The last one and half years have been extremely challenging for the transportation and logistics industry. Apart from the devastating effects of the pandemic through all sectors of the supply chain, the logistics industry also had to deal with the impact of Brexit. Furthermore, they had to contend with the port congestion and the blocking of the Suez Canal. The pandemic along with the container crisis brought to light the need for preparedness to effectively deal with all sorts of risks. The companies in our sector are now working hard towards identifying, assessing, and minimizing the risks.
They have been doing so by adapting to the digital transformation and operating their processes in new ways. Nevertheless, this sector continues to be conservative. In spite of the numerous choices, the logistics industry is not making full use of the resources at hand. Simply put, the transportation and logistics industry is one of those sectors that is still reliant on several manual processes. In today’s post, we are going to talk about the changes in the freight procurement process and how the logistics industry can effectively cope with these changes.
The present freight procurement process
Moving the cargo from one place to another is a very complicated process. This process is not only volatile but also involves the coordinated action of several parties. For this reason, the carriers and the freight forwarders have started to work together to create a strategy for each mode of transport, capacity, and service. Automation of these operations is helping the logistics companies to maximize their profits. In other words, they are now able to increase their capacity without spending too many resources.
Freight procurement is one area of logistics that requires thorough modernization. However, the intricacy of the fragmented processes of freight procurement is one major hindrance towards an overhaul of the processes. Even with all the digitization in the supply chain, the procurement process continues to be the same. In fact even today a majority of logistics companies still depend on Excel to tally the freight rates from carriers. The diverse mode of transportation, inconsistent capacities, and the countless administrative requirements coupled with the ever-changing rates, shipment tenders, and surcharges make this operation a very complicated and lengthy one.
Why does this sector need a change in the freight procurement processes?
The conventional freight procurement process is demanding both in terms of time and expenses. Additionally, the complicated freight tendering process makes it difficult for the companies to make last-minute changes in freight rates because of several factors. Moreover, the unavailability of the data beyond the Excel sheet adds to the problem of visibility. Data visibility allows the logistics companies to understand the performance of their suppliers, the carrier, and even the territory and the shipping lane. This is the sole factor that allows the shippers to understand the exact consequences of any possible disruption. Lastly, it allows them to make last-minute changes to their plan.
In other words, a digitized freight procurement process will lead to greater visibility of data. This in turn will help the freight forwarders to come up with valuable forecasts, thereby lowering risks. Additionally, it will also promote logistics innovation making way for more collaborative endeavors for increased profits and greater sustainability.
The present scenario of freight procurement
The major tech innovations in supply chain processes are forcing industry leaders to digitize several aspects of their operations. This is of crucial importance for risk mitigation. Moreover, the customer’s dependence on technology is making it imperative for procurement leaders to use centralized online platforms. Additionally, in this age of digitization lack of visibility of data can spell disaster for any business.
Increased alignment among stakeholders
The stalwarts in this sector put a lot of effort into the collaboration of stakeholders for achieving success. A digitized and centralized procurement process facilitates compliance and improves efficiency. However, the freight forwarder would need guidance and tech support for the proper implementation of the digitized freight procurement process. This is precisely the problem area for most small and independent freight companies.
Increased market intelligence
The need for data visibility and coordinated operations in the transportation and logistics industry is presently more important than ever. The recent market disruptions have further prompted the freight companies to develop proactive strategies and make the data visible. Freight forwarders are also trying to boost their carrier network. They are now using mini-bids to deal with the shortage of capacity, fluctuating shipping rates, and traffic in the sea lanes. Maersk, one of the first multinationals to automate their operations, has made it clear that shippers need to use digital platforms for responding to quote requests. However, not all logistics companies have the means to hire a 3rd party consultant or spend a fortune on internal data management software.
Greater efficiency at a cost-effective price
In order to take the first step in the digitization of freight procurement, the logistics companies need to make substantial investments. Companies in this sector are finally trying to reorganize the traditional freight tendering process, and eliminate most manual processes. The result is increased accuracy and greater workflow. The need to streamline the procurement process is pressing. Moreover, the entire task can be somewhat burdensome because of the massive investment it demands.
New players in the market
The changes in the freight procurement solution scenario has brought into focus many new players of the transportation and logistics industry. Digitized freight procurement aims at competitive pricing via increased collaboration and long-term partnerships. Alibaba the Chinese e-commerce giant recently partnered with logistics software company Freightos and launched a freight procurement platform. This platform allows the forwarders to access air and sea freight rates and helps them to provide more visibility of their cargo.
Another example of a joint venture in freight procurement is the partnership of SimpliShip with Qwyk’s vessel schedule. This partnership is the basis of SimpliShip’s freight management platform. The integration of their platforms has allowed them to digitize their processes, enhance visibility, and effectively manage rates and bookings.
Wrapping it up
The technological innovations and the need of the hour has led to an increased acceptance of digital freight procurement solutions. However, digitization necessitates considerable investments in an IT team and training of your employees. This is why Cooperative Logistics network offers its members a very important digital platform that allows them to initiate this process of digital freight procurement. The Coop’s member-exclusive freight rate management and quote generation software- FreightViewer allows the network members to take the first significant step towards digitization. In other words, it gives forwarders a standardized platform through which they can send/request freight quotes, exchange documents, and even share the freight rates with customers and partners.
Become a part of our team to get exclusive access to this groundbreaking software and make the most of several other advantages that come with the membership!