
For the successful tendering of their transports and freight, buyers need a clear strategy and profound market knowledge. How has the market situation changed since the last tender? How are demand and capacities, cost and revenue situation developing? Staying up to date is not an easy task for buyers, as the logistics industry and transport market in particular react extremely sensitively to incalculable economic conditions. Yesterday’s winning strategy may be outdated by tomorrow.
In order not to lose the overview, strategic partner Tim Consult supports freight buyers with the best possible purchasing strategy and the professional tendering of their transports as well as guiding the evaluation and fact-based allocation decisions. Tim Consult draws on more than 20 years of experience with tendering procedures, complex transport networks and the freight processes of international shippers and global service providers, in addition to a profound collective market knowledge. This results from, among other things, the Market Intelligence Initiatives (MII), with which Tim Consult has been implementing valid freight benchmarking for land, air and sea transport since 1999.
Step 2: Prepare high-quality tender data
In complex global freight tenders, an enormous amount of data comes together that forms the basis for allocation decisions and is ultimately decisive for freight costs and services. This data comes from very different internal and external sources, such as different departments of the loading company, the service providers and other partners in the tendering process. Before the information can be processed and evaluated using an e-sourcing tool, intelligent data harmonization is required. Put simply, for a reliable result, apples with apples and not apples with pears must be compared. The data-check method developed by Tim Consult checks spelling, logical connections and relevance as a foundation for producing valid results.
Step 3: Use the right tendering tool
As soon as the strategic tendering tactics have been defined and the data has been properly prepared, the operative part of the tendering process begins. This is where Ticontract Tendering comes into play. With a network of more than 40,000 verified and qualified service provider profiles, the e-sourcing platform from the Transporeon product portfolio offers shippers the opportunity to find the right carrier for their transport requirements and to build up a suitable "service provider community". The tendering platform simplifies and accelerates communication with a large number of providers. All service providers pre-selected by the purchaser are simultaneously informed about the tenders, can create their offers and submit them at the push of a button. The freight purchaser evaluates the incoming data from the service providers and selects the best offer. Shippers and forwarders receive comprehensive, up-to-the-minute information simultaneously, and the search for the best service provider is completed in a matter of a few weeks or days.
Step 4: Create transparency and draw the right conclusions: Managing freight rates and reporting
The tender has been completed, the service providers and rates for future cooperation are contractually fixed, but the work of the freight purchaser goes even further—sometimes even beyond the purchasing department. Negotiated freight rates must be filed, managed and made accessible to all departments involved, whether to organize the daily automated allocation of transport orders based on the negotiated rates or to initiate freight invoice checking and processing in the accounting department. For this purpose, the Transporeon Rate Management solution is ideal for central storage. The rate results from the tendering platform can be easily transferred to Rate Management, ensuring that all departments—whether purchasing, sales or accounting—access the same database.
Freight purchasing has become an important strategic instrument in the company. Results from freight tenders serve as preparation for strategic decisions, the development of procurement strategies, forecasts and demand planning, carrier evaluations and as a basis for negotiations with carriers. The freight purchaser is therefore faced with the challenging task of passing on this information to his management and stakeholders in a transparent, clear and easily understandable way. Tim Consult also supports shippers with methodically secure and graphically clear reporting.
What is your optimal procurement strategy? Discover it here
Procurement Excellence = “best of two worlds”
With an approach that combines more than 20 years of experience in freight purchasing and profound market knowledge with an optimal tendering tool, Tim Consult and Transporeon together create the conditions for procurement excellence in freight rate purchasing.
Logistics procurement managers benefit from the "best of two worlds" with:
- a well thought-out purchasing strategy adapted to the market
- a fast and efficient tendering process, which leads to goals such as securing the optimal service provider for the tendered transport
- easier communication, time saving and market transparency, which leads to better tender results for all parties
- the expansion of the service provider network for future tenders
- cleanly prepared data of high quality
- easy-to-understand, clearly structured reports.
The results are impressive:
- up to 19% reduction in freight costs through market intelligence, increased competition and auction functions
- up to 30% less administrative effort through efficient e-sourcing
The optimal tendering process with the e-sourcing tool Ticontract