| The research driven Aberdeen Group recently | | | | rest is in margin rich small package and less than |
| determined than American businesses leave | | | | truckload activity. Transportation is reeling from the |
| collectively $134 billion dollars on the procurement | | | | globalization of providers that has brought new |
| negotiating table each year. Of course no business is | | | | pressures for cost containment and value driven |
| willing to admit that it could be them, it must other | | | | services. Already on their heals from shrinking long |
| businesses, not theirs. | | | | haul LTL/LCL markets (traditionally the most |
| The reality is American business does not like change. | | | | lucrative) and new technologies that create real time |
| Layered up, command and control hierarchies have | | | | visibility to supply chains, asset providers have |
| no incentive to change, in fact, they often drive out | | | | unwittingly commoditized themselves with one |
| the people who bring light to ideas that threaten the | | | | dimensional operational management, no respect for |
| insecure, missing opportunities for leveraging savings, | | | | sales input on customer needs, or any true |
| building value and growing business. Automotive and | | | | deliverable value for shippers. Leveraging their asset |
| retail examples lead the way but there are many | | | | overhead is primary as they bottom line driven. |
| stories across other industry sectors. Of particular | | | | Shippers understand that most trade publications are |
| note is transportation procurement as since the | | | | funded by asset and non asset providers so the |
| industry was deregulated in 1980, much has changed | | | | content is driven by bias, with of particular note the |
| in innovative options. | | | | so called "white papers" of how others have |
| The challenge for purchasers of transportation is | | | | succeeded, curiously via said providers. The |
| evaluating options. The monopoly in small package | | | | advantage has been with asset providers who live |
| puts fear in distributor's hearts so they are reluctant | | | | off the predictability of shipper's procurement |
| to risk change. Even in bids, rarely do shippers change | | | | practices, knowing their lack of willingness to take |
| small pack providers. Full truckload and international | | | | reasonable risks for change. Bids, reverse auctions |
| modes look and feel like transactional purchases but | | | | and even consultant driven negotiations are no threat |
| rarely do shippers make changes outside of their | | | | to incumbent providers' relationship techniques. |
| limited exposure to the hundreds of options | | | | The reality unfolding in transportation is the traditional |
| available...even when the options are lower cost and | | | | sales rep and transportation manager functions are |
| improved transit services. The less than truckload | | | | becoming obsolete. Neither is in a position to bring |
| mode has undergone the most change since | | | | consistent value to the organizations they represent |
| deregulation. Shippers usually consider LTL the most | | | | and the trends in the marketplace bear this out. A |
| problematic in risks, so change is resisted, sticking | | | | new breed of transportation management provider |
| with "the devil they know." | | | | has emerged that leverage their superior buying |
| At the heart of transportation procurement | | | | power, new web enabled technologies scaled to |
| inefficiencies are siloed company hierarchies that lack | | | | shipper needs for real time supply chain visibility and |
| respect for transportation management as potential | | | | dedicated account support teams accessible for |
| leverage for containing costs, improving inventory | | | | various shipper department needs whether for |
| management and/or growing sales. This leads to fear | | | | transactional moves, customized reporting tools or |
| driving risk taking, usually settling for providers they | | | | enterprise deals. Shippers are moving to non asset |
| have relationships with, even in the face of blind bids, | | | | providers who are not tied to biased loyalties and |
| reverse auctions, or renegotiations. Asset based | | | | have value propositions that far exceed one |
| transportation providers know the odds are against | | | | dimensional asset providers. The result is lower costs, |
| change and can predict what it will take to retain | | | | improved transit times, less headaches from tracing, |
| market share. At least 10% of transportation spend | | | | billing, cargo claims, (all leading to greater value to |
| is left on the negotiating table...with the average | | | | grow their own market shares),...and the knowledge |
| company 3% being attributed to transportation | | | | that costs are not leaking out the back door with |
| costs, a $100mil/yr company costs itself $300,000/yr | | | | unknown missed opportunities to service/grow with |
| by being unable/unwilling to leverage their trans | | | | their customers. |
| spend. | | | | So what are shippers to do? The trend is clear that |
| Shippers often have little respect for the sales | | | | the only route, especially for small and mid cap |
| representation of transportation providers and for | | | | companies is to outsource their transportation |
| good reasons. High turnover of reps, operational | | | | management functions (most but not all billion dollar |
| rather than value driven processes (transportation | | | | companies can get at least good transactional rates |
| companies are inbred operational entities with | | | | on their own, though they still miss tech |
| homage to customers only in their marketing | | | | enhancements and support available at no cost). This |
| entertainment efforts), small package reps incentised | | | | does not mean a loss of control or a compromise in |
| to protect market share with truckload and | | | | any way of service to their customers. In fact a |
| international providers pushing one solution and blurred | | | | transportation management company only makes |
| pricing, often keeping shippers hostage to options | | | | sense when savings, tech/supply chain visibility |
| and pricing/accessorial swings. The worst are often | | | | enhancements and dedicated support are guaranteed |
| less than truckload asset providers with inexperienced | | | | contractually. Since 74% of the Fortune 500 |
| reps pushing one dimensional solutions to lure decision | | | | companies have outsourced their transportation |
| makers to using what often is just the best of a | | | | management, how can small cap/mid cap companies |
| mediocre bunch. Shippers often complain about the | | | | think they have leveraged savings when the largest |
| number of sales reps who knock on their door, | | | | corporations have long ago outsourced this function |
| dropping endless brochures and going over their | | | | to benefit? |
| heads to sell their offerings. Unfortunately these | | | | Think your asset provider has your best interests in |
| shippers do not realize that this surge of sales reps is | | | | mind?...probably, but not necessarily your balance |
| a clear indicator or excess shipping capacity and their | | | | sheet or business growth interests. Think your |
| own inability to leverage the best cost/service | | | | transportation procurement department has a handle |
| transportation options for their companies. | | | | on cost containment or service optimization? They |
| The last 10 years have seen a huge increase in | | | | simply do not have the tools or leverage to change |
| non-asset/third party transportation companies. | | | | their current transportation procurement |
| Reflecting new technologies that can leverage | | | | management processes. This is a senior leadership |
| transportation spend, best solutions in cost/transit | | | | opportunity, even priority, as otherwise |
| services and providing dedicated account | | | | transportation spend savings and sales growth |
| support...these new options elude asset providers as | | | | through increased value will not happen. |
| there is no capability for them to provide this kind of | | | | Managing your supply chain effectively is no longer a |
| value proposition. Many shippers response to these | | | | departmental function, but an integrated company |
| new options has been to align themselves with asset | | | | process. If transportation is not a core competency |
| based options and otherwise view change as a | | | | for you, why are you spending capital trying to |
| threat to their status quo and defend their actions | | | | manage? The best in class have learned to change |
| with anecdotal transportation horror stories. | | | | their transportation procurement paradigm, leveraging |
| Transportation is a $1.3 trillion dollar/yr industry. $500 | | | | their spend and value needs by outsourcing this |
| billion of this is private fleets (a costly mistake for | | | | function, at no risk, no cost...just adding more value |
| most shippers), full truckload and full container. The | | | | to grow and prosper. |