Sourcing and Procurement Challenges for Transportation Services Providers
One of the biggest sourcing and procurement challenges for transportation services providers is the rising fuel and trucking rates. Firms in the transportation services sector are also concerned that ocean rates are going up and ships are slow steaming as a result of fuel prices. Therefore, it is essential for firms in this sector to work closely with their suppliers to ensure that they use best possible carriers.
A leading transportation services provider to identify and establish new functional goals. Additionally, they wanted to benchmark the best practices and enhance the productivity and efficiency of their business operations. As a result, they approached SpendEdge to devise a comprehensive approach to compare and benchmark their business processes and metrics to the procurement best practices.
To help the client identify, evaluate, and benchmark the procurement best practices, SpendEdge carried out a detailed quantitative analysis by assessing research-based data, industry surveys, and interviews. The procurement best practices benchmarking study also offered detailed evidence-based insights on the overall industry’s performance, which helped the transportation services provider to set new functional goals.
About the Client
An American transportation services multinational company headquartered in Memphis with an annual revenue of over USD 30 billion.
The client wanted to benchmark the procurement best practices to formulate winning strategies, tactics, metrics, and plans.
How did SpendEdge Help the Client?
Step 1: Detailed assessment of the company’s process performance and procurement gaps
A comprehensive understanding of the existing business processes and gaps helped in deciding what and why factors need benchmarking.
Step 2: Prioritized metric to benchmark
This step involved identification and examination of collected data to reveal the extent to which the current performance can be improved for each segment.
Key questions answered in this procurement best practices engagement include
Benefits of the Engagement
With the help of SpendEdge’s procurement best practices, the transportation services provider analyzed the organization’s past performance in relation to the procurement best practices, competitors’ strategies, and proposed benchmarking changes. This enabled them to establish new functional goals.
Why incorporate procurement best practices?
A procurement best practices study is essential for organizations who are determined to enhance their operational efficiency and performance across different aspects of the industry. The study also enables firms to acquire knowledge on hard facts, including operations rates, performance gaps, and industry risks.
Today, it is pivotal for any organization to understand the acceptable industry standards and determine where their company stands. As a result, it becomes crucial for companies to leverage the use of procurement best practices as it helps them stay in sync with the current market scenario.
To know more about our procurement best practices benchmarking solutions
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Overview of the Transportation Services Industry
The global transportation services industry includes several sub-sectors including subways, municipal buses, goods transport systems, and other similar modes of transport. The industry encompasses all those businesses that move people or goods, by land, sea, or air, from one point to another. The transportation services industry is capital-intensive, and the demand is primarily driven by macroeconomic trends in global imports and exports. Additionally, the intensity of competition fluctuates depending on the specific industry; the road transport sector for instance, usually experiences the highest level of rivalry, while railways, as natural monopolies, suffer less from direct competition. As a result, leading players operating in the transportation services space are looking at expanding their business units to establish their presence in the market.
However, our analysis of the logistics industry shows that the leading transportation services providers are facing challenges in terms of:
- Economic factors: Transportation projects across the globe may have an adverse impact on the community’s economic development objectives including business activity, employment, property values, productivity, and investments. The chief aim of such projects revolves around improving the overall accessibility while reducing transportation costs. Therefore, it becomes necessary for firms in the transportation services space to consider both the positive and negative impacts of economic factors.
- Civic impacts: These include the effects of a transportation project on communities beyond specific factors that unpleasantly affect the users of transportation services. It is also known as ‘social impacts’ and includes variations in environments, noise, views, and land use mix and community cohesion. Additionally, community impacts serve as a significant decision factor when transportation services providers are weighing both the distributional and adverse effects of proposed projects.
Several such factors are compelling transportation services providers to leverage the use of robust spend management solutions. Spend management solutions help firms efficiently manage their organizational spend and identify critical savings opportunities to reduce maverick spend. These solutions also help companies effectively monitor their spend and gain better visibility into the spend performance.
The Business Challenge and Journey
Client background: A leading fortune 500 transportation services provider with business units spread across the globe wanted to streamline their business practices and analyze their current, past, and forecasted expenditures to allow visibility of data, based on commodities.
Client issue: The client wanted their entire process of spend management including data extraction, classification, and analysis to be reinforced by automation, thereby, making it a sustainable process. The client also wanted to implement a robust spend management solution to reduce their overall material and service costs.
The spend management experts at SpendEdge carried out extensive research comprising interviews and discussions with prominent stakeholders in the transportation services sector to help the client develop a strategic procurement strategy. The experts also compiled information across a wide array of reliable sources such as trade shows, company presentations, industry forums.
Client journey: During the course of this spend management engagement, the transportation services provider was able to identify the opportunities to improve operational performance and buying power, reduce costs, and provide better management and oversight of suppliers while strengthening relationships with the internal and external stakeholders.
Key questions answered in this spend management engagement
SpendEdge’s spend management solution offered the transportation services provider gain actionable insights on the organization’s overall spend data across the logistics Industry. The client also improved their spend visibility and increased their compliance with procurement policies. This helped them reduce their overall spend by ~74%.
To know more about our spend management solutions
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 with their network spread over 28 states in North America 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.
To know more about our spend analysis solutions
Globally, the transportation industry has started witnessing sluggish growth, and the key investors are looking for effective ways to promote subsequent logistics activities while curtailing the costs associated with transportation. Also, with the increasing demand for transportation services, leading service providers in the logistics industry have started utilizing services that would help them cut down on costs associated with logistical functions. By leveraging procurement intelligence studies, renowned transportation services providers can gain relevant, timely information on the market dynamics. Also, leading transportation services providers can proactively gain insights on the supply risks and expand their market share and boost innovation with the help of such services.
The Procurement Pain Point and Insights Offered
A renowned transportation services provider with a considerable number of offices spread across the globe was facing predicaments profiling the key competitors and managing spend. The client wanted to leverage procurement intelligence to gain real-time insights into the transportation services space.
With an eye on lowering transportation costs, SpendEdge’s procurement intelligence experts followed a comprehensive research methodology by compiling information across a wide variety of primary and secondary sources. Also, the procurement intelligence experts further carried out a qualitative and quantitative data analysis to understand the emerging trends and demand requirements in the transportation space.
SpendEdge’s procurement intelligence engagement helped the transportation services provider understand the logistics space in terms of the current and the forecasted market pricing, the key suppliers in the market, and the key economic factors affecting the transportation services provider space. Furthermore, procurement market intelligence helped the client reduce operational expenses; thereby, increasing the return on investment.
Fundamental questions answered in this procurement intelligence study include
This procurement intelligence study helped the transportation services provider to understand the supplier’s pricing strategy, the cost structure, and the price model prevalent in the logistics space. Furthermore, the procurement intelligence study also helped the client create a robust SWOT analysis to improve their overall business performance.
To know more about our procurement intelligence solutions
Over the years, globalization has offered new opportunities for the transportation industry, generating the need for more efficient transportation. Additionally, the growing number of cross-border collaborations and technological innovations are also expected to drive strategic investments in different transportation industry subsectors like roads and railways.
However, according to the supply chain analysis experts at SpendEdge, the transportation industry is influenced by factors including sluggish demand, increasing regulations, excess capacity, and increasing marginal and fixed cost centers. Consequently, to reduce overall costs across the supply chain and retain their foothold in this market space, transportation industry players have started adopting supply chain analysis studies. The supply chain analysis solutions offered by SpendEdge, help transportation industry players improve their supply chain capabilities and profitability.
The Procurement Pain Point and Insights Offered
A global transportation industry player with offices spread across various geographies wanted to assess their supply chain capabilities and compare their efficiencies to that of competitors in the industry. Additionally, the client wanted to identify the significant areas of spend across office locations and supply chain to reduce the overall costs.
To cater to the business requirements of the client, SpendEdge’s supply chain analysis experts tailored a comprehensive research methodology, which included primary and secondary research coupled with quantitative and qualitative data collection procedures to address the issues of the client.
During the course of this supply chain analysis engagement, the transportation industry client identified their significant areas of spend across office locations and supply chain. Additionally, the client assessed their supply chain capabilities and compared efficiencies to that of their competitors to serve clients better. This helped them gain a competitive edge over their peers and significantly reduce the overall costs across the supply chain.
Fundamental questions answered in this supply chain analysis engagement include
This supply chain analysis engagement helped the transportation industry client effectively reduce overall costs across the supply chain. Furthermore, the client gained actionable insights on several cost components to increase their overall profitability.