Most shippers still run procurement like it’s pre-2020: annual bid, lock in rates, review quarterly. Then the spot market moves and the whole plan falls apart carriers stop accepting contracted loads, and shippers are stuck scrambling.
In this conversation, PCS’s Chris Noble sits down with Adrian Gonzales of Talking Logistics to break down what’s actually changed: procurement isn’t a once-a-year event anymore. It’s an ongoing conversation, and the shippers and carriers winning it are the ones negotiating from shared data — not gut feel and stale contracts.
Transcript
Host: Hello everyone, welcome to Talking Logistics, where we have conversations with thought leaders and newsmakers in the supply chain logistics industry. It’s my pleasure to welcome today’s program, Chris Noble, who’s senior product manager at PCS Software. And today, we’re going to talk about how TMS helps companies manage their transportation operations more intelligently and efficiently.
So, transportation management systems have been around for many, many years, but the technology and the capabilities of today’s solutions are very different from those in the past, and some of the challenges that shippers and carriers face in the market today. So how are TMS solutions helping companies, again, manage their transportation operations more intelligently and efficiently? Well, that’s the main topic of today’s episode, and it’s great to have Chris on the program to share his insights and perspective on this topic.
So Chris, welcome to the program.
Chris Noble: Yes, thank you very much for having me today.
Host: So Chris—
Chris Noble: Looking forward to it.
Host: …excellent. So you’re a first-time guest on Talking Logistics. So before we dive into this topic of TMS, I’m always curious how people get involved in this industry. So why don’t we start there real briefly. Tell us a little bit about your career path, how and why you got involved with transportation and logistics, and what your current role and responsibilities are there at PCS.
Chris Noble: Sure, no problem. I’ve been in transportation for over 20 years. My background was actually on the operations side, so freight forwarding, import, export, as well as domestic surface transportation. I’ve worked in non-asset based for carriers, brokers, as well as warehousing and distribution. And then, more recently, I moved over into the software side, so implementing software for companies who are looking for a TMS solution.
Host: Great. Pretty broad background there on both, not only now on the technology side, but also on the operations side of the world, in the front lines there. So, let’s talk about, again, TMS and transportation management. Maybe let’s start at the front end of this whole process, which is—
Chris Noble: Sure.
Host: …procurement, and we’re in Q4, we’re entering into the new year pretty soon here, and that’s kind of the time a lot of companies are working on their transportation budgets and procurement engagements. And there’s certainly a lot of different approaches to transportation procurement. Everything from conducting annual bids to mini bids and using the spot market. Are you seeing companies changing their approach to transportation procurement and how they collaborate with their strategic carriers in response to kind of the current market conditions?
Chris Noble: Yes. If you were to roll back time, you go back a few years, certainly pre-pandemic, I think there was a general consensus that there was an annual bid process whereby you would contract with your carriers, you would get an idea of what your transportation network would be based on historical information. You’d line up your carriers, you’d line up your routing guide, you’d make volume commitments, and then you would execute against the plan. And then during the course of the year, there would be quarterly business reviews or monthly reviews with the carriers to evaluate their service levels as well as their performance from a tendering perspective.
Really, all of that changed. And what changed with that was there became a very large differential because of the volatility of pricing between what was an annual contract and what the current spot rate is. So really what that forced people to do short term was unfortunately discard a lot of their contract rates, because carriers were not accepting the tenders for various reasons, move more into the spot market, and then just try to get the freight covered.
I think that was really a short-term solution to the issue, and as this continues to evolve and we come together on what the new normal is, I think the one real takeaway is that the bid process and the commitment from a rating perspective is much shorter. So does that mean it’s a quarterly bid? Does it mean it’s a semi-annual bid? Does it mean there’s a little bit more dialogue back and forth? Yes. So I don’t think we’re into the set it and forget it, where you’re just maintenance and monitoring. Now there’s going to be a lot more engagement. There’s going to be a lot more conversations, and I think the biggest part of that is the collaboration that’s going to happen between the shipper and carrier to understand better what their needs are and how they can mutually benefit from the process.
Host: I love that. I hadn’t heard of that, “set it and forget it,” with regards to transportation procurement. If that’s your strategy going into 2022, you’re in for a lot of problems.
Chris Noble: Yes. And you’re right. Historically, the rule of thumb was you move 80% of your loads via contracted rates and 20% was spot. And I think what you saw during periods of time this year, because of situations, you saw that mix change, and sometimes it got up to as high as 30, 40, 50% of the loads were moving via the spot market, which is not sustainable either.
So, I think a lot of the lessons learned are the ones you just talked about there, that it can’t be set it and forget it, and it can’t be 100% spot, but there has to be more collaboration, more communication between shippers and carriers moving forward, and figure out what the right cadence is in terms of thinking about capacity commitments and rates and things like that.
Host: So in light of all that, what is the role and how can technology like TMS help shippers achieve their goal of finding capacity when they need it at a fair price, ultimately?
Chris Noble: So, I think one of the key pieces is stability. So when you’re in a rising rate environment or a fluctuating rate environment, which is really where we are, because numbers are all over, you really have to go back to the data. You have to go back to having a system where you can look at what are the lanes that you move, what are the historical rates, and how did you handle that in the past?
Because regardless of where you are in the market, if your business is the same, meaning you’re moving the same trade lanes from an inbound perspective, your customer base may have changed a bit through the pandemic, but essentially you’re going to be shipping the same customers. You need to have that data at hand, because when you’re having a conversation with a carrier or a group of carriers or going out to bid or anything, you need to bring accurate data to the conversation, because then it’s more, “Yeah, we kind of think we’re going to have about 50 loads a week,” or, “It’s going to be 25.” That’s not pointing to the stability piece.
I think both sides of the equation, and sometimes we don’t look at the carrier side coming from the shipper side, the carriers want stability, too. They don’t want their trucks scattered across the country, always looking for another back haul, or maybe they’re out of market, so now they have a higher deadhead. So all these things that made for a stable, consistent business are desirable on both sides of the equation.
So when I look at a TMS, I look at the power of a TMS: number one, it’s the single source of truth. You have a vast amount of data that’s in there. You can analyze it, you can slice it and dice it, and then you can present it in an organized way. And then have the conversations, and then since you have the data, as things progress a month from now, two months from now, three months from now, you also have the opportunity to evaluate the results.
Host: As you were talking there, it struck me that when we talk about TMS, a lot of times we tend to think about, okay, TMS is something to help you to execute your day-to-day transportation operations. It helps you to optimize the right carrier, optimize loads, and so forth. But when it comes to procurement, as you were just talking, TMS is really a business intelligence and analytics tool, right? Because there’s so much rich data in there, and it’s the ability to take that data, both historical as well as real-time operational data, and leverage that as you’re having your conversations with your carriers. And obviously carriers have their own systems that have their wealth of data as well. So you’re really approaching those conversations as informed as possible, and being data-driven as opposed to gut feeling or just guesses, right?
Chris Noble: Yeah. Data-driven decisions, data-driven conversations. Everybody’s grounded. It’s not like you’re trying to pull a punch. You’re not trying to hide something. This is the information, and let’s talk through it, and let’s make sure that we can be consistent in our conversations. Naturally, trade lanes do change. Volumes change week to week. But companies really do know where they’re shipping and who their customers are, so there should be at least enough information available from a baseline perspective to talk about that. And then you’re going to end up with some seasonality. There are times when shipping goes up or down based on the product and product needs of the customers. But at least you can have the coverage conversations.
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