Transportation purchasers prefer frequency
June 24, 2010
How are the habits of transportation buyers changing?
To answer the question, LeanLogistics, Inc surveyed transportation and logistics professionals from 112 companies located throughout North America in April.
The results show that nearly 70 percent of companies across all major verticals—have shifted away from annual, network-wide RFPs to more regular events.
All told, 69.8 percent of companies procure transportation more than once per year. The majority (51.7 percent) have applied a lane-by-lane or region-by-region approach to putting their freight tenders to market. A total of 9.5 percent do it two to five times per year, while 8.6 percent do it more than five times. That leaves only 30.2 percent making decisions annually.
These results suggest companies are shifting away from the traditional practice of sourcing all transportation in the first quarter of the year. The survey supports this; in fact, the first quarter of the year is the least active among survey respondents. Instead, the fourth quarter had the highest proportion of annual procurement activity at 27.6 percent, followed by Q2 (26.7 percent), Q3 (21.5 percent) and then Q1 (20.7 percent).
LeanLogistics attributes this shift in large part to prohibitive cost and resource requirements for large-scale, network-wide buys in today’s economy. Simply put, buyers don’t have the resources they once did to manage large-scale procurement events. Further, purchasers are able to drive greater cost savings by procuring transportation throughout the year instead of single annual network-wide purchases.
Matt Ahearn, chief operating officer at LeanLogistics, says smaller events that manage the freight requirements of lanes or regions that require attention is a far more strategic option for companies seeking to balance costs with return on investment.
However, this is only possible if companies have the resources or the technology in place to support these more frequent processes, he adds.
The survey results support his opinion; of the companies surveyed, 70 percent of respondents said they believe technology can improve and streamline their transportation procurement events when used strategically. That said, a full 80 percent are still using manual methods to do it.
Once a transportation contract is out to tender, what are buyers looking for? The top answer, with 60 percent of respondents agreeing, was better rates. Also important were carrier relationships and securing capacity, with 53.3 percent and 46.7 percent of respondents agreeing, respectively. Far less popular was the desire to add new carriers to the mix.