For a price sensitive economy like India, cost and timely delivery are the most critical concerns of transportation. Over 35% of manufacturers and construction enterprises have limited certainty or predictability of routes and dispatch frequencies. For them, long term contract is not an option. Hence, the logistics team at such enterprises spend over 65% of their time every day in negotiating freight charges with transporters and making freight negotiation reports for approvals and audit compliances. Despite all this effort freight negotiation still continues to be a grey area and people are highly skeptical about it.
So far, there have been several e-negotiation softwares’ for long term freight contracts such as SAP-Ariba, MJunction, and others. But for Spot freight negotiation there has been limited success due to urgency, high price volatility, fragmented suppliers, lack of knowledge, people on the move, etc.
Logistics managers over these years, hence had no option but to operate manually through telecalls, emails or text messages investing a lot of their time trying to negotiate for better rates. Manual operations have their own restrictions and limitations that often prevent enterprises & teams from having a cost-effective and efficient process cycle.
5 Key concerns of logistics spot market negotiation can be identified as:
• Limited reach out resulting in high freight rate: The toughest part of logistics workflow optimization is getting the right quote at the right time for the right vehicle. The only way by which the best market rate might turn up is by getting quotes from multiple vendors (if not all). Manually, this whole process not only wastes time, but also creates a human bottleneck. Reaching n-number of transporters within a specific time to get the best quote is near to impossible. Hence, at times logistics teams’ have to selectively call transporters based on their individual understanding of route competencies and expected availability that leads to restricted reach out impacting the rates.
• Lack of transparency: Lack of clarity and transparency in the freight negotiation process has been raising queries on the integrity and honesty of logistics personnel since ages. The manual process of taking quotes from vendors, comparing it and allocating it to one particular vendor brings in a lot of audit questioning and grilling. Despite the team’s sincere and hones effort in this 24*7 thankless job, the integrity question mark hits the employee morale deep and hard affecting their performance and productivity.
• 65% underutilization of human resource: A lot of time in logistics is wasted in repetitive tasks like making & attending phone calls, data entry, emailing, searching for emails, report making, internal paperwork, etc. This directly impacts the productivity of the person and stretches the time required in completing an operation cycle. The lack of reliable, easy-to-access, real-time platform makes logistics a labor-intensive process impacting the company’s efficiency and productivity as a whole.
• Hurdles in freight invoice approvals: Over 17% of bills disputes in logistics are around freight rates due to discrepancies in communication, typo error, verbal confirmations, missing PO, etc. The entire billing process is delayed by such issues which in turn stretch the process cycle significantly.
• The high total cost of logistics: Total logistics cost becomes substantially high if all its real components are counted. The multi-layered cost shall include:
• Manpower cost in the finalization
• The time delay in movement and servicing clients
• Loss of business due to delay in servicing
• Loss of business due to the high cost of freight (unserved area or client)
• Accounting time required in reconciliation and bill clearing
• Management time in following for reports and lack of structured data for decision making
Lack of proper negotiation can directly affect the cost and service quality. In the commodities market (such as Metal, Construction material, FMCG, etc) manufacturers profitability is directly dependent on logistics competencies. Manual calls, hustling daily with price rate negotiation significantly impacts the process cycle time thereby widening the organization’s overall cost and time funnel. So optimizing the process of freight negotiation is a critical concern for manufacturers across the world.
Freight e- Negotiation: Clicks to fix
Functions like accounting, human resource management etc. have realized that automation is the right click to fix their problems. So now it’s time for logistics teams to pick up their tools and start clicking to fix their problems.
Here’s how technology and automation can simplify and solve the problems of spot freight negotiation:
Freight e-negotiation accelerates and optimizes the daily logistics movement through a common platform for vendors to bid and compete. Even though about 79% of the transportation industry is yet to adopt automation and technology, some industries where transportation is critical like construction, consumer goods, animal feeds, chemical etc have already experienced and embraced the magic of e-Negotiation the spot market.
Freight e-negotiation: Real-time Impact and Improvement
• Wider reach to suppliers and increased placement chances with better rates: When vehicle requirement is posted in the system, the system automatically sends intimation by email, SMS & mobile notification to all transporters registered with the company. Groups can be created to float enquiry lane-wise to selective transporters only. So, the primary communication to all transporter is reduced to a single click. Freight e-negotiation makes coordination and communication with multiple transporters up to 5-fold easier and faster.
• Transparent and 100% audit compliance: e-Negotiation ensures equal right of participation for all transporters. Historical freight record and audit trail of all actions and quotes are maintained for future references and deviations can be logged as comments too. Typo errors, human communication errors, etc. are eliminated and rate disputes are reduced as the data entry is directly done by transporters themselves. This serves as a ready answer to all the audit queries & improves trust and respect between people involved.
• SuperPower employee productivity: The Freight e-negotiation process reduces the manual multi-step pre & post-negotiation process to a mere 2-step decision making process i.e. what is required (the enquiry) and whom to allocate (single click). Actions like data entry, report creating, email sending, etc are automated and this saves up to 87% of the time that was previously consumed in these repetitive tasks. Manual e-mails and phone calls drop by 80%. The entire process becomes faster and the TAT between order placement to order dispatch is reduced. As per Global Truck Study 2018 by PwC, 80% of the cost reduction in logistics due to automation is attributable to the optimization of human resource utilization.
• Single repository of all relevant data: The e-negotiation platform not only records every bit of data, quotes and confirmations in written but also stores it for future reference. This brings down the disputes and discrepancies relating to communication, confirmations, typo error, missing PO, etc. All manual errors, confusions, conflicts and refusals can be taken care of by using this stored data and hence, the bill process cycle can be reduced significantly.
We will soon get back with our next blog on advanced features of Logistics Workflow Management Software, SuperProcure.