That is the title of the workshop I will conduct next week at The Logistics & Supply Chain Forum organized by Richmond Events. The content of my presentation is based on numerous case studies and end-user interviews I’ve conducted over the years (Ace Hardware, Frito-Lay, HJ Heinz, International Paper, Wausau Paper, and others), as well as interviews with some of the leading technology and service providers in this area, including CombineNet, Infor, i2 Technologies, JDA, LeanLogistics, Manhattan Associates, Ryder, and Transplace.

As I’ve highlighted several times this year, transportation procurement is a ‘hot’ topic these days because it’s a shipper’s market (see the chart below based on the U.S. Department of Transportation’s Freight Transportation Services Index). Simply put, if you haven’t put your freight out to bid in a couple of years or more, you’re missing out on significant cost savings.

Source: ARC Advisory Group (click to enlarge)

At the risk of stealing some of my thunder, here are four important points I will communicate to the workshop attendees:

• The most important success factor in a transportation procurement bid is creating an EXECUTABLE result. The output of a bid engagement should reflect reality: the true characteristics of your freight and the true capabilities of the carriers. If the information you submit to carriers is incorrect or not detailed enough, carriers will base their rates and commitments on flawed information. For example, instead of communicating total yearly volumes by lane, break your capacity requirements down by month or week, and highlight spikes in demand caused by seasonality factors or promotional periods.
• A transportation management system (TMS) is required to truly achieve forecasted benefits. There’s no point in having an executable result if you don’t have the capabilities to actually execute. If at the end of the procurement engagement, instead of importing your rates into a TMS, you publish paper routing guides and use spreadsheets and fax machines to manage your day-to-day operations, those double-digit projected savings will quickly evaporate. Using a TMS to automate a multi-tiered tendering process, leveraging the data captured during the bid process to identify alternate carriers and rates, is one way to keep your savings on track. So is using business intelligence and analytical tools, such as carrier scorecards.
• Transportation procurement is facilitated by software, but it doesn’t replace the negotiating skills and market intelligence of people. Said differently, people negotiate, not computers. If your knowledge of the transportation marketplace is limited, which in turn limits your ability to identify and negotiate win-win solutions, then seek a knowledgeable and experienced partner to assist you with the bid.
• You can “strong arm” your carriers into getting lower rates in this environment, but it’s a poor strategy from a long-term perspective. There are many carriers out there that will fall victim to the “winner’s curse”—i.e., bidding aggressively to win the business, but then lose money or go bankrupt because they underestimated their costs to serve it. This curse also impacts shippers in the form of low tender accept rates, lost capacity, and increased costs. Smart shippers understand that maintaining “carrier-friendly” practices at this time, particularly with valued partners, is the best approach.

If you’re going to the conference next week, stop by and say hello. I’m also conducting a think tank at the conference on maximizing the value of 3PL-customer relationships. It’ll be a prequel to the performance-based outsourcing seminar that we’re having February 9-11 in Orlando.