Strategic sourcing within the transportation industry includes many variables and complexities. Variables can include the type of business utilizing the services, the goods being transported, the environment in which the goods must be transported within, the route of the shipment, and much more. Each organization utilizing these services has its own set of requirements; these compounded with those within the industry and specific segment create additional complexities, not to mention the inclusion of carrier specific requirements. Transportation services is a science in itself that demands a deep level of expertise to manage. In the same respect in order to effectively source the category one needs to understand the market, the industry overall, and specific requirements and client based complexities.
Within an organization’s portfolio, transportation services is segmented by some of the above parameters, such as goods transported, shipment routes (for example global versus domestic), and shipping conditions. Furthermore the transportation category should be defined by a particular portfolio’s spend segmentation, supply base, and service levels. Once these designations are made shipping categories can be developed and defined. One particular transportation category that I would like to cover in this article is specialty courier services. This designation may be defined differently depending on the industry and needs of the organization, but typically this refers to a highly specialized shipping process – examples include high end goods, live animals, and perishable goods. Industries can span from manufacturing to healthcare and life sciences. The level of risk associated with these shipments is typically very high in that the goods require extraordinary care throughout the end to end shipping process from the packaging of the goods throughout the shipping process until the products reach their end destination. While each organization’s transportation portfolio will vary there are some key elements to consider when sourcing specialty courier services:
• Prior to engaging with any suppliers, including incumbents, the organization should have well documented requirements for each type of product, service type, and route. Wherever variations might exist in the shipping requirements this should be very clearly defined and agreed upon by the internal logistics team, management, and any end users that might impact the shipping of the product (including customs documentation, for instance). Again, these should be well documented and kept on file not only for the sourcing process but for compliance controls on an ongoing basis.
• Another preliminary step prior to soliciting proposals is to have a clear understanding of the existing rate structure including any and all ancillary costs. Ancillary cost components and derivations should be well-defined as well. This is important so that when going to market you have sound baseline pricing for future comparisons.
• When it comes time to engage the market, ensure that you cast a wide net within the supply base so that you include a vast array of providers. This will include regional and national, as well as specialized and more general suppliers.
• Another tip for the proposal solicitation process is to provide comprehensive bid information including full route details, shipment specifications by lane, and total volume. The more information provided upfront the more accurate the bids will likely be.
• When evaluating the returned bids be sure to evaluate multiple options for route assignment. This may mean not always going with a sole source option, more than one carrier based on shipment types or region may present a better opportunity from a cost perspective as well as from a route optimization standpoint.
Whatever method is utilized for sourcing specialty courier services it is important to have in depth knowledge of the market including who the top players are, how costs are typically developed and driven, as well as a thorough understanding of industry trends. Third party consulting firms such as Source One have this knowledge and can make a significant impact to the achievable savings.