Best practices in transportation spend

March 31, 2010
by Purchasingb2b staff

When it comes to purchasing and paying for transportation services, what separates the leaders from the laggards?

Aberdeen Group recently polled 236 transportation buyers to find out. The results comprise a recently released benchmark report authored by Bob Heaney.

According to the research, best-in-class (BIC) performers achieve a 5.71-percent year-over-year decrease in baseline freight spend per unit handled. Nearly 95.5 percent of BIC companies’ carriers are compliant with their contract costs, while 94.7 percent are meeting their service level agreements related to routing compliance. Finally, leading companies take 2.84 days to process a freight invoice from receipt to payment.

BIC firms tend to use a centralized spend management platform capable of multi-language and multi-currency operations and a TMS solution for carrier daily selection. They are also likely to have a single person (or department) managing transportation spend globally.

Lessons for laggards

Heaney’s report identified several actions laggards can take to improve their status.

He recommended they automate either contract procurement or freight audit and payment.

He advised they complete the spend management loop to get control over what they are paying.

Finally, he suggested they consider community benchmarking for even greater rate reductions.

In the report, Heaney explained why it is time for laggards to get strategic about transportation spend.

“Not only have volatile freight costs and shipping charges forced many executives to panic and throw more resources at trying to solve the problem, but more groups within the organization are suddenly seeing the true costs behind transportation and are creating mandates to try and bring it under control.”

On this issue, executives do appear to be acting with urgency; according to the survey respondents, 35 to 45 percent of executives are demanding to see process and technology improvements to transportation procurement and payment in the 12 months.