Aberdeen report points to ways shippers can reduce transportation expenses
By Jeff Berman, Senior Editor -- Logistics Management, 4/1/2007
BOSTON — Shippers can see significant reductions in their overall freight budgets by centralizing freight procurement operations, implementing a formal spend management process, and mining transportation and freight spend management data to improve cross-functional business decisions, says a survey of 380 shippers conducted by Aberdeen Group, a Boston-based research firm.
The report Winning Strategies for Transportation Procurement & Payment, indicates that best in class shippers can save an average of 8.8 percent on their freight budgets with a sophisticated procurement or payment/audit system, which comes out to $4.4 million in potential savings for a shipper with an annual $50 million freight budget. And 90 percent of shippers surveyed in the report said they have recently enhanced or are looking to improve these processes over the course of 2007.
As freight rates continue their upward climb, shippers are realizing that they need to institute better spending control to ensure that their purchasing volume is being maximized, according to the report. The result is a renewed focus on transportation procurement and payment processes.
Beth Enslow, Aberdeen vice-president of enterprise research and author of the report, explained that the best in class companies surveyed in the report are 1.5 times more likely to see a reduction in freight costs by managing procurement operations through a centralized process.
“Whether you are a small company or a large one, you should be looking at centralizing freight procurement,” Enslow told Logistics Management. “The benefits of doing this range from being able to negotiate [rates with carriers] better and having the oversight to ensure a company is following spending plans, among others.”
Along with rising freight costs, which 62 percent of surveyed shippers identified as their biggest pressure in driving transportation and freight spend improvements, other cited factors included the need to improve transportation flexibility and reliability to support supply chain objectives (51 percent), and the need to improve spending control (44 percent).
While it appears that there are various ways for shippers to cut down on freight costs, some reported barriers are preventing them from taking action. These barriers cited include: lack of adequate staff resources (52 percent), hard to collect internal data to create and analyze bids (47 percent), and lack of sufficient technology, such as bidding and analytics tools (42 percent).
The report also noted that shippers with an annual freight budget of $50–$100 million or more are seeing cost reductions by using 3PLs or procurement specialists to manage spending.
For more information on the Aberdeen report, go to www.aberdeen.com.
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