Overview of the Freight Transportation Industry
Freight transportation forms the backbone of a supply chain as most businesses utilize third-party services to deliver their products, which saves them time and money. Freight transportation is carried out through various modes of transportation such as roadways, railways, seaways, and airways. Among them, roadways account for the maximum market share and hold out a firm promise for both new and existing players in future. In fact, freight vehicles are central to most industrial and manufacturing activities as they transport raw materials from one place to another.
The growth of the freight transportation industry is driven by the use of latest technologies such as hydraulic lifters and GPS navigation systems. Furthermore, lowering costs, improved safety in freight operations, and increasing operational efficiency have positively impacted the growth of the freight transportation industry.
However, there are a few aspects that are expected to influence the growth prospects of the freight transportation industry.
Creating a balance between customer needs and operational efficiencies: Firms operating in the freight transportation should look to empower and encourage employees to address shippers’ challenges within the framework of their daily duties. They should provide shippers with greater visibility and maneuverability with respect to the timing and mode of shipments which would consequently help them cut down maverick spends.
Enhancing network agility and support capacity management: Developing a local shipping network can support the effective management of supply chain disruptions and discrepancies in demand on a daily, monthly, and annual basis in a cost-effective manner.
These factors are forcing firms operating in the freight transportation space to leverage the use of spend analysis solutions. Spend analysis solutions help companies identify, gather, cleanse, group, categorize and analyze their spend data with a goal of reducing procurement costs and improving process efficiencies. These solutions also help firms visualize all the data to make better sourcing and supplier decisions. This will lead to improving compliance, reducing cycle times, and uncovering maverick spend across the supply chain.
The Business Challenge and Journey
The client, a leading freight transportation company required sufficient insights into its business spend and the ability to generate meaningful information on a variety of essential metrics despite having an in-house procurement department and a large team handling various requirements on a day-to-day basis. Additionally, the client wanted to identify robust sourcing opportunities and reduce unaccounted spending.
To address disparities and identify opportunities for savings, SpendEdge tailored a comprehensive research methodology. The research approach comprised of primary and secondary research coupled with qualitative and quantitative data collection procedures.
During this spend analysis engagement, the freight transportation client underwent supplier normalization, which is the process of cleaning up and normalizing supplier names with multiple spellings, misspellings or abbreviations for consistency. This process helped the client gain better visibility into spending across the board and help improve processes, provided a significant cost savings opportunity and a robust negotiation tool for further sourcing strategies.
Key questions answered in this spend analysis engagement
With the help of this spend analysis engagement, the client was able to identify and take corrective actions about the inefficiencies in its procurement system. This helped them to reduce maverick spends and disparity and better supervise supplier relationships, manage risk, recover overpayments and benchmark its relative position – for an estimated total annual savings of $1.4 million.