Logistics Sourcing: First and Second Wave Strategies
This post is based on material from the 2013 Spend Matters / Procurian research brief: Logistics Category Perspective: Strategies and Trends in Trucking and Intermodal (free, registration required). Contributors from Procurian include Ed Sands, Global Practice Lead-Logistics and Scott Youngs, Logistics Category Management Group Leader. Spend Matters contributors include: Jason Busch, Executive Editor, and Pierre Mitchell, Chief Research Officer.
When it comes to logistics sourcing strategies, “job one” is almost always centered on bidding strategies. We see significant savings from a sourcing strategy and approach that enables carriers to bid flexibly on preferred lots (i.e., grouped lots comprising several complementary lanes as one bundle) and to offer discounts or adders based on a variety of criteria. This approach allows the procurement team to weigh these offers (with potential additional negotiations) against a variety of constraints, such as supplier rationalization goals, customer service level requirements, and cost objectives.
Such an approach might be perfect for a first wave logistics sourcing effort. But there are many other opportunities for savings as well.
A second-wave sourcing effort might focus on areas such as inbound transportation or customer pick-up and various allowances within a supply chain. This might include considering the cost of such areas as risk management contingencies, hours of service and subsequent impact to the business, and various strategies to reduce supply chain costs.
Retailers, especially, can drive up the cost of inbound shipments based on specific requirements. This can then cascade down to CPG, food, electronics, and other suppliers in the form of higher logistics costs. Besides narrow on-time delivery windows, these requirements can include the avoidance of any breakage within a shipment. Companies may begin to ask the following types of questions at this stage as well:
- How many suppliers to work with?
- What are insurance requirements?
- What are contractual requirements?
For further analysis of this topic, download the complete Spend Matters and Procurian research brief today: Logistics Category Perspective: Strategies and Trends in Trucking and Intermodal.
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