Canadian Flag GENCO Canada

Strategic Transportation Procurement: Succeeding in a Dynamic Transportation Market

It’s been a bumpy ride for the transportation industry so far in the first decade of the 21st century. Problems ranging from capacity shortages and rising costs in the early 2000s to changes in hours of service and falling freight volumes and rates today show just how turbulent things have been.

Navigating these hazards by deploying traditional solutions, however, isn’t so fail-safe anymore. The dynamics of the transportation market, combined with the recession, are forcing transportation professionals to look at “out of the box” solutions. Their ability to move beyond the tried and true will largely determine their organizations’ success—now and in the long term.

One solution for addressing the constantly changing issues of the transportation market is to develop a strategic procurement plan, which comprises four steps:

  1. Evaluate overall transportation strategy.
  2. Conduct a strategic assessment of long- and short-term needs.
  3. Execute the procurement plan.
  4. Annually review the plan.

Step 1: Evaluate overall transportation strategy.

How effective is your organization’s transportation strategy? Have you considered all relevant factors? To answer these questions, complete an objective assessment of:

  • Your organization’s partners.
    Are they aligned with and do they understand your needs? Do they employ best practices in cost control, transportation service, and personnel management?
  • Your organization’s management style and relationship building.
    Is your management active in establishing relationships? Cultivating, maintaining, and enhancing relationships based on integrity and respect is often the key to success. When demand is in decline, it has been proven that the relationship or lack of relationship is the deciding factor in achieving success.
  • Carrier strengths and weaknesses.
    How do you rate your carriers’ network functionality, service capability, and financial stability?
  • Your organization’s ability to stay on top of current issues.
    Are you educated on today’s hot buttons, such as green initiatives, infrastructure, credit availability, productivity, technology enhancements, and asset investment costs? What actions do you take?
  • Your organization’s global awareness.
    How informed are you about the global transportation market and its issues? What happens on an international level affects the domestic market.
  • Your organization’s forecasting acumen.
    When will demand increase? Will equipment be available to support demand or will truck builds further constrain the recovery? When will the driver shortage become a problem again?

With this information, you’re ready to determine your immediate and long-term needs.

Step 2: Conduct a strategic assessment of long- and short-term needs.

Sales forecasts, expansion or contraction plans, competitor assessments, and financial plans provide great insight into shaping your organization’s needs, for both the short and long term. Complement this information with input from key stakeholders in your organization. It’s also a good idea to seek information from cross-functional teams from sales, production, operations, finance, and management.

Step 3: Execute the procurement plan.

The scope and sophistication of the procurement plan will be driven primarily by the defined needs from Step 2, as well as other factors. For instance, to reduce administrative time, encourage participation in the plan, and facilitate detailed analysis through use of specific scenarios to definitively show the cost of decision making, consider a comprehensive procurement technology solution.

Optimally, the solution you select should be a combination of cost, service, and capacity derived from a collaborative bid event. This will minimize or eliminate transition loss at implementation and fuel overall success. Subsequent ongoing management will position you well to achieve the defined strategy and close the loop on the overall project.

Step 4: Annually review the plan.

Finally, conduct an annual review of your procurement plan to identify changes in the market and your business and make corresponding changes to continue your success.

Clearly the marketplace is presenting unique challenges to the transportation industry. Although the economy is the wild card, the industry can address declining volumes and rates and other challenges within its control. By developing and implementing a strategic transportation procurement plan, companies can position themselves to succeed in the current economy and be prepared to better respond to the dynamics of the market.