Freight

4 Essential Strategies for Optimizing Freight Procurement

This article outlines four key guidelines for an efficient freight procurement strategy: centralizing information, calibrating your network, optimizing pricing, and continuous improvement.
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Since 2019, the freight markets have experienced unprecedented volatility, underscoring the critical role of efficient freight procurement in any shipper or fulfillment operations strategy.

As you define your transportation strategy, it is important to implement SOPs and workflows to best match market conditions. Here are four essential guidelines to help you develop an effective freight procurement strategy.

1. Keep Information Centralized

Anyone who has worked in the transportation sector knows the unpleasant volume of information sent through numerous channels: Google chat, iMessage, phone calls, emails, and texts are often used to manage the same load.

Shippers can centralize information by limiting communication to one or two channels or by implementing software tools like Portex. Portex aggregates load tenders, status updates, documents, and other essentials across channels, providing a single source of truth. 

By centralizing information, you always know where to find relevant information, and anyone in your company can access it. This significantly reduces the operational overhead of managing your freight and relaying information, allowing you to focus on being more responsive to market conditions.

2. Calibrate your Network

As you consider the carriers and brokers who will define your network, it is worthwhile to craft your strategy with a long-term perspective. Select the carriers and brokers who demonstrate strong loyalty to their companies and who treat others with respect.

While it may be tempting to take advantage of favorable market conditions, keeping relationships healthy through a down market makes your transportation partners more likely to reciprocate that respect when the market tide turns. These relationships can be foundational to stabilizing your supply-chain expenses.

Another essential part of managing your relationships is tracking data across your carriers' performances: Who has the best on-time performance? Price? Fewest damages/claims? Once you understand each carrier's profile, you can calibrate your network to best service your freight within your constraints.

3. Optimize your Pricing Decisions

Whether you are shipping over the spot or contract market, having the best possible pricing information on hand is important. A strong foundation includes both market- and network-level pricing to benchmark your rates.

To benchmark against the market, reference market-data aggregators such as DAT, Truckstop, and Freightwaves. Aggregators allow you to understand where your service providers fall relative to market rates. 

Network-level benchmarking involves soliciting rates from several carriers in your network and comparing them. It's best if you have carriers where you can send, receive, and award freight in near real-time. Iterating in near real-time allows you to compare rates and make decisions efficiently with active market feedback. 

Technology like Portex can automate this process, simplifying rate solicitation and centralizing information to enable easy reference and comparison of options.

4. Continuous Improvement

Last, it's essential to consistently review and iterate on your existing operations. 

Collecting data and looking at historical records can help you identify gaps and inefficiencies in your SOPs. 

Analyzing this data may involve referencing financial projections to decide whether to modify your contract strategy, set different expectations with carriers or brokers, or better calibrate your transportation budget.

By prioritizing a solid technical and operational foundation in your freight procurement strategy, you minimize the operational overhead of managing transportation and give yourself the flexibility to respond quickly to market changes. 

These foundational decisions compound over time, leading to consistent efficiency gains, ultimately positioning your supply chain as a competitive advantage.

If you’re looking for support with your transportation strategy, consider reaching out to Portex. Portex is an easy-to-use freight procurement platform designed with shippers in mind. It takes 15 minutes to implement, saves shippers 30% on freight spend, and improves efficiency by 10x.

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