The future of procurement

After the strained capacity the industry experienced in the previous freight cycle, for shippers, the current stability offers a time to reflect. But they shouldn’t get too comfortable.

Looking ahead, freight patterns will inevitably shift, and the question on everyone’s mind is when the market will turn once again. Given the challenges their supply chains went through in recent memory, shippers should be preparing the groundwork now for when market rates do increase and capacity tightens.

Current market conditions represent an opportunity to source at the “new market” rate level or seek a better service or relationship fit for lanes.

One of the most pressing areas to consider is what their procurement strategies will look like moving into the upcoming year and beyond.

When things were more stable industry wide, shippers could award freight for the next year. Their routing guides would more or less hold up for close to the duration of that award or even longer. Shippers sometimes even awarded freight for two or three years. But in a volatile market plagued with disruptions, as we are familiar with today, these longer contract periods don’t work as well.

When market rates suddenly increase or decrease, shippers’ routing guides are more prone to reshuffling. With volatility on the horizon,  carriers will reject contract freight tenders in order to seek rates more in line with the current market.

“In volatile markets like what we’ve had over the past few years, it’s important that the routing guide is designed in a way that is flexible and responsive,” said Raj Subbiah, head of product at Uber Freight.

Conducting mini-RFPs (also known as mini-bids) on a quarterly or even monthly basis is becoming increasingly important to shippers’ strategies. At Uber Freight, the team has observed more and more shipper volumes flowing through these shorter-term RFPs. It makes sense why — mini-RFPs are becoming more popular because they make routing guides more durable than shipping loads via the spot market. 

The downside with mini-bids and RFPs? More legwork. Instead of shippers running bids once a year, they’re now running bids four times a year or even as often as 12. In many instances, businesses are still using spreadsheets and emails to conduct bids.

“These procurement processes need to happen in hours not weeks in today’s freight market, and the tools currently available to shippers aren’t up to the task,” said Steve Barber, head of shipper products at Uber Freight. 

Without tools in place to streamline the process and remove manual tasks, shippers won’t be able to reap the benefits to the fullest.

As technology advances and the need for agile and dynamic procurement solutions becomes a pressing need, incorporating mini-bids into shippers’ strategies paired with cutting-edge technology will become a vital part of their processes.

Removing the back-and-forth by consolidating the process with technology is an obvious way to achieve the optimization necessary for agile procurement. But optimization tactics shouldn’t be added just for the sake of boosting efficiency. They must be used strategically.

“These are important decisions that require tight collaboration from all the players. It is time consuming today as a lot of this happens manually because there aren’t freight-specific solutions that work well for shippers,” Subbiah said.

Solving that problem is exactly why Uber Freight has worked with shippers over the last six months to build its new tool, Uber Freight Exchange. 

Uber Freight Exchange is a new software solution that brings the data, insights and functionality needed to seamlessly secure capacity for contract freight. It’s designed to compress the bid process and eliminate the back-and-forth of traditional mini-bids by migrating those workflows onto one platform. Uber Freight Exchange makes it possible for shippers to focus on what matters, which is awarding freight, instead of the tedious manual processes that take their attention away.

“Ultimately, we want to move from optimizing and matchmaking one load at a time to doing that over entire contract lanes and shipper networks. We think that the value we can create for shippers and carriers by doing that is just tremendous,” Barber said.

With the latest market data Uber Freight provides, shippers can make informed decisions about where to bid or gauge if their carrier bids are competitively based. They also have access to historical data for evidence-based choices. It just takes a one-time upload, and shippers can set their carriers up, launch a bid event and evaluate carrier rates and capacity directly in the Uber Freight Exchange platform. 

Uber Freight operates in a unique position, playing a powerful role as a matchmaker for contract freight. It boasts $18 billion in freight under management, 95,000 carriers, and 2 million drivers registered since the founding of the company, allowing businesses to tap into where freight is flowing in the U.S. and access an unprecedented carrier network.

Click here to learn more about Uber Freight Exchange.

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Source: freightwaves - The future of procurement
Editor: Jenny Glasscock