Automated Freight Procurement Systems are Transforming How LSPs Handle Requests

Negotiating the prices and conditions of each job is one of the most time-consuming processes in transport management. To achieve maximum efficiency in freight procurement, you need a solid strategy and processes to handle the supply requirements.

Digital auctions or auctions for tender management have been common practice for quite some time. Large corporations first introduced them to support their e-procurement process, mostly applied in the tender management process by large FMCGs, such as P&G, Amazon, or InBev, and public freight exchange platforms, such as Timocom, Teleroute, etc. 

However, the market's growing complexity demands new solutions. Automated procurement tools have emerged as a technology-driven solution, streamlining the negotiation process between the shipper and the carriers, whether they are individual drivers, small fleet companies, or large transport firms. 

Leveraging automated bidding, alongside tools like job marketplaces and mobile apps for feedback, facilitates a collaborative ecosystem, significantly enhancing the alignment of demand with supply. Here, we’ll run through the key benefits, including how such tools can save time, provide more insights and drive customer satisfaction. 

1. Time saved on negotiation

Although multinational consumer goods or industrial entities may have implemented carrier portals for streamlined communication, this approach remains largely limited to major players. In our experience, autonomous procurement remains the exception rather than the rule, with approximately 90% of communication still reliant on WhatsApp or phone calls. 

This manual approach is time-consuming and introduces significant cost variability, jeopardizing margins due to the lack of a structured bidding negotiation strategy with carriers. Furthermore, it's imperative to acknowledge the equal, if not greater, importance of the supply side. The conventional spot quote workflow entails manually contacting a network of outsourced carriers, a laborious task for fleet teams. Automation has the potential to save significant time locating an interested carrier, reducing the possibility that a request won’t be fulfilled. 

With automated freight procurement, logistics service providers (LSPs) can bid farewell to time-consuming phone price negotiation. Instead of being tied up in repetitive calls, their agents now allocate their efforts towards more strategic endeavours, such as cultivating carrier relationships, providing training and identifying areas of supply shortages.

2. Gauge interest with deeper insights

Automated bidding facilitates price negotiation and provides valuable market feedback, aiding demand forecasting. While some bids may fall outside the acceptance range and cannot be automatically assigned, the total number of bids received offers greater insight into the level of interest among carriers. This advance knowledge enables agents to seek out the right carrier for the job proactively.

Carriers often possess insights unknown to dispatchers and systems, potentially leading to mispriced bids. For instance, they may be aware of specific challenges like deliveries to large platforms with stringent requirements, making such jobs less appealing. Similarly, rare vehicle availability or significant price deviations within bids can indicate pricing discrepancies. Automated procurement thus serves as a source of critical information for the operational team, expediting the process of finding the ideal carrier.

3. Garner greater market intelligence

Automated freight procurement systems are powerful tools that facilitate price negotiation and provide a wealth of immediate market feedback. By analysing key factors, we can gain valuable insights into supply and demand dynamics. 

1. Number of bids. This indicates the level of interest in the proposed journey, helping us assess its attractiveness to carriers.
2. Spread/variance. The difference between the minimum and maximum bids reveals whether there is a unified response from the supply side or if carriers are considering certain complexities.
3. Consistency. When bids are consistently similar, it suggests a clear response from the carrier network, making the job easier to evaluate and execute.
4. Types of carriers bidding. Knowing whether companies with fleets or individual carriers with trucks participate provides valuable context.
5. Speed of placing bids. This helps us gauge the level of interest generated by our offer and the urgency of carrier responses.
6. Bids view. Examining the number of bids for each offer, active drivers within the network, and each driver's bidding activity offers deeper insights into carrier engagement.

These factors collectively offer a comprehensive understanding of job attractiveness and market conditions. They play a crucial role in enhancing the system's accuracy and improving the LSP’s ability to make informed decisions about supply availability.

4. More carrier engagement and better service

Carriers are accustomed to receiving numerous manual quotes through phone calls, WhatsApp messages and emails. However, only a small fraction of this information translates into actual jobs, which consumes time without yielding profit. By implementing an autonomous freight procurement system, time dedicated to communication is drastically reduced, while success rates double.

Improving the process for carriers not only increases the adoption rate of the app and associated tools but also enhances engagement, resulting in a higher service level and quality within the network. As a result, the fleet team experiences improved efficiency and agility on the carriers' side, leading to smoother operations and better overall performance.

Freight procurement transformed

Leveraging AI-powered freight procurement systems enables LSPs to achieve remarkable results. Clients who have implemented our tools have seen a staggering assignment rate of 99% for spot orders, including a significant portion dedicated to same-day or urgent deliveries. 

This technological advancement has not only garnered enhanced client satisfaction but also streamlined operations for small fleet teams. As LSPs continue to harness the power of automation, the future of freight procurement promises even greater efficiency and innovation.

If you’re curious about the impact of this technology, schedule a demo to witness it firsthand. today and explore how our solution can elevate your logistics operations. Or, if you’d like to better understand the finer points of the technology, stay tuned for our article about freight bidding, where we’ll dive deeper into the mechanics of the automated bidding tool.

‍

‍

References:

• Erriquez, M., Liakopoulou, T., Schaefer, J., & Marc. (2023,September). A new era for procurement: Value creation across the supply chain https://www.mckinsey.com/capabilities/operations/our-insights/a-new-era-for-procurement-value-creation-across-the-supply-chain