Shippers take multiple approaches to transportation procurement, from conducting annual bids and mini-bids to using the spot market, but in today’s operating environment no one can afford to take a set-it-and-forget-it approach.
In response to dynamic market conditions, a growing number of shippers and carriers are finding ways to work together to create mutually beneficial outcomes.
Chris Noble, senior product manager of PCS Software, sat down with Adrian Gonzales, president of Adelante SCM and host of Talking Logistics, to discuss how the procurement process has changed.
Pre-pandemic, there was typically an annual bid process whereby shippers would contract with carriers, line up their routing guide, make buying commitments, and then execute the plan with monthly or quarterly reviews. All of that changed as price volatility increased the differential between contract rates and the spot market.
Unfortunately, many shippers had to discard contract rates because carriers weren’t accepting loads for various reasons and move to the spot market.
Today, the bid process from a rating perspective is shorter, and shippers and carriers have to communicate more. “When you’re in a rising rate environment or a fluctuating rate environment, which is where we are, you really have to go back to the data,” Noble said, adding that it is essential to have access to information on lanes, historical rates and previous business practices.
Gonzalez noted that a transportation management system is a business intelligence and analytics tool rich in data. It can help provide a single source of truth for both parties to rely on when having conversations and making decisions. “You can take historical and operational real-time data and leverage that as you’re having conversations with your carriers,” he said.
As part of the new normal, both Noble and Gonzales say to expect a lot more communication and collaboration. What’s more, the ability to make decisions and have conversations based on data means everybody is grounded, and no one is trying to hide information.