Digital procurement is yet another avenue in which logistics businesses are moving forward, and those that have elected not to make the upgrade may find themselves left behind. When a business makes the transition to complete digital procurement, they make available a wide variety of advantages.
At its core, digital procurement automates repetitive tasks, boosts efficiency, and lowers costs. In addition to that, it produces a wealth of useful data, with real-time insights and analytics that are intuitive for users to access and make use of, and makes day-to-day operations and decision-making more informed thanks to accurate and informative data models.
Digital procurement leverages pricing, matching, and ranking algorithms across vast amounts of capacity data to efficiently distribute load opportunities to carriers. On top of that, it is extremely fast and utilizes data to more efficiently connect carriers with available freight.
Understanding traditional procurement
Procurement as a concept can be difficult to fully explain and understand. While an essential process for any business, it can often be confused with purchasing or sourcing, which while similar, are separate functions. Of the three, procurement has the broadest application and responsibility.
While purchasing is a direct process of exchanging goods for money, procurement- particularly when made digital- has the ability to serve as a platform for collaboration between buyers, suppliers, and third parties. The common wisdom at this point is not if a business should go digital in their procurement processes, but when they will need to in order to stay competitive.
Traditional procurement ultimately involves manually matching available truck capacity (usually identified through phone calls) to available freight. The process is manual for both the carrier and the brokerage rep, time-consuming, and draws on a more limited pool of carriers.
Benefits of digital procurement
As with many digital upgrades, once users have had access to the smoother experiences associated with upgraded technology, they embrace it. Digital procurement allows bots to automate and streamline processes that are routine and time-consuming.
With an interface that allows buying agents and advisors to make optimal purchasing choices, businesses receive peak value on the backend. The myriad benefits associated with adding digital procurement to your business strategy include greater job ease and satisfaction for procurement officers, automation of tedious tasks that free up employees for better efficiency, and significant return on investment.
Adding digital procurement may be expensive upfront, but once successfully integrated, utilization creates a significant reduction in costs and an increase in profits. For businesses weathering the tumultuous markets of a post-COVID world, any opportunity for cost reduction and increased profitability is a no-brainer.
Facing the challenges
When considering what challenges businesses in this currently rapidly fluctuating market face, better forecasting models and visibility are key components in the decision-making that will allow them to remain competitive. Digital procurement has a role to play here. Digital procurement includes visibility features that give procurement officers and business owners actionable insights into their processes.
The supply chain is extremely stressed right now from high demand in the market. As a result, routing guides are failing for shippers, and price inflation from going to the spot market is eating into shippers’ budgets. Additional work and stress are being placed on transportation managers to navigate failing routing guides and insulate themselves from expensive transactional capacity.
A tech-forward approach helps solve these problems for shippers by delivering real-time rate insights and capacity. Shippers can quickly and confidently source capacity on any overflow freight in their network.
With detailed information more readily accessible and easy to understand, they are now better equipped with the tools they need to forecast potential demand paths and create action plans that will be most profitable and beneficial to the business overall. Armed with increased data and automation, businesses will find themselves much more agile and flexible in response to changing markets.
In addition, a completely digital system can be more easily updated and changes across platforms more rapidly implemented without the need to wade through a variety of piles of old-school record-keeping. Distributing information across the business becomes a simple process.
A more streamlined system
Finally, digital procurement allows for the streamlining of processes. A buzzword constantly heard in the ever-upgrading world of business processes, a streamlined system is by its very nature more efficient and less expensive. Faster results, smoother transitions and transfers of information, less time spent on tedium and repetitive processes, as well as AI accuracy that prevents costly errors prior to their occurrence. All of these aspects mean digital procurement saves time and money by streamlining.
Shippers can streamline their transportation planning process and achieve high levels of productivity with a more connected supply chain strategy. In addition, higher levels of rate control can be managed once rates are delivered into the TMS they are using instead of getting lost in emails and spreadsheets.
Recognizing the value of a digital transition as early as possible will keep your business in line with the curve, rather than behind it. While there may be some adoption reluctance, analog methods could leave your business in the dust if your competition has already taken the digital leap forward into the future.
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Michael Johnson is the Executive Vice President of Strategy at Redwood Logistics. Redwood, a leading logistics platform company headquartered in Chicago, has provided solutions for moving and managing freight for more than 18 years. The company’s diverse portfolio includes digital freight brokerage, flexible freight management, and innovative platform services that simplify integrating disparate supply chain technology. Redwood Logistics connects its distinct roster of customers to the power of supply chain management, technology, and the industry’s brightest minds. For more information, please visit www.redwoodlogistics.com.