Freight Procurement: Traditional Methods can’t Match Modern Logistics Strategy

Freight procurement benefits from modern logistics strategy and digital load matching.

For transportation managers, one of the most critical aspects of shipping is logistics strategy and planning. Effective freight procurement is a foundational building block within that overall strategy for transportation.

Freight procurement is securing enough available transportation capacity to haul cargo from origin to destination. Traditionally, securing that capacity has relied, in large part, on long-term contracts secured through annual or bi-annual RFPs.
Unfortunately, market instability can affect the financial feasibility of long-term contracts (for shippers and carriers!). Booking loads in an alternate, cost-effective solution on short-term notice can be burdensome without the right tools. This is especially true as transportation rate market volatility continues to evolve in the remainder of 2022.

According to a recent survey noted by Commercial Carrier Journal, “55% of respondents expect spot rates (minus fuel surcharge) to climb in the next six months versus 59% in the fourth quarter of last year. About 14% of carriers expect rates to decline over the next 3–6 months, in line with historical averages. Only 2% expect rates to drop quickly this year. Another 32% expect them to slowly moderate.”

This bears consideration in transportation process planning. The disparity in expectations for rate levels in the back half of 2022 is further evidence that traditional freight procurement methods are no longer effective. If there’s no agreement on rate levels, how can you secure a consistent cost – for the long haul?
If nothing else, all the disruption, upheaval, and change in the freight market over the past few years made it clear that a dynamic load procurement process is required to meet modern supply chain demands.

A Modern Approach to Freight Procurement Creates Dense Capacity

Capacity is critical to maximizing the effectiveness of freight procurement procedures. Access to dense capacity and an established dynamic load procurement process makes it easier for shippers and brokers to manage transportation processes. With enhanced freight market insights comes a better understanding of market trends and obstacles to capacity access.

Modern, adaptable solutions for capacity acquisition and freight procurement expand access to vetted and professional carriers at a moment’s notice. At the same time, you can improve overall freight transportation services, digital freight matching, and capacity access.

Market Fundamentals For Improved Capacity Management and Dynamic Load Procurement

From a market fundamentals perspective, balancing contract rates, spot rates, and freight load procurement is essential for long-term success in transportation cost management.
However, because the traditional strategies of freight procurement no longer consistently keep up with changing market demands and pressures, modern solutions need to support a more agile logistics strategy.

Various tools and technologies help shippers, brokers, and carriers keep tabs on capacity levels and improve freight procurement:

  • Digital load matching platforms
  • Spot bidding and requests
  • Cloud-based logistics solutions
  • Integrated communication systems
  • Scalable and adaptable analytics
These tools allow shippers and LSPs to allocate freight more effectively among their contracted carriers.

Likewise, visibility to carrier performance facilitates a better understanding of carrier rejection rates and which carriers are stepping up or not. When change is needed, an integrated system and innovative logistics strategy provide flexible access to alternatives with capacity – and a better track record.

Market Volatility and Instability Require a Unique Approach to Procurement

Outdated models cannot keep up in a market with high tender rejections and tight freight capacity.

Examine the characteristics of traditional strategies for freight procurement, and the need for a new approach becomes apparent.

  • Annual/bi-annual RFP process with negotiation of fixed terms.
  • Second thoughts over being trapped in contracts when conditions change.
  • Challenges with carrier reliability and performance.
Traditional freight procurement is less effective due to constantly changing markets, shifting consumer demands, fluctuating rates, and transportation process and regulation constraints.

When the market dictates a more dynamic approach, shippers and LSPs who are unable or unwilling to change are doomed to struggle. Dynamic load procurement is an answer to modern digital freight networking needs.

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Capitalize on Current Market Trends and Ensure Capacity Procurement With New and Innovative Approaches

Take advantage of modern logistics strategy and planning tools and software to make freight procurement less hassle. Outdated methods were acceptable for their time, but current dilemmas require modern solutions.

A new and fresh approach to capacity procurement and management is needed, and MercuryGate has the tools and insights necessary to capitalize on every opportunity. To learn more about digital freight’s changing role in alleviating freight management and capacity procurement challenges, download The State of Digital Freight Networks.

Tap into the power of Digital Freight networks.

MercuryGate
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