By Godwin Sathiamoses | Consultant, Transportation, Chainalytics |
Procuring transportation services is an important activity on the supply chain calendar. It is also one area where every procurement manager thinks he or she is doing a good job, until proven otherwise. By all accounts, shippers in Europe and the Americas are using transportation and analytics approaches that ensure more successful–and strategic–procurement experiences. Wise procurement is not only a good business practice, it can also drive savings of between 5 to 15 percent of a company’s total transportation spend.
Shippers procuring transportation resources in India also need to be aware of some additional nuances that further complicate transportation procurement outcomes:
- Unlike their global counterparts–which split fuel costs from base transportation costs–Indian carriers include fuel costs in their pricing. Splitting fuel costs would give shippers operating in India much more control over their overall transportation costs, especially when fuel prices fluctuate, as well as more visibility when comparing potential carriers for their procurement needs.
- From our experience working with larger Indian shipper-clients in the fast-moving consumer goods and food and beverage industries, we find that India’s regional carriers provide better rates and service levels compared with national carriers. But this maxim may not hold true for all shippers doing transportation planning across the country. A good procurement strategy uses a mix of regional and national carriers to optimize transportation savings and service levels.
- A lot of procurement work in India is conducted using simple Excel spreadsheets–an approach that ignores the skilled application of optimization software to deliver benefits like significant time savings, reduced stress for the procurement team and easier tracking of actual transportation spend and related savings.
- Indian shippers rarely look beyond near-term financial gains to building strategic relationships with carriers, instead quickly shifting allegiance to carriers who appear to offer better rates. Shippers in Europe and the Americas have found that a more strategic approach to transportation procurement enables long-term savings and definitely supports better carrier service levels. Leveraging existing carrier relationships can be mutually beneficial to both parties: Shippers get to negotiate better rates and optimal service levels while carriers secure guaranteed business.
- Unlike shippers in Europe and the Americas, Indian shippers rarely conduct the periodic reviews they need to build strategic relationships with carriers. Put simply, a periodic review is imperative for any procurement exercise to succeed, since it uncovers defaulting carriers, lanes with savings leakage, etc. and enables the shipper to handle issues proactively and use results as a metric to drive subsequent successful procurement exercises.
It is true that without counsel, plans fail, but with many advisers they succeed. In the case of transportation procurements, these remain good words to do business by.
Linsa Godwin Sathiamoses is a consultant in Chainalytics Transportation competency, focuses on transportation procurement and modeling projects in the Americas, Europe and India across diverse industries. His areas of expertise include transportation bid optimization, fleet network optimization, freight benchmarking, procurement compliance, transportation value assurance, data analytics, and data visualization.