Transportation Procurement Benchmark Study

Transcription

1 In partnership with: Transportation Procurement Benchmark Study The Benefits of Global Procurement Integration Written By: Eric Johnson Research Director American Shipper Part of American Shipper s Transportation Procure-to-Pay Benchmark Series Published April 2014 Sponsored by:

2 Executive Summary Welcome to our sixth annual transportation procurement benchmark report. American Shipper, in partnership with the Council of Supply Chain Management Professionals (CSCMP) and the Retail Industry Leaders Association (RILA), surveyed roughly 230 transportation buyers on procurement practices, processes, technologies and trends. Qualified respondents are freight buyers, including manufacturers, retailers, government procurers, and third party logistics providers (3PLs). This is the first installment of our annual three-part series covering the lifecycle of freight from procurement through payment. ii Executive Summary Globally Integrated Transportation Procurers American Shipper has traditionally measured supply chains in terms of winners, i.e. those shippers that deliver excellent results in procurement and other phases of the transportation cycle. This year, in place of the winners group, we ve introduced a new category called globally integrated trans portation procurers. This category represents shippers that have taken a streamlined approach to global and domestic transportation procurement. Shipper and 3PL respondents were measured along two dimensions: whether the respondent uses a systems-based approach to procurement; and whether that one system is used for both international and domestic procurement. Around one-quarter of respondents qualified as globally integrated transportation procurers. Transportation Spend Trends Nearly two-thirds of large shippers spend more than $100 million on freight per year, compared to only 6 percent of small/midsized shippers. Conversely, virtually no large shippers have freight spends of less than $10 million per year, while more than half of small/midsized shippers fall into that category. Large shipper respondents also said they were roughly 20 percent more likely to engage in negotiations with their carriers than small/midsized shippers. The size of a shipper s freight spend indelibly impacts its relationship with carriers and logistics partners, as well as its strategy for procuring transportation services.

3 Carrier Management Trends One of the more interesting ways to gauge a shipper s or 3PL s procurement strategy is to view their desire to either grow or shrink their number of carriers. Large shipper respondents are more likely to either moderately grow or shrink the number of carriers they use in the coming year, compared to small/ midsized shippers. Roughly three of five in the latter group expects to keep to the same number of carriers in the year ahead. More than a third of large shippers also expect to keep the number of carriers they use stable. There is clearly diversity of opinion about whether it s best to increase or decrease the number of carriers with which large shippers work. Meanwhile, there was homogeneity across different shipper categories in terms of use of contracts. Retailer, manufacturer, and 3PL respondents fell within a 10 percent band, with all three groups saying they use contracts for at least three quarters of their shipments. iii Procurement Technology Trends It s important to note that respondents were surveyed across all modes, and dependence on contract versus spot rate procurement will vary depending on the mode. One potentially encouraging sign in this year s study is that respondents report the use of manual or spreadsheet-based procurement practices has declined from last year s study, and is more in line with the lower levels noted in However, very few respondents use a transportation-specific procurement tool. With many shippers having more multi-purpose procurement tools at their fingertips there is often less of a priority to invest in pure transportation procurement technology, as those tools can be used for transportation purposes as well Executive Summary There was a noticeable increase in the use of hybrid systems to handle transportation procurement. More respondents seem to be stitching together systems to handle their procurement needs than before. Perhaps adding new markets, new product lines, new modes, and more carriers has necessitated such an approach. Systems-based shippers are less focused on rates than their manual, or spreadsheet-based cohorts. Seventy-two percent of manual shippers said price was the most important aspect of a bid, compared to 43 percent of systems-based shippers. Conversely, systems-based shippers were more than twice as likely to cite service levels as the most important aspect of a bid. This speaks to the ability of systems to provide shippers a focus on parameters outside of rates, driving more value through their partnerships with carriers.

4 Is Funding Available? This year s report asked respondents candidly: are funds available to invest in procurement technology. Barely a quarter of respondents said that such funding was available, and less than a third of those respondents were able to characterize the funding as being definitely available. In short, fewer than one in 10 respondents were certain they could secure the funding to acquire or upgrade their transportation procurement technology. iv Executive Summary Benefit for Global Integrated Transportation Procurers? While many consider it best practice to centralize domestic and global transportation procurement in one system, this year s results show that organizations that have done so haven t derived major advantages over those that have not. Integrated procurers put a stronger emphasis on carrier service levels, but prioritize rate levels to the same degree as those lacking domestic and global system integration. There was also little difference in terms of length of negotiations and planned reduction in carriers for integrated procurers. In short, the idea of integrating global and domestic transportation procurement sounds like a best practice, and may well be over time, but this year s report shows little evidence that it tangibly improves processes for the metrics surveyed.

5 Table of Contents Executive Summary... ii Section I: Introduction...3 > Study Background...3 > Terminology...3 > Hypothesis...3 > Demographics...4 > Globally Integrated Transportation Procurers...6 Section II: Transportation Spend Trends...7 Section III: Carrier Management Trends...9 Section IV: Procurement Technology Trends...11 Section V: Globally Integrated Transportation Procurers Section VI: Best Practices...20 Appendix A: About Our Sponsors...21 > GT Nexus > JDA Software Group, Inc Table of Contents Appendix B: About Our Partners...22 > CSCMP > RILA Appendix C: About American Shipper Research...23

6 Figures Figure 1: Industry Segments...4 Figure 2: Company Size...5 Figure 3: Job Titles...5 Figure 4: Transportation Modes Managed...6 Figure 5: Transportation Spend...7 Figure 6: Percentage of freight spend that is negotiated...8 Figure 7: Percentage of freight spend that is bid and not pre-awarded to incumbents...8 Figure 8: Expected Change in Number of Carriers Used...9 Figure 9: Length of last negotiation Figure 10: Percentage of shipments that are contract-based...10 Figure 11: Procurement Platform...11 Figure 12: Current Delivery Model for Systems-based Shippers...12 Figures Figure 13: Inhibitors to Technology Adoption...12 Figure 14: Most Important Aspect of a Bid Manual vs. Systems-based...13 Figure 15: Number of bid rounds Manual vs. Systems-based...14 Figure 16: Is Funding to Invest in Procurement Technology Available?...14 Figure 17: Transportation Procurement Responsibility...16 Figure 18: Domestic and International Procurement Integration...17 Figure 19: Most Important Aspect of a Bid...18 Figure 20: Length of last negotiation...18 Figure 21: Expected Change in Number of Carriers Used...19

7 Section I: Introduction Study Background Welcome to our sixth annual transportation procurement benchmark report. American Shipper, in partnership with the Council of Supply Chain Management Professionals (CSCMP) and the Retail Industry Leaders Association (RILA), surveyed roughly 230 transportation buyers on procurement practices, processes, technologies and trends. American Shipper approaches each benchmarking exercise with a set of assumptions to prove or disprove. The 20-question survey was open from Jan. 14 through Feb. 21, Qualified respondents are freight buyers, including manufacturers, retailers, government procurers, and third party logistics providers (3PLs). This is the first installment of our annual three-part series covering the lifecycle of freight from procurement through payment. All reports are made available for download from 3 Terminology In the interest of being succinct and direct, this study uses several terms or acronyms you may not be familiar with. The explanations and definitions should be kept in mind when reviewing the results that follow. Logistics service providers (LSPs) are companies that charge a fee for supply chain services, including but not limited to transportation, distribution, warehousing, and customs clearance services. A third party logistics provider (3PL) is a non-asset-based LSP. Section I: Introduction It is important to note for the purpose of these reports the term automated or systems-based does not mean a task is managed without human interaction. Instead, automated procurement means a company is employing a substantial amount of technology to support its transportation buying process, allowing staff to interact where necessary to solve problems and optimize the process. Similarly, the term manual does not mean the process is managed without the use of computers, Internet access, or other fundamental business tools. It s assumed that companies managing procurement manually employ spreadsheets and other support tools. Hypothesis American Shipper approaches each benchmarking exercise with a set of assumptions to prove or disprove. In the case of this study these include: 1. The bulk of shippers will seek to reduce the number of carriers they use in the coming year, cementing deeper relationships with their core carriers. Fig. 9 shows a split decision: some large shippers say they intend to reduce the number of carriers they use, while some intend to grow that number. Three out of five small/midsized shippers are content with the number of carriers they employ.

8 2. Shippers and 3PLs will find it hard to get access to funds for investments in procurement technology, whether it be acquiring a system, or upgrading a current system. Fig. 17 shows this to be the case nearly three-quarters of respondents said funding is not available, or that they are uncertain about it being available. 3. Globally integrated transportation procurers shippers and 3PLs that use a system for procurement, and whose systems link domestic and international procurement will have clear benefits over those who don t similarly integrate these processes. Figs show these globally integrated transportation procurers have not carved out tangible benefits in terms of reduction of carriers to manage or length of negotiations. While these globally integrated transportation procurers do focus more on service, they are equally focused on rates as the respondent pool at large. 4 Section I: Introduction Demographics Qualified survey participants included transportation buyers from all industry segments, but this year manufacturers made up the highest single group (37 percent, including discrete and process manufacturers). 3PLs made up 27 percent of the respondent pool, and retailers made up a quarter, both down marginally from a year ago. Figure 1: Industry Segments 3% 17% Discrete manufacturing 27% Process manufacturing Engineering/Construction/Energy 2 Raw materials/commodities Retail/Wholesale 3PL/Forwarder/NVOCC/Intermediary 25% 6% 3% Government/Public Sector 231 total respondents

9 In terms of company size, respondents broke down along similar lines as a year ago, with more than 40 percent falling in American Shipper s large shipper category (i.e. shippers and 3PLs with more than $1 billion in revenue). This report, as in the past, makes significant use of the comparison between companies with more and less than $1 billion in revenue. Figure 2: Company Size Figure 3: Job Titles 3% 9% 9% 42% 3 13% 4 26% 5 28% Less than $100 million Between $100 million and $1 billion More than $1 billion C Level (CEO, CFO, CIO, CMO, etc) Vice president (including SVP, EVP, AVP, etc) Director Section I: Introduction Manager Staff/Analyst Other 228 total respondents 228 total respondents Respondents to this year s report were more heavily weighted to director, vice president, or C-level positions than in years past. In all, those three groups accounted for 48 percent of all respondents, compared to 40 percent a year ago. Manager, however continues to be the single most common position for a respondent to the survey, with 40 percent of this year s pool falling in that group. American Shipper has advocated in its benchmark research for transportation procurement to be a higher priority among the upper echelons of shippers, and though it s far too early to call this development a trend, it is encouraging to see more decision makers participating in this research.

10 Global shippers by nature manage across multiple transport modes, and so it s little surprise to see more than two-thirds of respondents saying they use virtually all modes (both domestic and international). Only non-containerized ocean freight and intermodal failed to register as modes in which at least two of every three shippers use. It s important, while reading this report, to keep in mind that respondents were surveyed across all the modes they use, and were not asked questions about how they procure any one specific mode. Figure 4: Transportation Modes Managed Less than Truckload (LTL) 86% 6 Section I: Introduction Truckload 84% FCL Ocean 8 Airfreight 74% Parcel/Small Package 69% LCL Ocean 66% Rail/Intermodal 63% Ocean Transport (other, non-containerized) 42% Other 2% total respondents Globally Integrated Transportation Procurers In years past, this report and others in our benchmark series have sought to carve out so-called winners from the larger respondent pool. This category attempted to identify the top 10 percent or so of shippers that were achieving better results through use of best practices. This year, in place of the winners group, we ve introduced a new category called globally integrated transportation procurers. This category represents shippers that have taken a streamlined approach to global and domestic transportation procurement. Shipper and 3PL respondents were measured along two dimensions: whether the respondent uses a systems-based approach to procurement; and whether that one system is used for both international and domestic procurement. Roughly 25 percent of respondents qualified as globally integrated transportation procurers. Section V of this report goes into greater detail about how this group handles certain aspects of procurement differently from all other respondents.

11 Section II: Transportation Spend Trends An obvious fundamental part of transportation procurement is spend. Shippers and 3PLs are driven by budget constraints and must manage their spend with carriers in as efficient a way as possible. To help categorize the various sizes and types of shippers and intermediaries who take part in our research, it s instructive to look at how annual transportation spend varies. In this case, we ve looked at the differences in spend between large shippers (again, those with $1 billion or more in revenue) and small/midsized shippers (those with less than $1 billion in revenue). Figure 5: Transportation Spend 7 Large Shippers Small and Medium Shippers 1% 64% 35% Less than $10 million per year Between $10 and $100 million per year More than $100 million per year 4 6% 54% Section II: Transportation Spend Trends 227 total respondents Clearly, there is a relationship between the size of companies and their freight spend, as Fig. 5 shows. Nearly two-thirds of large shippers spend more than $100 million on freight per year, compared to only 6 percent of small/midsized shippers. Conversely, virtually no large shippers have freight spends of less than $10 million per year, while more than half of small/midsized shippers fall into that category. The size of a shipper s freight spend indelibly impacts its relationship with carriers and logistics partners, as well as its strategy for procuring transportation services. It also affects the extent to which a shipper needs to automate some or all of its procurement activities, a topic we ll explore in greater detail in Section IV of this report.

12 Large shipper respondents also said they were roughly 20 percent more likely to engage in negotiations with their carriers than small/midsized shippers. Again, larger shippers, with their correspondingly higher volumes, often find more value in ongoing negotiations than in simply awarding contracts based on previous terms. Figure 6: Percentage of freight spend that is negotiated 8 76% % Section II: Transportation Spend Trends Large shippers Small/medium shippers Another measure of this same dynamic is the extent to which shippers and 3PLs bid their procurement across transportation modes versus pre-awarding to incumbents. The starkest differences emerged when examining how retailers, manufacturers, and 3PLs engaged in pre-awarding versus bidding. Retailers were 5 percent more likely than manufacturers and 10 percent more likely than 3PLs to bid their freight. Perhaps it s a reflection of retailers more intense focus on cost, with merchandising teams often expecting the transportation team to aid in the drive to increase margin. Manu facturers are also cost-conscious, but in general are more conservative when it comes to suppliers. 149 total respondents Figure 7: Percentage of freight spend that is bid and not pre-awarded to incumbents % 62% 52% Manufacturers Retailers 3PLs 169 total respondents

13 Section III: Carrier Management Trends One of the more interesting ways to gauge a shipper s or 3PL s procurement strategy is to view their desire to either grow or shrink their number of carriers. For certain, there is no one way analyze it. Some larger shippers prefer to work with a small basket of carriers with the goal to build stronger relationships and maintain more leverage with each carrier. Other large shippers see value in an expansive list of approved carriers (particularly on the domestic side) against which they can secure exactly the rates and capacity they need at a given time period. Figure 8: Expected Change in Number of Carriers Used % Large Shippers Small-Medium Shippers Significantly expand the number of carriers we use 3 17% 8% 8% 4% 3% 5% 1% Moderately expand the number of carriers we use 38% Maintain the present number of carriers we use 24% Moderately reduce the number of carriers we use Significantly reduce the number of carriers we use Uncertain 151 total respondents Section III: Transportation Spend Trends In Fig. 8, we see that large shipper respondents are more likely to either moderately grow or shrink the number of carriers they use in the coming year, compared to small/midsized shippers. Roughly three of five in the latter group expects to keep to the same number of carriers in the year ahead. More than a third of large shippers also expect to keep the number of carriers they use stable. This speaks to the fork in the road mentioned above there is diversity of opinion about whether it s best to increase or decrease the number of carriers with which large shippers work.

14 Figure 9: Length of last negotiation 35% % 32% Manufacturers Retailers 25% 2 15% 1 5% 22% 17% 14% 19% 24% 22% 21% 11% 2 11% 2% 6% 13% 4% 3% 3PLs One month Two months Three months Four six months More than six months Uncertain 171 total respondents 10 Section III: Transportation Spend Trends Fig. 9, meanwhile, shows that across the various shipper types, there is little discernible difference in terms of length of negotiations. By another metric shippers that use a procurement system versus those that handle procurement manually results were similarly close. This suggests the length of freight negotiations is not currently affected by factors such as shipper type, size, or automation strategy. Last year, our winners were able to conclude negotiations in a demonstrably shorter timeframe than the rest of respondents, but that advantage seems to have waned across all categories this year. As we wrote last year, shippers that use a systematic process for timing their procurement events tend to link them to seasonal and more predictable demand changes in their supply chains, and not to variable factors like the availability of resources or tightness in capacity. There was also homogeneity across different shipper categories in terms of use of contracts. Retailer, manufacturer, and 3PL respondents fell within a 10 percent band, with all three groups saying they use contracts for at least three quarters of their shipments. Remember that respondents were surveyed across all modes, and dependence on contract versus spot rate procurement will vary depending on the mode. Figure 10: Percentage of shipments that are contract-based % 81% 75% Manufacturers Retailers 3PLs 169 total respondents

15 Section IV: Procurement Technology Trends One potentially encouraging sign in this year s study is that respondents report the use of manual or spreadsheet-based procurement practices has declined from last year s study. Last year, half of respondents said they either use a manual or spreadsheet-based process. This year, that number declined to 39 percent for shippers and 32 percent for 3PLs. These numbers are more in line with the results from two years ago, perhaps suggesting this lower percentage more accurately reflects the degree to which shippers are still using manual procurement methods. That 3PLs use manual processes less frequently than shippers is little surprise. More and more, technology is becoming the backbone and differentiator for logistics services providers. 3PL respondents were also twice as likely to use the procurement module within their TMS than shippers. One last thing to note, very few respondents use a transportation-specific procurement tool this year s numbers were in line with previous years. With many shippers having more broad-ranging procurement tools at their fingertips to procure everything from raw materials to office supplies there is often less of a priority to invest in pure transportation procurement technology, as those tools can be used for transportation purposes as well. That s not to say those shippers couldn t derive serious benefit from transportation-specific tools. Figure 11: Procurement Platform One potentially encouraging sign in this year s study is that respondents report the use of manual or spreadsheet-based procurement practices has declined from last year s study. 11 Section IV: Procurement Technology Trends Manual or spreadsheet based 32% 39% Automated using a general purpose procurement system Automated using a transportation specific procurement system Automated using the procurement module of my transportation management system or another logistics/transportation system 6% 4% 9% 6% 8% 19% 3PLs Shippers Outsourced managed service 6% A mix or hybrid of the above 34% 34% None of these options 3% 5% 1 15% 2 25% 3 35% 4 45% 209 total respondents

16 Figure 12: Current Delivery Model for Systems-based Shippers 3% 12% 17% 39% A mix or hybrid of these Licensed installed software Software-as-a-service/On-demand None of these Software available on a project basis 28% 125 total respondents 12 Shipper respondents using a system of some kind whether it s internal or Section IV: Procurement Technology Trends outsourced reported employing a hybrid approach much more often this year than last (39 percent vs. 21 percent). Also, there were fewer respondents this year who said they use a software-as-a-service system (26 percent vs. 17 percent). Use of licensed-installed software remained at 28 percent. If there s anything to be gleaned from these changes, it s that more shippers are stitching together systems to handle their procurement needs than before. Perhaps adding new markets, new product lines, new modes, and more carriers has necessitated such an approach. For those lacking an automated procurement process, the biggest inhibitor to investing in such a system across shippers and 3PLs is that the current system or process meets their needs. This is especially true for 3PLs. Shipper respondents said they more often face a lack of identifiable return on investment, or an organization resistance to change. In any case, there is no one aspect that keeps shippers and 3PLs from investing in procurement automation. Figure 13: Inhibitors to Technology Adoption Current system or process meets our needs Lacks return on investment 25% 41% 48% 81% 3PLs Shippers Organizational resistance to change 6% 3 Other Available systems do not provide the functionality we require 6% 18% 13% 16% We do not have the technical expertise to make a change 6% 9% total respondents

17 Fig. 14, meanwhile, shows how systems-based shipper respondents were able to broaden their procurement priorities beyond rates. Seventy-two percent of manual shippers said price was the most important aspect of a bid, compared to 43 percent of systems-based shippers. Conversely, systems-based shippers were more than twice as likely to cite service levels as the most important aspect of a bid. This speaks to the ability of systems to provide shippers a focus on parameters outside of rates, driving more value through their partnerships with carriers. Figure 14: Most Important Aspect of a Bid Manual vs. Systems-based % Manual Systems-based % 46% Price quoted for services 22% Service level guarantees (includes transit time, on-time delivery, damage) 5% 1 Capacity guarantees 1% Environmental sustainability programs 162 total respondents Section IV: Procurement Technology Trends Meanwhile, systems-based shippers add an extra round of bidding on average compared to manual shippers, suggesting an automated platform allows these shippers to focus on nuances of each bid, not just price.

18 Figure 15: Number of bid rounds Manual vs. Systems-based Systems-based shippers Manual shippers 158 total respondents 14 Section IV: Procurement Technology Trends For years, our research has been examining the extent to which shippers and 3PLs have used systems to underlie their procurement process. We ve also looked into what keeps shippers and 3PLs from moving toward such a systemsbased approach. This year we aimed to extend that examination, asking respondents a key follow-on question. If there is a will to acquire an automated procurement system, or upgrade an existing system, is the funding available to finance that move? All respondents both with and without systems were asked the question. Fig. 16 tells this interesting story. Figure 16: Is Funding to Invest in Procurement Technology Available? 35% 3 32% 29% 25% 2 18% 15% 1 9% 12% 5% Definitely available Likely available Uncertain Likely unavailable Definitely unavailable 201 total respondents

19 Barely a quarter of respondents said that such funding was available, and less than a third of those respondents were able to characterize the funding as being definitely available. In short, fewer than one in 10 respondents were certain they could secure the funding to acquire or upgrade their transportation procurement technology. On the other hand, more than 40 percent said funding was unavailable, including 12 percent that said it was categorically not available. Crucially, nearly a third of respondents said they were uncertain as to whether the funding is available. Clearly, some of those might have access to funding, but just as clearly, many will not have access to any funding for procurement technology. This funding availability question will be examined throughout American Shipper s Procure-to-Pay Benchmark Series this year. 15 Section IV: Procurement Technology Trends

20 Section V: Globally Integrated Transportation Procurers 16 Do shippers use an automated approach to procurement, and are international and domestic procurement activities linked? These are the central tenets for what we have dubbed globally integrated transportation procurers. One dimension not included is whether a single department or office has responsibility for all procurement. It s too simplistic to say that housing both of these processes under the same roof is a best practice, because there are many successful organizations that use separate teams to procure global and domestic freight. There are sound reasons behind separating the two: domestic and global transportation markets remain different animals, with different dynamics. Yet there are also shippers who recognize the benefits of linking these processes by systems and personnel. There are sound reasons behind separating the two: domestic and global transportation markets remain different animals, with different dynamics. Section V: Procurement Technology Trends Fig. 17 shows more than half of shipper respondents in each category have responsibility for both domestic and international procurement. The number is higher for retailers compared to 3PLs, and higher still for manufacturers. Anecdotally, it has been observed that more logistics managers are tasked with managing both their domestic and international procurement due to a reduction in headcount post-recession. It will be interesting to examine in future years how these numbers evolve. Figure 17: Transportation Procurement Responsibility % 64% 52% Responsible for international and domestic procurement Responsible for international procurement only % 15% 16% 12% 19% 29% Responsible for domestic procurement only Manufacturers Retailers 3PLs 231 total respondents

21 A defining characteristic of globally integrated transportation procurers is that they use one system for global and domestic procurement. Fig. 18 shows around half of shippers and 3PLs use one such system, while about a quarter of respondents use separate systems to manage those processes. Of note, Fig. 18 also shows shippers in all groups are much more likely to have a system for domestic procurement than vice versa. Which makes sense the domestic market is more attuned to an automated procurement approach than, say, ocean. This also suggests many shippers are likely using a procurement tool meant for domestic purposes that is being used for global transportation markets. Figure 18: Domestic and International Procurement Integration 6 56% 55% Manufacturers % Retailers One system is used for international and domestic 21% 33% 26% One system is used for international and another system for domestic 1% 4% 2% A system is used for international but not for domestic 18% 1 8% A system is used for domestic, but not for international 4% 8% 1 Uncertain 3PLs 181 total respondents Section V: Procurement Technology Trends

22 Figure 19: Most Important Aspect of a Bid 7 All Respondents % 51% 48% Global Integrated Transportation Procurers 4 39% Price quoted for services Service level guarantees (includes transit time, on-time delivery, damage) 8% 2% Capacity guarantees 1% Environmental sustainability programs 206 total respondents 18 Section V: Procurement Technology Trends Looking again at what respondents see as the most important aspect of a bid, it s interesting to view the choices through the prism of whether a shipper is a globally integrated transportation procurer. While not as stark as the difference between systems-based and manual shippers, globally integrated transportation procurers still put a higher premium on service levels in this case, in lieu of a prioritized focus on securing capacity. But roughly half of both categories saw price as the most important factor. In terms of the length of the respondents last negotiation, there was little to separate the two groups, except that a proportion of globally integrated transportation procurers were slightly more likely to take four to six months to negotiate with their carriers than all other respondents with negotiation periods of two to three months. Figure 20: Length of last negotiation 3 25% 2 19% 19% 22% 18% 28% 21% 17% 25% All respondents Global Integrated Transportation Procurers 15% 11% 1 5% 6% 7% 7% One month Two months Three months Four six months More than six months Uncertain 192 total respondents

23 Figure 21: Expected Change in Number of Carriers Used % 47% All respondents Global Integrated Transportation Procurers % 14% 22% 1 Maintain the present number of carriers we use Moderately expand the number of carriers we use Moderately reduce the number of carriers we use 5% 3% 4% Uncertain Significantly expand the number of carriers we use 2% 2% Significantly reduce the number of carriers we use 2% 203 total respondents 19 Globally integrated transportation procurers said they were slightly more likely to reduce the number of carriers they use in the coming year, compared to all respondents. Through this and other metrics, it is hard to say that globally integrated transportation procurers have secured major benefits through a linked approach to domestic and international procurement. Section V: Procurement Technology Trends While it may be considered a best practice to integrate these processes within a common system, in practice, three quarters of shippers handle them separately, and don t seem to be suffering any disadvantage for doing so.

24 Section VI: Best Practices 20 Section VI: Best Practices This report advocates a series of targets or characteristics that best-in-class procurement organizations employ: 1. Avoid the lure of searching out rate-oriented service relationships for the bulk of your volume. They are doomed to remain transactional in nature and won t carry the service benefits that more strategic relationships with carriers can bring. 2. Set realistic targets for transitioning from a spreadsheet-based procurement process to an automated one. The benefits of automation are plain to see, and yet research in this report shows a majority of shippers don t feel they have access to investment for procurement technology. 3. If you have a procurement system, ensure it is up-to-date, and consider using one system for both domestic and international procurement. The benefits may be gradual or not very apparent at all, but there is often latent value in centralizing processes, particularly on a system suited to handle both. 4. That said, the jury is out as to whether it is better to have one department or team to handle international and domestic transportation procurement, or whether those tasks are best left separate. Successful shippers have used both methods the key is to decide which is the best fit for your organization. The jury is out as to whether it is better to have one department or team to handle international and domestic transportation procurement, or whether those tasks are best left separate. Successful shippers have used both methods.

25 Appendix A: About Our Sponsors GT Nexus GT Nexus operates the world s largest cloud-based business network and execution platform for global trade and supply chain management. Over 25,000 businesses across industry verticals, including adidas Group, Caterpillar, Citi, Columbia Sportswear, DHL, Electrolux, Levi Strauss & Co., Kohl s, Nestlé, Pfizer, Renault, and Sears share GT Nexus as their standard, multienterprise collaboration platform. This enables all network participants to operate against a core, real-time and always on set of information across multiple supply chain functions, allowing them to optimize the flow of goods, funds and trade information, from the point of order through final payment. For more information please visit us at 21 JDA Software Group, Inc. JDA Software Group, Inc., The Supply Chain Company, offers the broadest portfolio of supply chain, retail merchandising, store operations and allchannel commerce solutions to help companies manage the flow of goods from raw materials to finished products and into the hands of consumers. JDA s deep industry expertise and innovative cloud platform help companies optimize inventory, labor and customer service levels. As a result, JDA solutions have become the standard for the world s leading retailers, manufacturers and distributors. To learn more, visit jda.com or info@jda.com. Appendix A: About Our Sponsors JDA The Supply Chain Company Worldwide Headquarters Scottsdale, Arizona, U.S.A. Office: Worldwide:

26 Appendix B: About Our Partners CSCMP Since 1963, the Council of Supply Chain Management Professionals (CSCMP) has been the leading worldwide professional association dedicated to education, research, and the advancement of the supply chain management profession. With more than 9,000 members globally, representing business, government, and academia from 62 countries, CSCMP members are the leading practitioners and authorities in the fields of logistics and supply chain management. To learn more about CSCMP, visit 22 Appendix B: About Our Partners RILA The Retail Industry Leaders Association (RILA) is the trade association of the world s largest and most innovative retail companies. Retail executives choose RILA s unique collaborative forums, effective public policy advocacy, and premier educational events to advance excellence throughout the retail industry. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, provide millions of jobs and more than 100,000 stores, manufacturing facilities, and distribution centers domestically and abroad. For additional information visit

27 Appendix C: About American Shipper Research Background Since our first edition in May 1974, American Shipper has provided U.S.-based logistics practitioners with accurate, timely and actionable news and analysis. The company is widely recognized as the voice of the international transportation community. In 2008 American Shipper launched its first formal, independent research initiative focused on the state of transportation management systems in the logistics service provider market. Since that time the company has published more than a dozen reports on subjects ranging from regulatory compliance to sustainability. Scope American Shipper research initiatives typically address international or global supply chain issues from a U.S.-centric point of view. The research will be most relevant to those readers managing large volumes of airfreight, containerized ocean and domestic intermodal freight. American Shipper readers are tasked with managing large volumes of freight moving into and out of the country so the research scope reflects those interests. 23 Methodology American Shipper benchmark studies are based upon responses from a pool of approximately 40,000 readers accessible by invitation. Generally each benchmarking project is based on qualified responses to a question survey depending on the nature and complexity of the topic. American Shipper reports compare readers from key market segments defined by industry vertical, company size, and other variables, in an effort to call out trends and ultimate best practices. Segments created for comparisons always consist of 30 or more responses. Library Appendix C: About American Shipper Research American Shipper s complete library of research is available on our Website: AmericanShipper.com/Research. Annual studies include: Global Trade Management Report Global Transportation Planning & Procurement Benchmark Global Transportation Management Benchmark Global Transportation Settlement & Measurement Benchmark Import Operations & Compliance Benchmark Export Operations & Compliance Benchmark Contact Eric Johnson Research Director American Shipper ejohnson@shippers.com

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