Anyone who works in procurement will be familiar with running annual, often complex sourcing events with a list of invited suppliers to bid on the business. These large events allow the buyer to leverage their annual volumes to negotiate the best possible offers. This can be an effective strategy, but does it tell the full story?
In ocean freight procurement, a buyer will typically take last year's spend and treat it as a projection for the year ahead. But forecasting based on historical data is imperfect. Market conditions will change, demand will fluctuate; in short, no two years will be perfectly aligned. Some buyers will try to account for this and update their projections based on other available data sources, but the end result is still just a prediction. In reality, ocean freight sourcing rarely ends with this large, planned annual bid event.
Throughout the year, new, changing and often unexpected requirements arise, such as:
· The company introduces a new product or new location during the year.
· Untracked lanes may have been omitted from the annual event.
- The company experiences high growth in demand, either for a particular region or for a certain product that was not forecasted.
- There is a change to a supplier or ocean carrier that necessitates a new option.
- Disruptions to the supply chain or global markets drive new requirements, such as the COVID-19 pandemic, natural disasters or geo-political upheavals.
As a reaction to these changes, ocean freight buyers must quickly put together mini-tenders or spot bid events that are much smaller in scale and spend size but still vital to business operations and continuity. But, the words “mini” and “spot” do not equate to trivial.
These mini-tender cases can come up with great frequency and unpredictability, creating interruption to other work as buyers scramble to contend with the urgency of these needs. Some companies may find that this reactive bidding happens on a weekly, even near-daily basis, totaling up to hundreds or thousands of spot or mini-tender events per year. Responding to these events can be time-consuming and often results in improper buying practices, i.e. operations picking up a phone to contact a carrier (perhaps even a non-approved carrier) to try to verbally negotiate a deal. Improper handling of these events can mean an absence of data and record of these interactions, which can further undermine next year’s volume forecast.
Automation solutions added to the e-sourcing process can step in to help reduce the acute negative impact that these many smaller bidding events have on sourcing teams. The right kind of automation can offload much of the tedious-yet-time-sensitive work associated with these sourcing events, such as handling all the interaction points with suppliers or carriers, collecting and storing the bid data, and analyzing optimal bid award scenarios to recommend to the buyer.
Key benefits to augmenting sourcing with automation, especially in these reactive bidding events, include:
- Buyer efficiency and improved event speed. Automation helps to minimize disruption and improves responsiveness of your buying team without sacrificing outcome quality. The more of these smaller events that can be handled by automation, the more the productivity benefits scale.
- Carrier efficiency and improved bid quality. Rather than buyers having to respond to every interaction point with carriers during the invitation and bid data collection steps, automation can carry this load and thus be more responsive to the carriers, even guiding them to submit more complete and accurate bids.
- Traceability and process adherence. Sourcing automation also ensures transparency and tracking of even these smaller spends and the bidding activities involved, which can improve future RFPs and reduce negotiation friction by keeping everything centralized and adhering to a standardized, repeatable process.
The good news is that employing this type of automation is no longer aspirational. In fact, it’s already being applied within a number of global freight shippers today. Sourcing automation technologies are available and delivering the efficiency and traceability results mentioned above.
Furthermore, when such automation can include artificial intelligence, its use in more and more events means it will learn over time from the buyer’s inputs and preferences, leading to even greater efficiency gains and recommended decisions.
In summary, despite the significant strategic planning and tactical effort placed on conducting an annual sourcing event, the reality is that buyers often find themselves scrambling to launch and manage smaller, urgent bidding events in reaction to dynamic market and business conditions. Adding automation capabilities to the e-sourcing toolkit can help those teams more easily handle those demands while minimizing disruption to higher-value work. And, leveraging automation in the larger annual events can also shrink the timeframe and workload associated with those projects.
It’s inevitable that the current state of procurement transformation will include automation at varying degrees. Now it’s just a question of buying organizations identifying the right opportunities and solutions as they chart that course.