It’s been a busy year for procurement events. A lot of shippers are realigning their rates and commitments with their carriers in what has been a “soft” market. This has proved cost effective with shippers reducing their rates between 5 and 15 percent. But as we all know, the market is ever changing and the favor will swing the other way eventually, so it’s important not to place all of the focus on cost savings. A better long-term strategy is to focus on building strong partnerships with carriers to maintain stability through the years.
Talk is Cheap
When the market was tight in 2014, a lot of carriers felt they were taken advantage of during procurement events and discovered “talk is cheap” when certain loyalties were put to the test. Always remember these two truths: the market will change and carriers will remember how they were treated.
Focus Internally First
It’s better to start your procurement process by looking internally. Seek out opportunities in your own operations (wait times, terms, and flexibility) to give you the shipper of choice advantage. Determine which carriers you work with well and dig deeper to understand their markets and needs. Communication is key when building relationships. When developing your request for proposal ensure you are accurately depicting your business and expectations. The more details the better so the carrier fully understands the requirements. This will increase the percentage of your primary carriers picking up loads on a consistent basis.
Five Tips for Successfully Going to Market
- Be consistent. If you bid on an annual basis, conduct your event at the same time each year vs. trying to time the market.
- Don’t be concerned with adding new carriers, but be mindful not to create too much disruption within your current base.
- Go into your event with your eyes wide open. Understand market conditions and benchmark your rates ahead of time to limit any possible surprises.
- If you have limited experience with managing an RFP (or if you do not have time to do it right), get help.
- Collaborate with your operations team during the set-up phase of the RFP and during the awards process. By doing so, you will be able to ensure that any lane nuances are captured and that they feel as if they were part of the process which will assist with the implementation of the awards (operational ownership).
Keep Building the Carrier Partnerships
Once shippers finalize and implement their RFP results, the work is not yet done. Post-event management is an important step in any procurement event and it is critical to realize expected savings, service, and capacity. A lot of time and thought go into the awards process and the following can assist with maximizing the expected results:
- Provide your operation teams with “paper” routing guides so they can confirm that if tendering systems are being used, that rates and routing guide sequences are being pulled correctly.
- Establish a process with your operations team so they know who to contact if a carrier isn’t honoring their commitment and when an issue should be escalated.
- Schedule touch-point calls with your Core Carriers to review metrics, opportunities, etc.
- Implement/Review the following reports or tools to proactively understand whether awards are being honored:
- Carrier Scorecard – provide feedback to partners – review opportunities and celebrate successes
- Routing Guide Compliance reporting – understand where primary carriers are not accepting awarded lanes
- Financial reporting – for the lanes that were awarded, are you seeing the results that were expected
A successful procurement event can have lasting implications on your fiscal year (and beyond based on your carrier relationship/management process) and it is important to proactively understand where commitments are not being honored so they can be addressed timely. When working with your partners, take the time to listen to their processes and experiences to ensure you understand why loads are not being taken and work to rectify the issue if there are hold-ups on your end.
Being a true partner really is the key to building a better supply chain…and remember what it means to be a partner when the market makes it easy for you to forget.
Tim Dalton, Senior Manager, Procurement Services at LeanLogistics, is responsible for the management, support, and/or execution of all transportation procurement activity. Tim started his professional career at Total Logistics Control in 2002 and joined LeanLogistics in 2005. Since then, he has held several leadership positions with increasing responsibility, including Logistics Manager and Account Manager. Tim holds a bachelor’s degree in business administration (Logistics & Marketing) from Central Michigan University and an MBA from Western Michigan University.