The last few years have seen a lot of volatility within the supply chain industry. At a time when the market seems to be seesawing between major highs and lows, organizations have had to develop new approaches to help suppliers and carriers address the challenges of making accurate contracts, negotiating costs, and building relationships that benefit both parties.
One company that has been working to help their customers navigate the complexity of transportation cost in supply chains is C.H. Robinson (CHR), a leading global transportation and logistics services provider. In a recent podcast episode, Chris Caplice, Chief Scientist at DAT, sat down with two analytics leaders at CHR to discuss the company’s approach to transportation procurement strategy. They delved into CHR’s unique portfolio approach and the ways the COVID-19 pandemic has impacted procurement analytics as a whole.
The Evolution of Analytics in Transportation Strategy in Supply Chain
Tim Gagnon, Vice President of Analytics and Data Science, and Andrea Serra, Director of Customer Analytics, have jointly spent more than 35 years at C. H. Robinson. They spoke to Caplice about how the company’s approach to transportation procurement in supply chain has changed in recent years, as well as how the industry’s relationship with analytics has changed over time.
As leaders in the analytics space, both Gagnon and Serra place an immense value and importance on analytics when it comes to navigating the freight industry. At CHR in particular, they’ve seen all their stakeholders, including both carriers and shippers, becoming more and more dependent on information and insight in the form of analytics. That’s a big change from the traditions of years past when analytics took a backseat to gut feeling, tribal knowledge, and experience, all of which were seen as more important strategies in transportation procurement and supply chain.
The change comes down to two major factors: shifting mindsets within the industry and the introduction of new technologies, systems, and capabilities that have elevated what is possible. While there is no denying that technology has helped companies implement and utilize data more effectively, it’s the changing attitude toward analytics that has made the biggest difference.
The plain fact is that it doesn’t matter how good a solution you produce or how big its potential impact is if no one is going to use it. Fortunately, along with a mindset that embraces theimportance of analytics comes an increase in capabilities. That means companies like CHR can confidently push the boundaries of analytics knowing that the constituency and culture is ready to embrace it.
One of those recent boundary-pushing efforts is Procure IQ, a solution designed inside C. H. Robinson Labs. Procure IQ helps customers transform their RFP processes by offering data and visualizations to help uncover the optimal transportation procurement strategy for each lane. According to Gagnon and Serra, it’s thanks to the increased acceptance of analytics within transportation procurement that solutions like Procure IQ can succeed.
Understanding the Portfolio Approach to Supply Chain Transportation
The increased acceptance of analytics also plays a big role when it comes to CHR’s portfolio approach for transportation procurement. While many companies have maintained a more standard approach to procurement that relies on single bids or multiple similar bids each year, CHR has transformed the way they tackle procurement to help their customers succeed in uncertain times.
There’s no denying that volatility has always been present in the industry. However, the cadence has changed in recent years (long before the coronavirus pandemic hit) with faster swings, higher highs, and lower lows than ever before.
Volatile markets make forecasting much more difficult for shippers, which makes relying on single bids an often costly challenge. That cost isn’t just financial, though shippers may find themselves paying too much for contracts on specific lanes or for loads that don’t actually need to be delivered. It can also be tied to business relationships, given that carriers who have been burned as a result of the volatile market may not want to work with the shippers again, even if they weren’t at fault.
That’s where C. H. Robinson’s portfolio approach comes in. Instead of using the one-size-fits-all avenue favored by many shippers, CHR leverages analytics to help create a more focused and individualized approach that takes into account the volatility of individual lanes, their density, and more.
The portfolio approach revolves around the idea that there are a number of different types of lanes that cover a spectrum from high to low density, with many lanes falling somewhere in the middle. Depending on the type of lane a shipper uses, there are different strategies that are most useful for finding carriers to move their loads.
CHR gets contracts for specific lanes that reflect their capacity, general volatility, and any other qualities that could impact rates and how much freight will likely be moved. CHR makes both one-way and round-trip committed contracts that reflect the areas where the company anticipates it will have a competitive advantage to buy and sell on the market. For lanes that have higher market density, contracts are made for carriers who are willing to commit their equipment for a period of time to take advantage of certain rates and market conditions.
Success in this portfolio approach depends entirely on utilizing analytics effectively. Having access to accurate and near real-time rate and market data, like that available from DAT iQ, enables CHR to develop specified procurement strategies designed to benefit their customers.
The Impact of the COVID-19 Pandemic on Transportation Procurement
There’s no denying that the COVID-19 pandemic has had a significant impact on transportation procurement. With massive changes to the supply chain, factory shutdowns, shifting product demand, and more, a market that had already been volatile for years saw itself become even more prone to rapid changes.
Like others in the industry, C. H. Robinson’s procurement leaders had no choice but to navigate the highs and lows of the market as best they could. The difference was that CHR already had a portfolio procurement approach in place — an approach designed around the existing volatility in the market and meant to help reduce the impact of sudden changes. That provided the company with a more solid position when the pandemic hit.
At the same time, CHR’s leaders have seen the ways the pandemic has impacted the industry as a whole — and the incredible creativity of shippers who helped prevent a large-scale disaster within the supply chain. According to Gagnan and Serra, the COVID pandemic has helped to accelerate existing trends in the transportation procurement space including increasing transparency among all the stakeholders and increasing collaboration and flexibility within the industry. For CHR’s analytics, those changes are trending in the right direction in order to develop a more strategic approach to supply chain management.
Download a copy of DAT iQ’s procurement guide to assess what your team needs to get the most from your transportation dollars.