6 Best Practices Used by Winning Procurement Teams
One of the greatest college basketball coaches of all time was John Wooden. In a 12-year period he coached UCLA men’s basketball team to 10 national championships. Such a level of success took a great deal of hard work, and this is reflected in one of my favorite John Wooden quotes: “If you don’t have time to do something right, when will you have time to do it over?”
Just like in basketball, following best practices in procurement and doing things right can help your organization create a routing guide that succeeds in a tight market. Many shippers are achieving this success by adhering to the following best practices in truckload procurement.
- Establish a yearly procurement event time schedule. Shippers that conduct a procurement event every year at the same time are usually more successful than those that carry out these exercises sporadically. Regular events increase the likelihood that carriers honor their rates and commitments because they know that each year they’ll have the opportunity to realign their network and pricing with yours (for more information on this subject, please read the TMC white paper Stale Rate Research).
- Utilize a constraint-based bidding tool. In a tight market, securing capacity can be a difficult challenge, and taking only a cost-based approach to setting up your route guide won’t work. By utilizing a constraint-based bidding tool, you will be able to quickly run scenarios that yield the lowest costs in a market where capacity is constrained. The tool will also help you to manage risk and create a solution that can be executed against.
- Do not delay. Speed is of the essence in a tight market. Procurement events must be executed as quickly as possible to reduce the chance that a carrier’s network has changed between the times when they submit their rates and when you award the freight. Constraint-based bidding tools and outside consultants can help you speed up the process.
- Honesty is the best policy. If your freight is difficult to move and you represent it as easy, your capacity will only be available in the short run. Similarly, if your freight is easy to move and you represent it differently, you will pay a premium where you don’t have to. The most accurate pricing and reliable capacity commitments go to those shippers that accurately describe their freight, lanes, and seasonality requirements.
- Issue Pre-Award Confirmations. In a tight market, identifying non-compliance to a route guide is key. As a preventative measure, many shippers send out pre-awards to carriers to get confirmation that the rate and award can actually be executed against. If an award can’t be committed to, this allows you to quickly adjust the awards before the routing guide goes live.
- Deploy a robust transportation management system (TMS). Creating a realistic routing guide will only take you so far without the right management and implementation tools. A strong TMS will allow you to use ratio tendering, lane and rate hierarchies, and offer a suite of reporting options to help you monitor how closely you are adhering to your route guide. This structured approach to managing transportation will allow you to fine-tune your procurement process each year for continued success.
These best practices will help you to navigate a difficult market and work with carriers to make sure that your networks are aligned. And, just as John Wooden’s wisdom underlines, getting it right the first time is much better than having to pick up the pieces of a procurement program that fails to deliver on your freight management goals.
If you would like to learn more about the procurement practices described in this post contact the author.