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Logistics technology

Managing freight procurement with generic procurement tools: Why you shouldn’t

Learn how integrating specialized freight procurement solutions can make your organization a frontrunner in navigating the challenges of freight sourcing. 

by Durga Pratiha | December 8, 2023 | 4 mins read

Learn how integrating specialized freight procurement solutions can make your organization a frontrunner in navigating the challenges of freight sourcing. 

From overlooking crucial opportunities for cost optimization to grappling with a lack of visibility into freight spend, the repercussions of using generic procurement tools to tackle the freight procurement process are far-reaching. For example: when generic tools are applied in the landscape of shipping logistics, critical aspects such as carrier management and rate negotiation often fall through the cracks, compromising the overall quality of service and inflating costs.   

In this blog, we deep-dive into the challenges organizations face in trying to force-fit generic procurement tools for direct and indirect sourcing like Ariba, Coupa, Jaggaer, etc. for freight procurement and provide insights into why and how you should seamlessly integrate a specialized freight solution alongside your procurement tool. By doing so, you can not only navigate the intricacies of freight procurement but also unlock new avenues for cost savings and operational efficiency.

Challenges in force-fitting generic procurement tools for freight procurement

Generic procurement tools, while versatile in many aspects, often fall short in handling the specialized requirements of freight procurement. Their lack of depth and understanding of freight-specific nuances can lead to a series of unforeseen obstacles, hindering your ability to optimize freight operations and achieve strategic objectives. These effects show up in many ways:

  • Inefficiency and error-prone processes: Generic sourcing tools lack specific features for freight, such as handling accessorial charges in rate management, choosing between spot and contract options for specific lanes, and comparing bids across vendors. This often leads to manual, time-consuming processes prone to human error. As a result, suboptimal combinations of vendors and lanes can impact shipments, and customer experience, and result in higher freight costs.  

  • Missed opportunities for cost optimization: The dynamic nature of the freight market necessitates flexible and adaptive procurement strategies based on rate forecasting, market intelligence & carrier performance scorecards. However, generic sourcing tools often fail to adjust to fluctuating rates and complex carrier contracts, hindering your ability to identify cost-saving opportunities and optimize your transport spending.  

  • Lack of freight specific automation: Creating RFQs (Request for quote) involves many manual steps, slowing down agility, especially in urgent spot-buy situations. The time-consuming bid creation process, coupled with a lack of pre-bid intelligence and complex charges, leads to delays. This fragmented process with limited actionable intelligence results in missed SLAs (Service level agreements) and impacts the customer experience.  

  • Lack of scenario planning: Generic procurement tools lack bid insights at the lane level, hindering optimal vendor-lane allocation. Additionally, they cannot forecast scenarios, impacting decisions on carriers, business share, and preferences for incumbent carriers. In the current era of freight volatility, relying on rudimentary and manual decisions in freight sourcing is not sustainable.  

  • Disconnected contract & rate management: Freight contracts are usually stored as PDFs, making it hard to access rates or update them. Identifying lanes with expired contracts leads to unplanned, costly spot buys. Without ERP (Enterprise resource planning) or OMS (Order management systems) integration, urgent shipments can't be expedited. These isolated processes harm freight sourcing by affecting carrier selection and shipper-carrier relationships.   

These issues affect your organization's efficiency and finances. Specific and specialized freight procurement software is meticulously designed to cater to the unique demands and complexities associated with the management and optimization of freight operations within your organization.  

Optimizing freight management with specialized procurement  

A freight procurement tool can seamlessly combine with a generic procurement tool by leveraging a common data platform and integrating their respective functionalities. This integration enables a unified view of all procurement activities, including freight, and streamlines the entire procurement process. Here's a detailed breakdown of some broad guidelines on how you can combine a freight procurement tool with your existing procurement system to streamline freight management:  

  • Establish a centralized data platform connecting both the freight and generic procurement tools. This ensures real-time visibility into all procurement activities, including freight-related transactions. The freight procurement platform holds granular data on rate management and bid history, seamlessly integrating for a holistic view of business spend management, including freight spend visibility.  
  • Integrate the core functionalities of both tools for seamless data exchange and workflow automation. Cover areas like supplier management, requisition, event management, bid analysis, negotiations, carrier finalization, awards, and contract management.  
  • Automate repetitive tasks and streamline workflows across both procurement tools. This automation should encompass tasks such as supplier qualification, event creation, lane selection, collaborative bidding & automated comparison, negotiations, optimal vendor lane allocation, awards & contract management.  
  • Augment generic procurement tool through integration to seamlessly maneuver to your freight sourcing tool to handle freight specific scenarios like accessorial rate management or complex bid analysis or scenario planning with any action or insights relaying back to your generic sourcing platform.  

Organizations can enhance transportation procurement efficiency, reduce costs, gain real-time freight spend visibility, and optimize supply chains by integrating freight and generic procurement tools.  

Achieving the path to success in freight procurement  

In the evolving landscape of logistics, the adoption of a tailored freight procurement solution is not just a strategy; it's a competitive advantage. By recognizing the limitations of generic sourcing and procurement tools, organizations can pave the way for a future where they not only navigate the complexities of freight procurement but emerge as frontrunners, equipped to tackle the challenges and opportunities that lie ahead. As you chart your course, remember: the future of freight procurement will continue to be characterized by freight rate volatility, unforeseen political and economic risks and hence needs a specialized solution - the time to embrace this solution is now!