Freight sourcing and procurement is a critical component of the whole supply chain and is crucial to the success of the business. Whether you are a BCO (Beneficial Cargo Owner), Freight Forwarder, or NVOCC it is essential that you get this critical component right.
In order to achieve maximum efficiency in freight sourcing and procurement, you need a strong team to handle the requirements.
These are the must-haves for any effective freight sourcing team.
Freight Procurement Market Knowledge
For your freight sourcing team to be efficient and effective, it is important that they have a strong knowledge of the market that your business is in.
As a BCO you would be using a wide range of suppliers including haulers, freight forwarders, NVOCCs, and VOCCs. Your freight sourcing team should have a sound knowledge of these suppliers in order to be aware of whom to contact for which activity.
The team also needs to understand the characteristics and nature of the cargo. Knowing the cargo, packing, and shipping requirements will enable the team to select the most suitable supplier from the database.
It is crucial that your team also knows, understands, and has analyzed the data from your own sources/business, supply chain requirements, volume, etc. Your team can then share this with suppliers in a sensible manner so the ones chasing your business actually get a good understanding of what they're trying to win.
This knowledge and awareness are also vital to understanding what type of freight to sources – such as LCL (Less than Container Load) or FCL (Full Container Load).
If you are a freight forwarder or NVOCC, your freight sourcing team needs to have a good knowledge of the carriers that operate on your trade routes, which carrier is stronger on which route, who is the preferred carrier, which carrier offers the best value not just in terms of price, but also service and service reliability.
The freight sourcing team also needs to know and be aware of the various service contracts in place with the various carriers and ensure that the carriers receive their share of the contracting business as otherwise, you may end up paying carriers penalties for non-fulfilled contracts.
In the age of digital innovation and resources, it is important that your freight sourcing team reduces dependence on manual data, inputs, and techniques to analyze freight movements.
Freight rate benchmarking with real-time data can assist your freight sourcing team to benchmark the rates that you are getting against what is out in the market instantly. You'll be able to get a better idea about what your peers or competition are paying. This will enable you to know if you are paying the right freight rate, where you can improve as well as judge the overall efficiency of your sourcing team.
Freight rate benchmarking and market intelligence will greatly assist you irrespective of the size of your business. You will always have competition from companies that are similar to yours in size or bigger or smaller.
What's beautiful about digital freight rate benchmarking is that procurement professionals don't need to rely on static and dated rate data when in tendering cycles. The instantly available rate data lets sourcing teams easily monitor the market, report, and manage risks right when it's most necessary.
In ocean freight procurement, benchmarking gives you a clear analysis of both port-to-port and door-to-door rates. In some of the cases, shippers may have better options for pre-carriage and on-carriage moves than what the carrier or the freight forwarder or NVOCC can possibly offer on a door-to-door basis.
For these shippers, port-to-port rates may be a critical factor beyond their control at times and this is where freight benchmarking can assist them when sourcing.
Once you have gained a thorough knowledge of your market and your product, combine this knowledge and the analysis from freight rate benchmarking to negotiate aggressively but without putting on your boxing gloves.
Tools like freight rate benchmarking have been proven to give freight sourcing teams the upper hand in carrier negotiations helping them negotiate better rates while highlighting the required service and reliability standards needed to maintain the customers in today’s market.
This knowledge also gives your freight sourcing team a good understanding of cost control, ensuring there are no unknown or hidden accessorial charges or surcharges that can creep into a service contract or freight negotiation.
Freight benchmarking also allows your freight sourcing team to evaluate service providers and effective practices which can deliver cost savings to you and your customers.
The shipping industry is fragile in nature. Often, due to factors caused by geopolitical instability, overcapacity with oceanic carriers, and the barrage of disruptive technologies that are being released and adapted on a daily basis.
Your freight sourcing team can tap into freight shipping intelligence which is the combination of the aforementioned freight cost benchmarking and market intelligence.
4. How much inventory levels have to be maintained
5. How often order fulfilments may be required
6. Providing an understanding for startups in which areas of the freight market they should enter and how the current market performs in that area
6. Freight shipping intelligence is of great importance to established companies who don’t have business in a certain market and wish to find out more information about that specific market
7. Identifying what is the market rate for a certain zone/area saves time in repeatedly securing rates from the carriers.
8. Market intelligence also plays a major part in identifying who makes it to your core carrier list and who doesn’t as things constantly evolve.
Various freight sourcing teams react in various ways at various times depending on the requirement of the business, the volume involved, the mode of transport, and the intelligence on hand.
A winning combination for any company in terms of freight sourcing would be a well-informed team that is entrenched in the business, armed with the market intelligence and actionable data provided by benchmarking and other tools.
This combination provides substantial benefits which act as a key leverage for companies placing them miles ahead of the pack in terms of offering cost reduction and efficient service based on the relationships with the carriers and other suppliers involved in the supply chain.