Back in May, I wrote a piece on how transportation procurement is “hot” right now (plus a follow-up piece called “Transportation Procurement: Another Viewpoint”).  A couple of weeks ago, I gave a keynote presentation at a transportation management seminar organized by Manhattan Associates and CSC for executives in the Boston area.  Terry Norton, VP of Transportation Lifecycle Management at Manhattan Associates, presented some interesting data on the procurement engagements Manhattan has facilitated over the past 2.5 years (summarized in the chart below).

Manhattan Associates Transportation Procurement Data (Source: Manhattan Associates; click to enlarge)

The bottom line: shippers are putting more of their freight spend out to bid, and the savings are getting larger.

Also, although I’m still analyzing the results of my annual transportation management systems study (soon to be published), it’s clear to me that transportation procurement is an area of focus for most TMS vendors.  In a web survey, I asked the leading vendors “Aside from your ‘core’ application capabilities, which functionality or add-on modules are growing in demand?”  Transportation procurement was number one on the list, up from number nine last year!

Earlier this week, Manhattan announced the release of Express Bid, “a software-as-a-service (SaaS) solution that automates and standardizes the procurement process from price-shopping to final contract.”  You can read the press release for the details, but a couple of points are worth highlighting.  First, this is a SaaS solution, which in my opinion, is the ideal deployment model for a procurement solution.  As I’ve noted in the past, SaaS makes the most sense for business processes that are inherently network-centric—i.e., processes that involve the exchange of information and documents between many different trading partners, which is the case for transportation management in general, and procurement in particular.  Secondly, Express Bid is best suited for “tactical” procurement engagements, where the focus is on obtaining capacity (or new rates) on a select number of lanes instead of your entire network.

For example, Terry presented a case study of a leading grocery retailer that decided to convert a select number of inbound freight lanes from pre-paid to collect.  The challenge they faced was determining which lanes would provide a cost savings if converted.  To determine this, they first had to know what the vendor would provide as a freight allowance off the cost of goods sold for the lanes the grocery retailer was targeting.  Once they had this information, the retailer used the transportation procurement application to collect bids from carriers, and compare the freight costs to the freight allowances.

The first “mini bid” engagement they conducted focused on 58 lanes ($7.5 million spend). Forty-four carriers responded to the bid, both new and incumbent carriers, and the end result was a $1.4 million (18.75%) savings opportunity.  The retailer conducted another mini bid a few months later (98 lanes, $20 million spend, 55 carriers) and identified an additional $3.6 million (18.32%) in savings.

Manhattan is not the only vendor capitalizing on this demand for transportation procurement solutions.  i2 Technologies, JDA, LeanLogistics, and MercuryGate are also very active in this area, and so are leading logistics service providers (3PLs) like Transplace and Ryder.

I’ll end with the same advice that I gave before: if you haven’t conducted a transportation procurement engagement in the past year, you’re probably missing out on cost savings.  But refrain from taking a short-term, non-strategic approach.  Can you “strong arm” your carriers into getting lower rates in this environment?  Absolutely, but it’s a poor strategy from a long-term perspective.  Smart shippers understand that maintaining “carrier-friendly” practices at this time is the best approach.  It may take a few years, but fuel prices will climb over $100 a barrel again and there will be a severe shortage of capacity once the economy improves.  Shippers that establish “strategic” relationships with their core carriers today will be in the best position to weather these future challenges.