Shippers that understand how to meaningfully integrate data into their strategy have a competitive advantage that allows them to ship more efficiently, reduce costs, become more agile, and adjust to transportation demands.
While transportation challenges are growing more complex, many shipper strategies continue to rely on longstanding industry practices, from the annual RFP to static rate benchmarking. But in many ways, these methods fail to account for the new levels of complexity that continue to emerge. When your strategies fail to align with the rapid pace of change in the market, it can result in over-spending, shipping delays, and other inefficiencies, making shippers’ jobs even more difficult.
The Need to Fix an Inefficient RFP Process
Let’s start by looking at the current RFP process, which is incredibly resource-intensive for both shippers and carriers. Both parties may prepare for three to four months by evaluating existing network trends and predicting their freight needs for the next year. Whether handled internally or externally with a specialty provider or consultant, this is a cornerstone process that can be highly time- and resource-intensive across industry players.
But is the use of time and resources well spent?
Despite the best forecasting, the future is unpredictable, making transportation a constantly moving target. For instance, customer performance may differ from expectations, retailers might open or close locations unexpectedly, and unforeseen market circumstances can suddenly occur—like the uncertainty created in the 2020 marketplace due to COVID-19 and OPEC+’s crude oil price war.
Trying to plan for all of these factors annually can create inconsistency and disruption to service and costs for shippers down the line. Because the analysis for an RFP only shows historical data from a network, it cannot give insight into what’s happening “right now.”
Adopting a Data-Driven Strategy
Research from the Council of Supply Chain Management Professionals shows fuel and freight make up 63% of logistics costs. Yet, shippers are using processes they know are likely inflating those costs. Finding alternatives while managing their strategic plans and responding to unpredictable events, such as unexpected production delays, volume surges, regulatory uncertainties, natural disasters, and other transportation disruptions, can be challenging. Additionally, it is important to recognize and maintain shipper-carrier relationships and lane matches that are working well, and keep costs aligned to plan. Adopting a data-driven strategy can reduce those costs by allowing shippers to be more flexible and accurately monitor success, even when unanticipated changes occur.
Data offers precise knowledge about areas of opportunities. Instead of working with a general sense of what’s happening within the shipping industry, data allows shippers to see specific lane information, how that lane affects the entire transportation ecosystem, and vice versa. Seeing fuel and freight data at all levels enables shippers to make the most accurate strategic decisions.
The Importance of Visibility
Shippers need to access data representing the entirety of the transportation network in real-time to effectively determine which carriers fit best into their network and what type of pricing is sustainable. Visibility into both shipper and carrier freight networks, including lanes, carrier performance, costs, and shared parameters, gives a more accurate depiction of the transportation landscape to make the best determination of carrier fit. When the right carrier is consistently contracted for the right lanes, it creates efficiencies to processes, reduces costs, and will improve overall service.
Compared to going through an annual RFP process, having a robust understanding of transportation flows in total allows shippers to be more targeted in adapting to changes in the marketplace so that they can find more sustainable solutions for their network. Fortunately, in our technology-driven world, that data is now available.
Looking Beyond Price for Sustainable Cost Management
During an RFP, it might be tempting to take all of the lowest bids to achieve the highest perceived cost savings. But low costs aren’t always the right costs. It’s important to consider whether those carriers can service those routes at that price on an ongoing basis.
Late penalties from on-time delivery parameters, carrier capacity getting pulled out of network due to unexpected volume requirements from shippers, and loads significantly outside of a carrier’s geographic range of operation can lead to added cost of service. Data can show which carriers have a track record of success on a particular lane, which can help shippers avoid those penalties.
When carrier networks don’t align with the freight they are contracted for, it can lead to dropped freight that gets shifted to brokerage or the spot market. Unexpected changes like this can become costly over time. In these cases, the higher-priced options that were avoided at the outset might have been a better fit after all.
Using Data to Develop Improved Carrier and Distribution Insight
Knowing the performance history of a particular lane can also inform shippers about which carrier will work best for them in that specific lane. They can understand if it’s advantageous to have a smaller carrier base because it consolidates freight, or if pricing would be more competitive if there were a more robust carrier base. Understanding how a network interacts with the broader transportation network can improve a shipper’s overall supply chain strategy.
Even distribution center locations can be analyzed using data, helping shippers better determine new construction locations that will have the most benefits. Or, they can maximize efficiencies for existing sites based on that region’s transportation network.
Overall, visibility through data can help shippers understand the most sustainable pricing. Understanding how variables, like supply and demand balance and freight requirements, impact price are essential when comparing one shipper’s rate to another’s. While benchmarking is a common practice, there is no reason to settle for a generalized rate if there are other, better options available. Data beyond price reveals those options.
The Path Toward Transportation Network Improvements
Imagine how accessing real-time data from thousands of carriers across a cohesive network would impact the decisions you make in your transportation strategy. Shippers that understand how to meaningfully integrate data into their strategy have a competitive advantage that allows them to ship more efficiently, reduce costs, become more agile, and adjust to transportation demands.
Having access to data is crucial, and the growing demand for visibility solutions supports this. But merely having access to it is not enough. Ultimately, the inherent value of supply chain data lies in the planning, forecasting, analysis, and ongoing management opportunities it provides.
To remain competitive, shippers must leverage their data to define strategies that will drive continuous supply chain improvements and help achieve specific business goals. However, taking advantage of data requires knowledge and expertise that might be beyond in-house capabilities.
Relying on an outside partner that utilizes the supply and demand dynamics of both shipper and carrier data can bring shippers all the information they need. From there, a partner can help formulate a plan, optimize network efficiency, and monitor carrier compliance over time.
From fuel management to freight solutions, it’s time for shippers to start using actuals, not averages, to build more effective transportation networks. Adopting a data-driven strategy is the solution.