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Author’s Note: This article was originally published by Supply & Demand Chain Executive on November 12, 2020 and co-authored by Keelvar’s founder and CEO, Alan Holland. The version below is slightly modified, but you can find the original here.
Those who work in procurement are familiar with running annual, often complex sourcing events with a list of invited suppliers to bid on the business. These large events allow the buyer to leverage their annual volumes to negotiate the best possible offers. Such a strategy can be effective, but does it tell the full story?
Those annual sourcing events are likely based on historical spend converting to a forecast, which is an incomplete picture. No two years are the same. As we certainly saw in 2020 driven largely by the effects of the global pandemic, market conditions will change, and demand will fluctuate. Some buyers will try to account for this and update their projections based on other available data sources, but in the end, it’s still just a prediction.
Ocean freight shipping is particularly vulnerable due to its complexity. New, changing, and often unexpected requirements arise over time that impact the sourcing of ocean transportation, such as:
- The company experiences high growth in demand that was not forecasted, either for a particular region or for a certain product.
- Changes to a supplier or ocean carrier necessitates a new option.
- Disruptions to the supply chain or global trade drive new requirements, such as the COVID-19 pandemic, natural disasters, or geo-political upheavals.
- The company introduces a new product or new market during the year.
- Untracked lanes may have been omitted from the annual event.
As a reaction to these changes, ocean freight buyers must quickly put together mini-tenders or spot bid events that are much smaller in scale and spend size but still vital to business operations and continuity. But, the words “mini” and “spot” do not equate to trivial. In fact, these types of bidding events can come up with great frequency and unpredictability, creating interruption to other work as buyers scramble to contend with the urgency of these needs. Some companies may find that this reactive bidding happens on a weekly, even near-daily basis, totaling up to hundreds or thousands of spot or mini-tender events per year.
For those involved with sourcing, handling these unplanned, added workloads can be time-consuming and often results in improper buying practices, such as someone in operations picking up a phone to contact a carrier (perhaps even a non-approved carrier) to try to negotiate a deal verbally. Improper management of these events can mean an absence of data and record of these interactions, which can further undermine next year’s forecast.
Automation solutions like Keelvar’s Ocean Freight Sourcing Bot added to the e-sourcing process can step in to substantially help reduce the acute negative impact that these many smaller bidding events have on sourcing teams. The right kind of automation can offload much of the tedious-yet-urgent work associated with these sourcing events, such as handling all the interaction points with suppliers or carriers, collecting and storing the bid data, and analyzing optimal award scenarios.
Key benefits to augmenting sourcing with automation, especially in these reactive bidding events, include:
- Buyer efficiency. Automation helps to minimize disruption and improves the responsiveness of your buying team without sacrificing outcome quality. The more of these smaller events that can be handled by automation, the more the productivity benefits scale.
- Carrier efficiency and improved bid quality. Rather than buyers having to respond to every interaction point with carriers during the invitation and bid data collection steps, automation can carry this load and thus be more responsive to the carriers, even guiding them to submit more complete and accurate bids.
- Traceability. Sourcing automation also ensures transparency and tracking of even these smaller spends and the bidding activities involved, which can improve future RFPs by keeping everything centralized and adhering to a standardized, repeatable process.
The good news is that employing this type of automation is no longer aspirational. In fact, Keelvar’s intelligent automation for Ocean Freight Sourcing is already being used by a number of global freight shippers today: customers including Siemens and Coca-Cola are reporting substantial efficiencies and innovation gains as benefits.
In summary, despite the significant effort placed on conducting an annual ocean freight sourcing event, the reality is that buyers often find themselves scrambling to manage smaller, urgent bidding events in reaction to dynamic market and business conditions. Adding automation capabilities to the e-sourcing toolkit can help those teams handle those demands more easily while minimizing disruption to higher-value work. And leveraging automation in the larger annual events can also shrink the timeframe and workload associated with those projects.
