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Freight Procurement Budgets Surging in 2022

Feb. 23, 2022
As freight rates climb and the capacity crunch continues, here are some of the top transportation and logistics freight procurement issues companies are struggling with this year.

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Ongoing challenges like port congestion, container shortages, labor constraints and the global pandemic have put undue pressure on the world’s transportation and logistics networks. And while these critical systems were able to absorb some of the shock early in the pandemic, the fact that we’re now solidly in COVID-19’s junior year has forced freight providers to raise their rates, reject loads and triage their own challenges.

This isn’t great news for procurement professionals who often base key buying decisions on just how much time and money it’s going to take to get required products from point A to point B (for incoming raw materials and other goods) and then back out the door to their distributors and customers (for outgoing orders). Without a solid number to go on, making those decisions has become somewhat of a crapshoot.

Add extended order lead times, ongoing supply chain disruption and issues like the semiconductor shortage into the mix, and the situation becomes even more complex and difficult to solve.

For its new 2022 State of Freight Procurement Report, freight procurement software provider Sleek Technologies set out to get a pulse on some of the freight-related issues keeping companies up at night right now.

Through this exercise, the company learned that:

·      97% of shippers plan to increase their freight procurement budgets in 2022 in hopes of better managing capacity, increasing agility, bolstering cost management and delivering better overall results.

·       29.8% said they will increase their budget by 26-50% compared to 2021, while 16.4% plan an increase of 51-75%.

·       6.5% said their budgets will increase by 76-100% over 2021.

By these numbers alone, it’s clear that companies have come to terms with the fact that they’ll be spending a lot more on freight at least for the foreseeable future. “These findings illustrate just how competitive the freight procurement space has become over the last 18-24 months,” Sleek Technologies points out in its report. “Some shippers have ramped up their transportation budget because they experienced massive budget overages in 2021 and anticipate similar freight market conditions for 2022.”

Wanted: Better Freight Procurement

Historically, companies have relied on aging technology, spreadsheets and manual processes to procure freight. Now, more of them are investing in technology tools that help streamline and automate the process. According to the survey, 289 out of 300 respondents have invested in new technology or strategies to optimize freight procurement performance since the pandemic began. Nearly all (95%) of the companies say their freight procurement operations have either “significantly improved” or “somewhat improved” as a result of these investments.

“For years, freight procurement was largely an afterthought for many C-suites—even at the large-shipper level,” Sleek Technology states. “As the pandemic unfolded, many shippers struggled to deliver goods on time at a fair market price. Decision makers outside the transportation team started to take notice of budget overages and poor customer service. The transportation team began to realize they could no longer stick with the status quo, making freight procurement upgrades a necessity.”

Reacting to Freight Market Fluctuations

Companies are also worried about controlling costs and ensuring on-time deliveries, both of which have become somewhat elusive during the global pandemic. Survey respondents pointed to cost control (66%), on-time delivery (65%) and high primary rejection rates (46%) as the most frequently recurring freight issues that they’re dealing with so far in 2022. 

For help, some of them are turning to data-driven procurement platforms infused with artificial intelligence (AI) and machine learning (ML). These platforms aggregate data, assess it and give companies the information they need to be able to make better decisions in real-time. Despite these advantages, Sleek Technologies says that about 25% of all shippers lack real-time insights about their transportation and logistics networks.

“As we press into 2022, it will be imperative that shippers have real-time data so they can react appropriately to freight market fluctuations,” it says. “Otherwise, shippers lack the resources needed to quickly uncover fair market cost per load and large cost reduction opportunities.”

About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.

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