Procuring transportation for freight is much different than any other procurement category. There are different tools, goals, and market dynamics. Transportation procurement needs to support both customer service and a company’s internal supply chain goals. The freight market is mercurial. It can move quickly from a situation where there is too much capacity in the market and buyers having the whip hand, to a situation where shippers are begging carriers to take their loads at almost any price.
One master of freight procurement is Kyle Masters. Mr. Master’s experience at Simmons Foods illustrates many of the distinct characteristics and challenges related to freight procurement.
Simmons Foods is a farm to fork poultry manufacturer. They are a leading supplier of poultry, pet food and animal nutrition products based in Siloam Springs, Arkansas in the US. Depending on the product, their customers are consumer goods companies, retailers, food service distributors and restaurant chains. Simmons supplies private label products to some of the world’s largest retailers and food chains. They are vertically integrated. This makes Simmons highly efficient – little of a processed bird goes to waste.
Because they are vertically integrated, a lot of their shipments are intracompany moves from one Simmons production facility to another. Mr. Masters explained, “we’re picking up from the back of a poultry production facility and taking those birds, feathers, and skin to an animal nutrition production facility. Then we are pulling out of an animal nutrition production facility and taking those finished products to a pet food manufacturing facility.
Almost all companies will say that “service” is important. But service is paramount in a vertically integrated supply chain with perishable products. Once a chicken is processed, “the clock starts ticking,” Mr. Masters said. That processing event determines when the goods need to be delivered to the next stop. That factory also aims to rapidly process the raw materials into product. “Then the clock starts ticking again.”
Simmons has highly demanding internal and external customers. A 95% on time delivery metric – very high performance – is just not good enough for Simmons. “The last thing that can happen is for production to stop” because of late deliveries. Speed is of the essence.
When it comes to delivery to their own production facilities, “on time” is defined as the truck being at the dock at its appointment time. For their customers, “on time” is customer defined. For one retailer, that may mean within 30 minutes of a dock appointment, for another it may mean the goods are delivered on a specified day.
Simmons uses dedicated contract carriers, a private fleet, and brokers for their shipping. The transportation team supports 13 production facilities. The company moves 46,000 shipments per year using dry van, temperature-controlled trucks, hoppers, live haul, and other trucks as well. The moves span inbound, intracompany, and outbound shipping.
The Journey to Improve Service
When Mr. Masters joined the company in August of 2020, the company had three business units each using its own carriers. Mr. Masters joined when the company had started to create an enterprise approach to transportation. It was quickly determined that a procurement event was necessary just to set a baseline. Procurement ran a request for proposal event. This RFP taught Simmons Foods just how fluid their network was. 30% of the carriers they ended up working with had not been working with them the year previously. Further, customers’ buying patterns were so variable, that 30% of the lanes they procured freight for were new to the network. A lane involves a specific origin and destination. Any shipment moving from Siloam Springs to Bentonville, Arkansas, for example, would be one lane. Even today, now that the pandemic shocks have largely worn off, 20% of this year’s lanes are new to the network.
An RFP is a data intensive exercise. On the outbound side, they were using a transportation management system from e2open. This made the data analysis easier. On the inbound side, it was highly reliant on spreadsheet data. This made the data analysis “painful.” Simmons has corrected this problem; they are now using a TMS from Kingsgate Logistics for inbound freight.
This initial procurement event occurred during COVID “when spot rates were going through the roof and capacity was declining weekly. Really, in 2021 we were hanging on for dear life,” Mr. Masters lamented. Less than half of their freight tenders were being accepted by their existing carriers. “The other half we were begging” carriers to take the loads. “We did not have a great spot tool.”
One of the brokers they used to find carriers was Emerge. They learned that Emerge could do more, they had an innovative freight procurement solution.
Simmons ran an RFP between late 2021 early 2022. This is when they first began to use the Emerge solution. Prior to Emerge they were paying for an RFP platform that was “not close to being as good” as the Emerge solution. Further, the Emerge solution goes beyond just helping with RFP management to providing rate analytics. The solution can be used to benchmark whether Simmons is paying below, above, or at market for their moves on a particular lane.
Simmons always does an ROI analysis prior to purchasing a solution. They have come across transportation solutions they thought were terrific, but when they looked at the cost and did the business analysis, the ROI was just not there.
But with Emerge, “everything is free” Mr. Masters exclaimed. “I have had people reach out to me from competitors of Emerge and ask ‘how do they do it?’” I don’t know how they do it. That’s not for me to worry about.”
It turns out, that Emerge gets their money from carriers. The Emerge solution requires that tenders generated by a customer’s transportation management system be sent through the Emerge platform. If a tender is accepted by an incumbent carrier listed in the TMS, there is no fee. If loads are not accepted by carriers the shipper is already working with, shippers can tap into the marketplace to access new capacity. The Emerge marketplace has thousands of carriers. If the Emerge marketplace is used to secure capacity, there is a small add-on fee paid by the carrier that is built into the marketplace rate.
This marketplace tendering is made possible because Emerge is based on a public cloud architecture. That architecture is also what makes it possible for Emerge to provide accurate and actionable rate analytics.
A procurement tool can help shippers get better rates. But just because you can use a tool like Emerge to drive transportation savings, that does not mean cost should be determinative. Because of their need for high service levels, Simmons Foods wants to create long-term partnerships with key carriers.
FourKites is being used as Simmons Foods real-time transportation visibility solution. The data from this solution is what allows Simmons to ensure that goods arrive on time, are efficiently unloaded, and moved off the dock and into the factory. Then on the outbound side, the visibility analytics allows for the same type of improvements that increases the shelf life of their products.
FourKites was selected in the first quarter of 2022. Simmons began the implementation in April of 2022. The implementation is still in progress. Getting carriers to provide the integration to their telematics devices is what creates the real-time analytics. Driving carrier compliance is not an easy task.
“We’re about 15 months into the implementation right now,” Mr. Masters said. “We started slow because we went from a carrier base where there hadn’t been an expectation of using that tool.” Now they are telling their carriers that this will eventually be mandatory. “We’ve tracked carrier compliance using the tool for the past three months. We’re to the point now where if progress isn’t being made” – if carriers are not using the FourKites tool on a “consistent and accurate basis” – we will make routing guide changes.” A routing guide is the list of carriers that get business on given lanes. If carriers can’t provide high service at a reasonable price and real-time visibility, Simmons will stop using those carriers.
Freight Procurement is a Conversation
While Simmons Foods has a transportation spend of over $100 million, their lane network is fairly concentrated into just a few shipping regions. Because of this, Simmons has a relatively small number of strategic carrier partners – only 20 or so. This allows for at least monthly conversations between the core carriers and the Simmons procurement team.
The Emerge tool can show if a carrier’s rate is too high on a specific move, this can become part of the conversation. But service will always be a key part of the conversation. The Simmons team might see that a carrier’s service isn’t quite there and ask “Hey, are you happy? Is this working?” We know that our data is not always right,” Mr. Masters went on to explain, “and that’s what a lot of those conversations are about.” A team member might say to a carrier, “I’m showing you had a bad week last week, what are you showing?” The conversation helps determine what really happened and what can be collaboratively done to improve service in the future. The FourKites data is helping to improve these conversations.
Simmons has a small freight procurement team. The team recognizes that there is a tradeoff between having regular conversations with carriers and doing more frequent RFPs. More frequent RFPs might deliver better freight savings, but to run an RFP event, Simmons would have to pull people out of their day-to-day work to support the new bidding process. “We’d rather not do that. We like to take a more strategic, long-term approach,” Mr. Masters said.
Mr. Masters went on to say, “we know more about our business right now than we’ve ever known, and we’re sharing that knowledge with our carriers. The expectations of execution are higher than they’ve ever been, and that bar just keeps getting lifted. We’re walking together through this journey to perfection, or as close as we can get to it.”
Simmons Foods has made great strides. Mr. Masters concluded, “we’ve just gotten to where we trust the data in about the past six months. We’re between a 96 and 97 and a half percent service level.”