What is transportation spend management?
Transportation spend management is a method for analyzing and optimizing the operations and finances of a logistics organization. Transportation spend management involves a variety of calculated tasks to ensure cost-efficient and timely transportation of freight. The approach relies upon data, assesses the factors that influence spending, and evaluates the value delivered to customers. As a complex component of supply chain management, it is a critical strategy that can help enterprises eliminate waste, enhance profit, increase efficiency, gain visibility, and sustain a competitive advantage.
Changes and Trends in Transportation Spend Management in 2021
In 2021, waves of COVID-19 variants and restrictions, supply chain disruptions, logistics velocity challenges, driver shortages, delays on building new trucks, depleted used truck inventory, construction booms, and growing freight demands impacted transportation spend management. Because of all of this, transportation spend management was incredibly difficult in 2021. Brokers had to increase capacity expenditures to navigate the multitude of challenges. Use of spot moving and transportation rates increased. As the transportation volumes rose, the operational margins shrank.
Predicted Trends in Transportation Spend Management in 2022
At the Wall Street Journal CEO Council Summit, corporate executives reported they expect supply chain problems will persist through 2023. Increased market demands and continued strains on capacity will likely fuel higher spot market premiums and quotes for short-term freight contracts. If supply chain disruptions and equipment delays dissipate, a market correction is possible in 2022. When the market metabolizes, pricing is likely to return to a normal rate, adjusted for inflation. Until these corrections happen, transportation spend management in 2022 will likely be stressed by delivery delays, misplaced products, laborious return processes, capacity constraints, and more. Efforts to control and reduce transportation costs will be impeded by global disruptions, tender rejections, routing guide leakage, and spot market premiums.
Logistics cost pressures will likely continue throughout 2022. According to a study conducted by the American Transportation Research Institute, driver compensation and diesel fuel prices are likely to be a large factor in transportation spend management. Additionally, spot moving is on the rise, and spot rates are going up as well. Ultimately for 2022, transportation spend management teams will be challenged to control transportation costs. Thankfully, there are tools and strategies that freight companies can deploy to manage existing and surprise challenges.
How Freight Companies Should React
To ride any waves that 2022 may bring, freight companies need to empower their enterprises with in-depth analytics and insights that will guide strategic business decisions. Successful transportation spend management involves detailed assessment of data rates, volumes, and more. In order to gainfully negotiate and control transportation expenditures, freight companies need to be familiar with the current rates and trends. Furthermore, freight transportation companies need to identify the areas of their network that are most vulnerable to transportation spend management risks. Effective transportation spend management will require sophisticated understanding of the strengths and weaknesses of the respective enterprise, latest transportation costs, rates, carrier performance statuses, and market forecasts.
Solutions based in smart digitization, analytics, and data can help freight companies evaluate quotes and negotiate advantageous rates. Insight into rate forecasts can prompt companies to look for alternative solutions to meet the needs of their customers without straining their operational budgets. Tracking rate increases and trends can also guide companies to ensure their contracts align with the times. Freight rate analytics ensure enterprises get fair prices, on every key lane, regardless of the demand environment. All of these strategic planning efforts must be complemented with detailed network performance benchmarks to monitor historical performance and costs and plan for future developments.
To gain further advantages and decrease risks, freight companies need to automate invoices and payments, follow a sound transportation spend management strategy, and conduct thorough audits. Automated billing can improve invoice processing, reduce mistakes, and optimize resource utilization. Proactive data management processes can ensure invoices and manifest records align, identify other potential errors or gaps, and resolve issues before they result in costly problems.
All together, these strategies can position freight companies to successfully navigate logistics challenges, improve transportation spend management, consistently and reliably satisfy customers, and drive business growth.
Why First Star Logistics?
First Star Logistics is a global logistics provider with over 60 years of experience. As a unique, asset based company, First Star Logistics is one of the fastest growing companies in the industry. Their core business is the transportation of freight by arranging and securing space for the cargo between states and countries via common carriers such as trucks, railroads, and ocean lines. Clients benefit from a comprehensive North American network and global reach, along with time and money-saving technology that delivers. Additionally, First Star Logistics has an in-house freight brokerage department and trucking agent team. For all of your transportation management needs, contact First Star Logistics today.
