Purchasing Freight Transportation


by Harry Gorden - Date: 2006-12-27 - Word Count: 713 Share This!

The landscape of purchasing freight transportation has changed dramatically. Have your supply chain processes kept pace maximizing service and minimizing costs? Key elements of change have been capacity, technology and leverage.

Capacity - Other than rail, there is abundant small package, less than truckload and truckload capacity, when managed properly. The asset providers will tell you otherwise as in their respective niches, sellers may be constrained but buyers certainly are not. In 1980 there where 20,000 trucking companies in North America, today there are over 564,000…each with unique cost structures, market reach and technology. The only way for purchasers of transportation to manage this highly fragmented market is to leverage new technologies for optimal services and cost effectiveness.

Technology - Who can afford buying the software to manage provider choices and audit freight bills?...fortunately in today's competitive market, you do not have to as new highly focused third party providers have the latest that is scalable to your unique needs and they absorb the cost. Clients can not afford nor should they eat the ongoing costs of robust software and inevitable enhancements/upgrades needed to reflect the marketplace changes in provider reach, reliability, transit times and rate comparisons.

Leverage - Only the largest of businesses have the leverage to create supply chain efficiencies on their own and most of these usually leave money and value on the table with current transportation providers. There simply are too many asset choices, much less access to their respective lanes of need and capability, that buyers can leverage on their own for service and cost efficiencies.

The trend since 1990 has been the proliferation of non asset, third party logistic concerns that have tried to address the above issues for shippers/receivers. Just as there are many different types of asset providers in scale and capability, there are a multitude of choices of non asset providers for purchasers of transportation management services. The combined effect of these operationally driven entities with largely mediocre customer support both in the asset and non asset worlds leave shippers/receivers numb at best as to how best move their goods at reliable and cost effective ways. Your staying with past processes and unfocused providers in your supply chain is a risk-averse path that your competitors will capitalize upon with products to market more timely and at less cost to you. Poor past experiences with change further limit a willingness to be vigilant on options and maximize one's transportation spend in this expansive marketplace. What to do? Three steps worth investing your time (not money!):

1. Benchmarking your spend, technology needs and provider commitment to dedicated resources for you is critical. No question the choices can be overwhelming, however there are resources that will do the analysis for you and can commit to measurable savings, and increased value, with no cost surprises.
2. There are asset providers who create the impression of tight capacity, tight margins and the fears of change…it may be true for a given provider, but not true with other available providers at your disposal, who will value your business. The trend today clearly is for you to keep control of provider selection but align yourself with new transportation management concerns with technologies that leverage optimal service and cost effectiveness.
3. While there are a myriad of non asset, unfocused third party providers to choose from, there are new transportation management players in the marketplace worth finding. The trend today clearly is for true customer driven transportation management models, an understanding of low cost, service reliable providers by market lane, new technologies that push real time data, customized values for your needs and dedicated service personnel to your account. These should be at no cost to you as they are appropriately contingency based on savings created.

Today's new wave of transportation management companies are value driven and can absolutely drive your supply chain transportation costs down and deliverable values up. The old approaches do not work anymore, whether formal bids, online bids, renegotiations, associations, base tariffs, .coms, brokers, non focused third party logistic companies, etc…all put the buyer at a disadvantage with their limited reach and spend. Leveraging your spend with larger buying pools, adding value with more advanced technologies and gaining dedicated customer support is truly the new trend to leveraging transportation savings which are within your reach and shareholder obligation.


Related Tags: management, supply chain, savings, leverage, transportation, spend, purchasing, freight

Harry Gorden, President, Transportation Management Services, Inc, a transportation management agency with over 35 years experience, providing consulting to the equity, capital management and transportation communities as well as no cost referrals for manufacturers/distributors seeking the right fit transportation management support. Inquiries welcome at: hmgorden@comcast.net.

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