Situation

Facing rising transportation costs

ShipperCo had what they thought to be a good procurement program in place for road transportation. On an annual basis, ShipperCo would tender the market for its outsourced trucking. This had become a very efficient process with a standard template and fixed terms & conditions. However, despite their diligent efforts, ShipperCo’s trucking costs were on the rise.

Synaptic Decisions was asked to streamline ShipperCo’s transportation sourcing practices and identify opportunities to achieve savings.

Approach

Finding the optimal choice

Our approach was to:

• Identify opportunities that increased revenue certainty, reduced cost to serve or reduced cost of risk for Supplier
• Design a menu tender to target identified high value opportunities and discover what Supplier valued
• Utilize our cutting-edge BidLanes© Menu Tendering tool to determine the optimal contracting architecture

Insights & Recommendation

Don’t rush to buy capacity

One of the identified areas for improvement was ShipperCo’s fixed terms and conditions which required the shipper to maintain a high service level (i.e. on time in full %), but did not allow for subcontracting. To meet the high service level, especially during high demand periods, a shipper had to reserve extra capacity to meet ShipperCo’s uncertain volume. For one opportunity to address this, we wanted to understand how a traffic commitment and allowing for subcontracting would affect pricing. The menu tendering approach allowed us to discover value of this and other identified opportunities.

Results

Savings in a tight market

13% savings in a tight transportation market