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Reader Question

What kind of savings do companies typically see when they do a formal carrier bid process by lane (Carrier Bid Optimization)? What are the factors in whether you might see a lot or a little savings?

Director of Transportation
Paper Products Company (Fortune 100)

Category:

Transportation

 
Expert Panelist Response: From Stephen Craig and Erik Markeset, CP Consulting


Most consulting firms tout broad transportation sourcing savings in the 5% - 15% range and, with the notable exception of the capacity crunch of a couple of years ago, my experience matches that.
  Yes, there are a number of factors that impact what you will achieve. Those include:

1. How good have you been? The simple truth is it can be hard to create savings now if they have been captured before.

2. How good will you be? If you have had trouble creating transportation savings in the past you need to, again honestly, figure out what will be different this time.

3. What is your freight profile? Some companies simply have better opportunities than others to drive down costs from sourcing (such as if they have very attractive lanes).

4. What is the state of the market? The current or expected supply-demand scenario will impact how carriers bid.

This question has prompted us to think about this area in more detail. We've offering more detailed thoughts in an upcoming "Transportunities" column on Supply Chain Digest. You will be able to find it here: http://www.scdigest.com/assets/Experts/expertinsights.php

Look for other responses below, or add your perpective or insight!

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Other Responses

I have eSourced over $10M in truckload spend in the past two years. I have realized documented savings (excluding FSC) of 8%. I would add a 5th point: How much advance notice can you give carriers for load releases? The more time they have to plan, especially for otherwise unattractive lanes, the better rates you will obtain.

Manager, Inbound Logistics



I would agree with the panelists. The extent of savings is dependent upon - a. Your current RFP strategies, processes and market conditions b. Savings directly linked to overall procurement process improvement using CBO (and that's just one of the enablers) At a min. CBO alone can get you 2-3% savings. The other obvious benefits are: - Reduction in carrier base - Quicker and firm establishment of SLAs Few factors impacting the savings: - Individual lane vs. multi-lane cost optimization - Web-based, faster and easier communication and bidding process - Depth of constraints modeled - Contractual period (part of company's strategy - not linked to CBO directly). But CBO can evaluate multiple scenarios based on contract period/terms.

Principal, SCM Consulting