Discover how good freight procurement reduces supply chain costs and improves logistics efficiency.
Do you know that, on average, transportation costs can make up 38.26% of your operational cost? At the heart of your operations lies the supply chain, with logistics serving as its backbone. Within logistics, transportation management plays a critical role, ensuring goods move efficiently and cost-effectively. However, inefficiencies in transportation and freight procurement can lead to wasted time and money, unmet consumer expectations, reduced support, and a loss of brand loyalty. This is why having a well-optimized freight procurement system is vital to maintaining a smooth and reliable supply chain.
When delivery volumes surge, clients demand faster turnarounds. Otherwise, profit margins shrink. Moreover, freight disruptions such as port congestion, labor shortages, weather anomalies, container shortages, and natural disasters cause significant challenges in managing freight and cause freight rate volatility. On top of this, your business must balance cost optimization with maintaining high service quality and profitability. The key to handling these pressures lies in strategically focusing on freight procurement to drive smarter decisions and sustainable outcomes.
Freight procurement guarantees cost-effectiveness, reliability, and scalability. When you use cutting-edge technology and data-driven approaches to design a freight procurement plan, it even further helps you create a strong supply chain with ease.
In this regard, this article delves deep into the specifics of freight procurement. It will cover the basic knowledge and best practices to maximize your logistics, unlock major cost savings, improve reliability, and attain higher flexibility.
What is freight procurement?
Freight procurement is the procurement of the transportation services required to move products across regions. This covers choosing carriers, negotiating rates, handling contracts, and applying technologies to guarantee the best cost and service performance. Over the past few decades, freight procurement has evolved from manual rate negotiations and spreadsheets to sophisticated platforms incorporating automation, analytics, and artificial intelligence.
With platforms like Pando's AI-powered end-to-end freight management solutions today, freight procurement transcends simple carrier selection. These days, it's about creating a strong, reasonably priced logistics system adaptable to changing market conditions.
Importance of freight procurement
By 2026, the global logistics industry will reach $14.08 trillion. That said, strategic freight procurement will be highly critical. So, if executed right, freight procurement can save you money, boost your supply chain resilience, and give you a competitive edge in an increasingly complex market. Let's dive deeper.
- Cost management: One of the main reasons you should concentrate on freight procurement is cost control. It helps you to come up with strategic rates and term negotiations to save large expenses and strengthen your bottom line. By means of an advanced rate manager, you can automate approvals, compliance checks, and alerts.
- Improved carrier relationships: You can strengthen your carrier relationships by efficiently tracking performance using accurate historical data. Additionally, advanced AI technologies help you make better decisions during tendering, the seamless and efficient bidding process, and contract awarding.
- Supply chain reliability: Freight procurement guarantees that the appropriate partners are chosen to offer consistent service, lowering the possibility of disruptions that can cause lost sales and unhappy consumers.
- Risk mitigation: By vetting carriers and establishing clear contracts, freight procurement minimizes risks related to delivery delays, transportation damage, and compliance issues. These days, companies see the value of diversifying their logistics network rather than depending on just one shipping source. Shippers can maximize market reach expansion and client satisfaction by using a variety of carriers, which gives them more flexibility, better service levels, optimized prices, and reduced risk. When you leverage advanced freight procurement tools like Pando, you get a unified platform to work with all carriers in real time and make decisions to reduce supply chain risks and create resilience.
- Scalability and flexibility: A unified freight procurement platform powered by robust freight procurement procedures helps you to grow your logistics activities to fulfil changing demands without sacrificing service levels. It enables your company to react fast to evolving conditions, such as seasonal fluctuations or market growth.
Core strategies for effective freight procurement
You might be surprised to hear that freight procurement is a significant area for strategic improvement because it accounts for up to 60% of total supply chain costs. In this scenario, leveraging good freight procurement strategies should consider the following aspects as inputs to ensure resilience and cost-efficiency as output.
- Leveraging AI: It is essential to perform freight procurement based on historical data, predictive analytics, and real-time insights. AI copilot driven by generative AI is another fantastic tool for freight procurement, which lets you either continue or terminate contracts depending on performance. According to EY, 40% of supply chain companies are investing in Gen AI, as it is becoming a robust data pool for logistics optimization. With advanced analytic tools like Pando, you can even predict market trends, find top-notch vendors, and adjust strategies as needed.
- Carrier relationship management: This goes beyond just price negotiation as you closely collaborate with carriers to grasp their capacity and quality of service. During freight contract negotiation, open communications and commitments like awarding promised lanes can help you negotiate better and create cooperative ties with your carriers.
- Sustainable freight procurement practices: You will be surprised to know that the logistics and transport sector generates more than a third of global carbon dioxide (CO2) emissions. Choosing sustainable freight choices, such as electric trucks or best routes, reduces fuel consumption and thus lessens environmental impact as sustainability takes the front stage.
- Diversity and inclusion in supplier selection: Consider expanding carrier networks to include varied partners. Diverse perspectives provide better problem-solving and more customized solutions. Wide supplier networks eliminate isolation, manage hazards, and improve rates due to competition. It will increase your supply chain resilience by lowering reliance on limited suppliers.
Key technologies involved in freight procurement
According to a recent global survey, 74% of executives still track procurement performance using spreadsheets, while 79% of procurement teams lack dedicated management tools. This reliance on outdated methods hampers procurement efficiency and impacts logistics sourcing.
On the other hand, modern freight procurement thrives on advanced technologies. So, they help you to enhance accuracy, boost efficiency, and provide greater visibility. Let’s explore how these innovations are transforming the process.
- E-procurement platforms: From bidding to invoicing, e-procurement systems simplify the whole freight procurement process. These platforms are transparent, invite as many bidders as possible, and help you get the best freight rates from reliable carriers.
- Advanced analytics: Data analysis in freight procurement supports better negotiation, favorable contract terms, and other aspects of freight contract finalization. For instance, analyzing historical data of a particular shipping partner on delayed deliveries triggers on-time delivery commitment during negotiation. Similarly, an advanced rate manager offers insights into contract coverage and distribution across carriers. Additionally, rate managers also help assess shipping lane competitiveness to improve contract allocation and procurement, improving operational efficiency.
- Blockchain: The use of blockchain technology in freight management can radically alter freight procurement by improving supply chain traceability, lowering fraud, and facilitating transparent and secure transactions. With decentralized platforms, smart contracts, and real-time supply chain visibility, blockchain paves the way for a more efficient and reliable procurement process.
- AI and automation: Advanced freight procurement systems use AI and automation-powered tools to rectify error-prone processes, tap on missed opportunities for cost optimization, and streamline disconnected contract and rate management. Pando's AI-driven solutions improve decision-making by offering intelligent insights that propel the economy and cost-effective practices.
Best practices for freight procurement
As a result of logistical problems such as unfavorable geopolitical situations, increased labor charges, and freight contract rates, the demand for corporations to keep margins high is increasing. If you want to optimize your operations and maintain a competitive edge, it is imperative to follow freight procurement best practices.
- Comprehensive market research: Stay informed about industry trends, market conditions, and carrier capabilities to make smart procurement decisions. Leverage technology tools to adapt to the evolving freight landscape effectively.
- Detailed requirement specifications: Clearly define your logistics needs, including service levels, delivery schedules, and carrier expectations. This clarity helps carriers deliver better services tailored to your requirements.
- Continuous performance monitoring: Track carrier performance using KPIs like on-time delivery, cost per mile, and customer satisfaction. Real-time insights from platforms like Pando enable you to strengthen partnerships and maintain high standards consistently.
- Collaborative procurement: Engage multiple departments in the procurement process to ensure all business needs are addressed. This cross-functional approach provides diverse insights for better decision-making.
- Change management: Regularly review and update your freight procurement strategy to align with industry developments, emerging technologies, and shifting customer expectations.
Emerging trends in freight procurement - traditional vs. modern logistics strategies
Modern procurement now emphasizes digital solutions, predictive analytics, and eco-friendly practices over traditional methods. Platforms like Pando enable companies to automate procurement and track sustainability, providing a significant competitive advantage.
- Freight procurement sustainability: The rising awareness of environmental issues is becoming increasingly important for businesses and consumers alike. Businesses are on the lookout for innovative strategies to minimize their carbon footprint across their supply chains. This means implementing freight procurement strategies that focus on environmentally sustainable choices. This can include using fuel-efficient carriers, optimizing routes, consolidating loads, and implementing sustainable packaging solutions.
- AI Agents: AI agents are revolutionizing freight procurement by automating tasks such as carrier selection, rate benchmarking, and contract negotiation. These intelligent systems analyze vast amounts of data in real-time to make optimal procurement decisions, reducing costs and enhancing operational efficiency.
- Collaborative Procurement: Collaborative procurement involves multiple shippers working together to consolidate freight volumes and negotiate better rates. This approach fosters stronger relationships with carriers, reduces transportation costs, and enhances supply chain resilience through shared resources.
- Dynamic Freight Contracting: Dynamic freight contracting replaces traditional fixed-rate agreements with flexible, real-time pricing models. This trend helps shippers adapt to fluctuating market conditions, ensuring competitive rates while maintaining service quality.
- Carbon Footprint Tracking: As sustainability becomes a priority, freight procurement is increasingly focused on tracking and reducing carbon emissions. Advanced analytics tools enable shippers to monitor their environmental impact, optimize routes, and select eco-friendly carriers to align with green logistics goals.
- Real-Time Risk Assessments: Real-time risk assessments leverage AI and predictive analytics to identify potential disruptions, such as weather events or geopolitical issues. By proactively addressing these risks, shippers can minimize delays, avoid costly penalties, and maintain smooth supply chain operations.
- Digital transformation: Businesses are adopting cloud-based platforms to enhance freight management through process automation, real-time visibility, and data-driven decision-making. Moreover, utilizing data analytics enables comprehensive cost analysis, monitoring of carrier performance, and dynamic pricing negotiation, resulting in more strategic procurement decisions. Digital freight marketplaces and online platforms seamlessly link shippers with carriers, enhancing transparency, fostering competition, and facilitating on-demand freight management.
What's ahead
Freight procurement is evolving with a growing emphasis on sustainability and digital-first strategies. In this regard, leveraging advanced technology like Pando’s AI-driven procurement platform can future-proof your logistics operations while significantly reducing costs. Now is the time to explore how Pando’s solutions can enhance your freight procurement process and enable smarter, data-driven decisions.
Take a step toward a more sustainable and efficient logistics strategy with Pando. Discover our solutions to simplify your freight acquisition activities. For inspiration, explore Pando's customer success stories to see how top businesses have optimized their supply chains. Book a demo today and transform your logistics operations.