Over 88 percent of all companies are sourcing products from overseas and 85 percent are selling them to customers overseas. Transportation professionals now support worldwide freight movements (both inbound supply and outbound demand) and today’s transportation activities have grown in both scale and complexity under globalization.
These findings from our April Insight, Transportation Procure to Pay: Spend Management Trends under Globalization, indicate that across the board, all companies are trying to cut their costs and improve inventory turns. This results in the demand for more frequent deliveries and a greater number of shipments to manage and control (cited by 54 percent of respondents). Just to maintain the same level of cost or service over increased shipment frequency is a challenge, let alone trying to improve it under global lead times. All these factors further result in the disproportionate increase in transportation costs “relative to overall supply chain cost” that is coalescing to become the new normal for today’s transportation executive.
To combat this pressure to address rising costs, many executives are looking at outsourcing their procure-to-pay transportation activities. Up to 73 percent cite the primary reason as the “need to gain better visibility and control freight audit and payment activities.” When companies look to outsource they should partner with a Logistics Service Provider that has experience and tools capable of multi-national shipments. To stress this point I’ll repeat the findings from our April report:
“Only 51 percent of the Best-in-Class have a centralized spend management platform in place with multi-currency and multi-lingual ability and less than a third of all other companies have that in place. Yet as we shared in earlier sections up to 85 percent of all companies have inbound /outbound international shipments with freight management requirements that span global. Leveraging the total transportation spend (and addressing the multi-country aspects of today’s global supply chain) is a key factor in reducing costs.”
Aberdeen advises each company to move to a collaborative data platform that is global in nature and can give them a company-wide look at transportation spend and carrier performance. In addition, partnering with a solutions provider that has international operations (when contemplating managed service expertise) should be a key consideration since the average company has global operations.
So, please provide your feedback:
What is your new normal? Are you outsourcing more? What changes are you noticing in your global supply chain? Comment below with your observations and questions. I look forward to hearing from you.