It’s usually obvious when you’re using the wrong tool. Everything becomes more difficult and takes more time. Sometimes costs go up too. With the wrong wrench, it’ll take much longer to fix that leak under the kitchen sink. With the wrong hex key, you’ll get hugely frustrated and may give up on assembling your new flat-packed furniture. So then why do logistics professionals go on using the wrong procurement tool? Their jobs are already stressful enough, often with very long working hours.
Why use the wrong procurement tool?
My guess is that all of us – including logistics procurement professionals – are more comfortable with what’s familiar. Traditionally, procurement professionals have always used telephone calls, fax transmission and email messages to issue and manage their tenders. This entails a lot of back and forth with every bidder. Repeated conversations and messages are required just to keep everyone at the same level of information at the same time. And these processes introduce lots of human error.
Because of all this, procurement professionals are reluctant to trigger elaborate new carrier searches, preferring to stick with the same old service providers no matter what. And they certainly don’t have time (even if they do have the mathematical skills) to correctly analyze, thoroughly compare and effectively evaluate all bids. Together, this means logistics procurement decisions are often based on inaccurate and incomplete information, a sub-optimal pool of carriers, informal arguments and sometimes nothing more than intuition.
So which tool is the right procurement tool?
It’s time for logistics procurement professionals to discard their Excel spreadsheets, their reminder and clarification emails to each carrier and those endless phone calls. Rising wage bills mean employers expect more meaningful productivity from employees. To execute tasks that require their special expertise, logistics procurement professionals need a new tool.
Which tool is the right one? Here are three steps to becoming a procurement tool-savvy professional:
Investigate what’s available
The alternative to outdated and ineffectual manual tools is an efficient and proven e-sourcing tool. There are several to choose from. Today’s new transportation sourcing tools are available in various shapes and sizes – tools for general procurement (not specifically transportation procurement) or tools for procurement of a single mode of transport (road only or air only, etc.) or multiple modes of transport (road, rail, air and ocean).
As the chart below indicates, these tools come in a range of software types. The least complex and most cost efficient of these is SaaS (software-as-a-service), which offers the lowest cost of entry and reduces your time-to-benefit. SaaS means the applications are easy to integrate and you only pay for what you use; you can start small and scale big whenever required.
Another huge benefit is that all responsibility for upgrades, uptime and security are handled by the SaaS vendor. SaaS is the 21st century platform that does not require individual company implementation, setup, maintenance and platform innovation and development. These costs are shared among tens of thousands of users, saving everyone time and money.
Explore your market
Transportation procurement professionals can get a general idea of freight rates by looking back at past bids. They can also access online indices and use benchmarking data for mode-specific and even some market-specific freight rates. But none of these data sources is up to the minute; some of them are positively historic.
To take your market understanding to the next level, use the wealth of information that comes with a tried and trusted e-sourcing transport procurement solution. You’ll benefit directly from the enormous expertise of people working on transportation tenders every day. Your e-sourcing platform should provide a market overview along with market specifics such as the percentage increase/decrease in ocean freight (you might want to adjust your mode allocations accordingly) and any annual peak period for issuing orders (you might want to hold back and issue your order later in the year).
Discover what works for you
With this knowledge behind you, it’s time to discover which tool will work best for you. Ask to see your preferred e-sourcing tool in action. For example, Transporeon offers a free live demonstration.
Specific things to look for are:
- A proven focus on logistics and supply chain services procurement – this is your assurance that the vendor understands the complexity behind rates, service levels, capacity and more.
- Ease of use – you certainly don’t want 99 steps and specific buttons to press just to generate a report. Your new e-sourcing tool must be intuitive and fool-proof and must reflect the procurement cycle process flow.
- Pick a tool that is quick to learn and requires no more than two days’ training. As back up, ask for training videos, FAQs and 24/7 access to specialized, experienced shipping consultants able to speak in your time zones and your languages.
- Ideally, your new tool should support the entire ecosystem, connecting you to the broadest global network of logistics and supply chain organizations. This allows you to add new carriers to your closed pool when needed. And it enables carriers to sign contracts in their preferred lanes, optimizing their own operations by shortening wait times, securing full truck loads and reducing empty miles or kilometers. Their cost savings will ultimately reflect in lower rates for you.
- Support for bid ranking and multiple rounds of bidding. It has been proved statistically that you can drive better rates through live bid ranking and multiple rounds of bidding. So look for an e-sourcing tool that enables this.
- Complex problem solving capabilities – let your new tool do the hard work of assigning the right carrier to the right lanes to transport particular quantities of specified freight according to various schedules. Some e-sourcing tools include a combinatorics solver, a digital tool based on algorithms that analyzes even the most complex tendering scenarios – perhaps trillions of possible combinations – in seconds, while taking into account all specified criteria. This digital tool will help to optimize operations, reduce risks and minimize your costs.
For more information
If you would like to know more about e-sourcing with the Transporeon Group, please get in touch with me directly at vcheong[at]ticontract.com or take a look online at our Ticontract RFP Management tool.