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Ocean freight procurement is a challenging process, with multiple shipping lines, customs navigation, freight pricing, and a plethora of regulations to manage. In such an environment, the simplification of the procurement process becomes crucial. Driving efficiency in the ocean freight procurement process by automation of procurement processes becomes necessary.
Though the automation of freight procurement is growing, with a preference for shippers using digital platforms to get responses for their quote requests, the industry continues to be conservative. A large majority of logistics companies still continue to use Excel sheets to tally freight rates from carriers when other parts of the supply chain, like warehousing, have long been digitized.
Smart ocean freight procurement uses automation for the generation of RFQs from suitable carriers and for the selection and booking of load and pickup time. The shippers or freight forwarders get details of the cargo distribution and assigned carriers and can even complete the documentation digitally.
Here, we discuss the ocean freight procurement automation platforms at length, discuss the various challenges of traditional freight procurement processes, and how automation helps businesses overcome them easily.
Ocean freight procurement is the process of sourcing the most suitable shipping service from among prospective carriers, often via a tendering or bidding process based on parameters like freight rates, fit for the cargo, availability, and fulfillment of special requirements.
Shippers invite quotes from multiple carriers for the services they require before finalizing the right service provider according to set KPI standards. On finalization, the shipper will book the load and the time with the carrier, who will inform the assigned carrier. After the carrier receives the consignment in good condition, a bill of lading is issued to the shipper.
During transit, carriers are expected to give regular updates on delivery time to stakeholders. After the consignee receives the goods, the shipper is invoiced.
Let us now look at the possible approaches to the ocean freight procurement process.
With the rise in the transportation of goods and raw materials across the globe, supply chain processes have become increasingly complex. While most shippers still rely on the traditional ways of ocean freight procurement, the number of those adopting automation is also increasing.
The traditional way means using manually managed spreadsheets to source, compare, and analyze freight rates from carriers. The task is tedious as well as time-consuming. Moreover, the chances for errors are also high.
Automated ocean freight procurement uses software for various tasks in freight procurement and is the best way to identify optimal carrier partners and get the most competitive freight rates. By integrating freight procurement software, shippers can avoid the complexities of freight procurement and ensure greater business agility while saving both money and time.
With the globalization of trade, shipping requires the management of countless shipping lanes and ports, and multiple destinations with their own different regulations, besides political turmoil and volatility of available shipping capacity.
Beginners and SMEs generally lack the understanding and infrastructure that is required for tackling ocean freight, and procurement becomes a confusing and costly process for them.
During times like the recent COVID pandemic, supply chains have been delayed or even stopped, showing a lack of resilience in quickly adapting to unforeseen crisis situations. Further, the inability to get updates about impending events, such as shipment delays, can lead to additional costs apart from delayed deliveries and unhappy customers.
The businesses generally have no unified management platform to take care of soupy situations such as shipment tracking, booking failure, customs rejection, etc. They cannot check whether the perishable shipments are moving as expected and reach safely in consumable condition. All this makes freight management and procurement highly challenging.
With the increase in ocean freight movement, delays are happening with worrying regularity. Busy business seasons now need better planning and delivery time forecasting. Failure to obtain the right freight carriers, container shelves, and inability to save costs on bookings owing to the lack of experience – all these can lead to higher transportation costs, ultimately leading to poor CX and violated bottom lines.
In recent years; global freight rates have shown a sharp upward trend. This requires shippers to tender more strategically to reduce transportation costs. Further, sometimes, businesses fail to compare the prices across multiple freight carriers simply because of the effort and time-intensive nature of the process. All this leads to increased freight procurement costs.
With the increase in ocean freight movement, reduced visibility is becoming a major concern for stakeholders. End-to-end visibility from sourcing to transit and delivery becomes crucial. Businesses are not able to get real-time insights into asset movements, and they have to personally get in touch with shipping companies to get shipment status updates.
This lack of visibility also affects the overall efficiency of freight transportation as businesses can no longer make dynamic planning decisions based on real-time shipment status.
Let us understand how freight procurement software simplifies the complex process of freight procurement.
Freight procurement is a complex process involving the movement of freight across hundreds of shipping lanes. Multiple modes, carrier capacities, and regulatory and safety issues must be kept in mind. This must be coordinated with multiple freight forwarders and shipping companies to get competitive rates.
Traditionally the spot rate quotations have been taken on excel spreadsheets. This process is very cumbersome and time-consuming, effectively restricting the number of times it can be carried out. This traditional process is not sustainable in an increasingly uncertain and dynamic world, with increasing volatility in freight rates.
Digital freight procurement software replaces the most time-consuming tasks with automated digital processes and has unique features, some of which are mentioned below.
When the need for a specific transportation service is identified, the platform enables the raising of a Request for Quotation ( RFQ ), which details the different services sought. The RFQ is instantly communicated to all carrier partners, who will respond back on the same platform with their detailed bids across all the points mentioned in the RFQ, within the stipulated period.
The intuitive platform instantly analyses bids from hundreds of carriers based on required parameters and identifies carrier partners who make the right fit.
Shippers can have specific requirements like shipping routes, specific types of ships for their cargo, containers of specific sizes, or seasonal business. Based on these parameters, the platform interacts with the carrier partners and shipping lines and calculates rates instantly, something which would be too cumbersome and error-prone if done manually.
These rates are compared, and the platform ranks them using AI on the required parameters. If the shipper wishes, renegotiation can easily be done with a single click.
Freight forwarders are important partners in ocean freight. Ocean freight procurement platforms have a dedicated portal for freight forwarders to receive RFQs, and inquiries, respond to the RFQs and see their ranking in the bidding process.
If the shipper decides to renegotiate, all the freight partners taking part in the bidding are informed, and they have an opportunity to modify their rates and move up the ranks to get the bid. All documentation can also be done online. Besides, they also have online chat support for faster communication.
Each Freight Management System will have a different price based on the features the system offers, the level of customization involved, the service provider, etc. Most of the major shipping lines come integrated with the system, and the addition of other shipping lines and NVOCCs can be easily done.
Typically the platforms will not have any upfront payment. Rather they will be cloud-based transparent SaaS platforms where the pricing will be on a yearly or monthly subscription basis.
Having seen the software features which simplify ocean freight procurement, let us understand the advantages automated freight procurement software brings into the picture.
Freight procurement software analyses millions of real-time data points and compares them to current rates, besides providing spot and contract freight rate intelligence and highly reliable forecasts. This lighting-speed analysis provides insights not possible by manual processes and aids in making the best possible fact-based decisions in a fraction of the time.
It enables making decisions for optimizing bids and for making contractual arrangements to manage future performance risk. Most importantly, it empowers you with data and market trends for confidently negotiating with prospective or existing clients.
Freight procurement software provides market data on factors like contract rates, and spot market rates. It also provides market insights, trade route analysis, risk assessments, and rate forecasts.
Carrier-wise performance data is provided on metrics like on-time pickups and deliveries, damage claims made, transportation expenses, and billing accuracy. This enables the identification of the right carrier for the business.
Freight solutions offer reasonable references for rates like freight and services rates, port detention, and demurrage rates, and guide on market trends. By analyzing relevant factors like freight rates, active shipping lanes, volume/ weight requirements, and other necessary carrier information, they help manage contracts, strategize procurement, and make cost-effective bids.
Using features like automated spot buying, a repeatable process for spot buying can be put in place. This automated spot-buying process seamlessly tracks spot data digitally to learn which lanes should be added to contracts. This way, there is an optimum mix of contract and spot buying for minimized freight costs and better profitability.
The software enables the best freight rates procurement by engaging with multiple vendors to get the best real-time price on cargo shipping rates. The RFQ and bidding process is completely transparent for all stakeholders, including vendors or carriers, giving everyone real-time visibility of the freight procurement process.
The platform is completely transparent and enables carriers to view contracts in detail, lane by lane. This transparency motivates them to bid with their best rates for the selected lanes they want.
You can sync port pairwise data from most ERP systems within minutes to create accurate RFQ plans for sourcing spot rates across full container load and part container load. With a single click, shippers can be invited on the platform from freight forwarders within the time stipulated by the shipper, and have the system efficiently compare them. Freight forwarders can see their bid rankings on a single platform and can respond with bidding modifications or amendments online.
Enterprises can categorize forwarders based on their bids instantly, and on finalizing the service partner, you can send confirmation to forwarders online to close the process.
Freight management requires coordinated actions from carriers, freight forwarders, and shippers, and freight management software makes it possible. The software can communicate with Workshop Management software ( WMS ) and Customer Relationship Management software (WMS ) to get the maximum efficiencies provided by an end-to-end digital logistics platform.
Freight forwarders need constant guidance and communication for the proper implementation of the process. The software supports them by providing information on inquiries in real-time, enabling them to send bids easily, and know the ranking of their bids, so they can easily communicate with the shippers to initiate renegotiation.
Some other advanced features offered by automated ocean freight procurement solutions include the following:
Shipsy’s future-ready, end-to-end logistics management platform allows intelligent automation and unified visibility into the entire logistics process. This ensures seamless engagement with multiple carriers or shipping partners to get the best possible deals, thereby reducing freight costs and time.
Built-in smart RFQ system provides a reference guide facilitating comparison to market rates. Moreover, this provides the ability to smoothen and automate the negotiation process with multiple vendors.
The agile portal creates a direct line of contact with vendors and freight forwarders, allowing transparency in operation. Smart data analytics modules provide much-needed insights into key components across various KPIs.
Customers have realized critical business objectives using Shipsy’s freight procurement solution and have unlocked:
Request a customized demo and connect with our experts today to bring the Shipsy advantage to the ocean freight procurement process.
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