Data-Driven Decisions: Transforming Transportation Sourcing through effective Analytics

Logistics consistently ranks as a major expense for many organisations, often appearing within the top three spend categories. Surprisingly, it frequently lacks procurement oversight. But why? The reasons we commonly encounter include its demanding nature, requiring rigorous oversight, its critical importance to customer satisfaction, and the necessity for flawless execution on the first attempt.

The execution of transport purchasing within a supply chain operation is pivotal. It's a complex process with a significant impact on an organisation's bottom line and service quality. For instance, organisations typically allocate about 10% of their sales to logistics services. This figure can soar to as high as 30% for those with dispersed supply chains or a focus on eCommerce.

The advent of big data and advanced analytics offers a powerful opportunity. Harnessing data analytics for procuring services in this category and using the insights to enhance strategic value and transparency could significantly move the needle. This article explores the critical importance of understanding data and outlines key considerations for organisations aiming to implement these strategies.

How Investing in Transport Data Can Unlock Strategic Advantages in Logistics Procurement:

1. Gaining Visibility: Data analytics has the power to provide organisations with detailed insights into their logistics network and facilitates the identification of spending patterns and trends. This is crucial for global organisations with localised logistics functions, where global visibility unlocks opportunities. It eliminates guesswork, enabling informed decisions and striving for improved process and contract standardisation.
2. Risk Management: Advanced analytics identify and mitigate supply chain risks. Predictive analytics uses spend management, supplier information, and raw materials data to forecast future trends and outcomes. This prepares procurement teams for various future scenarios.
3. Supplier Relationship Management: Data from carriers is vital for fostering collaborative and transparent partnerships. Analysing freight data evaluates carrier performance, compliance, and reliability. Visibility enables procurement teams to manage key carriers globally, maximising procurement benefits.
4. Sustainability Initiatives: Visibility establishes a baseline for the carbon footprint of logistics operations. It identifies emission reduction areas, such as route optimisation and switching to sustainable transport modes or suppliers. From 2025, organisations in Europe will need to report their Scope 3 emissions, making it essential to start this journey now.
5. Total Cost of Ownership: Data analytics helps understand the full cost impact of commercial elements in contracts, such as surcharges and penalty charges. Big data analytics combines diverse data sets for comprehensive analysis, identifying opportunities to reduce spend and improve profit margins.

Key Considerations for Leveraging Data Analytics in Logistics Procurement:

1. Data Quality and Integration: High-quality data is a key enabler. Procurement teams must ensure data accuracy and comprehensiveness, especially when working with third-party logistics providers (3PLs). Integrating multiple data sources provides a unified logistics network view.
2. Systems and Tools: Investing in the right technology and analytical tools is critical. Business Intelligence (BI) tools offer network visibility by integrating data and visualising it meaningfully. As data quality improves, consider investing in advanced analytics tools with predictive capabilities and artificial intelligence.
3. The Right Team and Culture: A balanced team with procurement skills, logistics domain knowledge, and analytics capability is crucial. Cultivating a culture of data-driven decision-making ensures data reliance for informed decisions.

Conclusion

Among procurement professionals, the critical impact of data—its availability, accuracy, and the need for adjustments in internal processes and systems to realise its value—is a common discussion point. However, this challenge need not extend to transport, a category that can greatly benefit from external, standardised carrier-based information. Such data can significantly enhance network flow optimisation, reduce CO2 emissions, and unlock cost-saving opportunities.

Leveraging readily available information, alongside advanced analytics, offers a substantial opportunity for procurement. This mindset enables organisations to achieve unparalleled visibility into their global networks. It allows them to effectively mitigate risks, develop resilience, manage suppliers, and enhance their sustainability initiatives. By embracing modern data analytics techniques to support procurement strategies and foster operational excellence, organisations can improve future data quality, integrate technology, foster talent development, and build an inclusive culture to manage this spend area effectively.

Co-Authored by Chris Powell & Natalie C.

Colleagues at Argon & Co, a global management consultancy that specialises in operations strategy and transformation

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