Guest Blog by Dempsey Olsen, Manager, Transportation Consulting and Britain Pavlic, Director, Transportation at enVista
A strong and scalable transportation sourcing strategy is a cornerstone of a well-developed and resilient supply chain practice. To strategically navigate sourcing events, one needs a meticulous selection process to evaluate and select the most efficient and cost-effective carriers for one’s business. To effectively solicit competitive bids from carriers during the selection process, one needs precisely defined requirements, like capacity, specialised services or comprehensive route management.
What is Transportation Sourcing and Why it Matters
Transportation sourcing is the strategic process of selecting, negotiating with and managing relationships with carriers and logistics providers to move goods efficiently across the supply chain. It involves defining service requirements, conducting RFPs, evaluating bids and aligning providers with network needs, shipment volumes and cost targets.
Sourcing plays a vital role in broader supply chain planning by balancing cost, service quality and capacity. Effective transportation sourcing reduces freight spend, improves on-time performance and builds supply chain resilience by diversifying carrier options and securing reliable, scalable transportation partners.
Identifying Sourcing Strategy Gaps
Using a strategic approach to transportation sourcing events will let you can take control of your supply chain by defining relationships with your carriers that align with your logistic needs and company mission. To successfully implement a strategic sourcing approach, you need the ability to holistically review your transportation spend, practices and challenges to better understand how to best engage with transportation providers in order to unlock a best-in-class transportation operation.
Here are some key questions that can help you identify if your company has a solid and strategic approach to transportation sourcing:
- Do you have trouble keeping your transportation costs down?
- Is it hard to forecast your transportation spend because of rate increases or contract renewals?
- Are you missing systemic control over your carrier selection?
- Do you have different accessorial, fuel or freight all kinds (FAK) schedules for each of your carriers?
- Are your shippers using their favorite carriers instead of the ones that best suit your organisation’s needs?
- Do you have trouble keeping track of carrier exceptions for your claims or auditing processes?
Creating a Data-Driven Sourcing Strategy
If the answer to any of the above questions is ‘yes’, it may be a sign that your organisation isn’t using a strategic approach to transportation sourcing and could have an unoptimised carrier network or a lack of standardisation across your carrier base.
It can be difficult to identify what is keeping your business from benefiting from a strong sourcing strategy, especially if your processes are bogged down by exceptions or an underutilised transportation management system (TMS). For leaders aiming to optimise their transportation sourcing, a data-driven approach coupled with accountability measures is essential.
Here are some focal points for creating an optimised strategy:
- Carrier Mix Optimisation: Strive for a balanced mix of regional and national carriers tailored to service area and lanes.
- Volume-Driven Carrier Selection: Identify carriers based on volume needs, considering service areas and lanes.
- Asset-Based vs. Brokers: Determine the optimal balance between asset-based carriers and brokers for different scenarios.
- Leveraging Spot-Market Opportunities: Explore the potential of spot-market opportunities alongside contracted rates to maximise value.
- Implementing Changes: Streamline the process of implementing changes within the carrier network for enhanced efficiency.
- Key Performance Indicators (KPIs): Define and monitor core carrier KPIs to gauge performance effectively.
- Assessing Performance-Motivated Carrier Shifts: Evaluate the impacts and timing of shifting primary carriers based on performance metrics.
- Optimising Route Guides: Fine-tune route guides to accommodate carrier capacity thresholds and ensure load balancing across the transportation network.
- Managing Carrier Pricing: Track and audit carrier pricing against contract commitments to ensure compliance.
- Setting Pricing Targets: Provide specific pricing targets to carriers to increase awarded volume.
- Exception Management: Develop protocols for managing exceptions to standard pricing schedules effectively.
Measuring the Success of Your Transportation Sourcing Strategy
As mentioned above, it is critical to track KPIs to ensure your transportation sourcing strategy is driving both cost efficiency and service reliability. Below are core KPIs to monitor:
- Cost per Mile/Cost per Shipment: A foundational metric for evaluating overall transportation spend. Track this over time to identify cost-saving opportunities, assess carrier performance and benchmark against industry averages.
- On-Time Delivery Rate (OTD): Measures the percentage of shipments delivered by the promised date and time. High OTD rates reflect reliable carrier performance and directly impact customer satisfaction and supply chain continuity.
- Tender Acceptance Rate: Tracks how often carriers accept the loads they are awarded. Low acceptance rates may indicate poor alignment with carriers, under-market rates or capacity issues, signaling the need to reassess your routing guide or pricing strategy.
- Invoice Accuracy: Compares freight invoices to contracted rates and actual shipment details. High accuracy indicates tight control over billing processes and fewer disputes or delays in payment cycles.
How enVista Helps Optimise Transportation Sourcing
Navigating the complexities of transportation sourcing can be simplified with the assistance of industry experts. At enVista, we specialise in leveraging our transportation expertise to design and execute best-in-class sourcing methodologies. Our tailored approach focuses on identifying current gaps, optimising strategies and transferring knowledge at every step.
Beyond cost savings of 5%-10%, our solutions empower organisations with resilient, scalable transportation networks capable of adapting to market dynamics and future growth. By partnering with experienced professionals like enVista, you can steer your organisation toward enhanced efficiency, scalability and resilience in the competitive landscape of logistics. Fill out the survey here to qualify for a free 30-minute consultation with one of our transportation experts.
