**London**: Dr. Chris Caplice, Chief Scientist at DAT Freight & Analytics, discusses innovative procurement strategies in logistics to navigate market disruptions, highlighting the importance of technology and adaptable practices for shippers to optimise operations and reduce costs in an evolving landscape.
Dr. Chris Caplice, the Chief Scientist at DAT Freight & Analytics, recently engaged in a comprehensive discussion regarding logistics challenges and solutions as part of Sourcing Journal’s Chain Reaction series. The conversation primarily focused on how his company employs technology to assist shippers in optimising procurement strategies, particularly in navigating the ever-changing transportation market.
DAT Freight & Analytics operates the DAT One truckload freight marketplace, which is crucial for freight shippers, brokers, and carriers. Additionally, their DAT iQ data analytics service is noteworthy; it utilises a robust pricing model based on $1 trillion in market transactions, providing valuable benchmark spot and contract pricing for nearly all trucking lanes across North America.
Dr. Caplice emphasized that while significant changes in logistics—such as optimising supply chain networks, nearshoring, or warehouse automation—require both executive endorsement and substantial investment, companies can still realise immediate improvements by focusing on controllable aspects of their operations. He suggested that two immediate actions could substantially reduce disruptions: avoiding attempts to predict unpredictable events and employing a balanced approach to transportation procurement. This method reduces the risk of facing price and service shocks when primary carriers cannot cover certain loads.
During the discussion, Dr. Caplice highlighted the need for companies to adjust their strategies to prepare for disruptive challenges. He noted that instead of trying to foresee specific events, businesses should concentrate on preparing for their outcomes. He provided an example from last year when decreased water levels at the Panama Canal resulted in extended transit times from the Pacific Rim. Several companies are now creating playbooks to address similar situations in the future.
Furthermore, the conversation addressed how retailers should alter their transportation procurement practices amid disruptions. Typically, requests for proposals (RFPs) lead to the identification of primary and alternate carriers for specific routes. However, when load acceptance shifts from primary to backup carriers, the costs tend to escalate. Dr. Caplice referenced studies from MIT FreightLab which illustrate this phenomenon, showing that rates can increase significantly—by 8 per cent for the first alternate and up to 35 per cent for the tenth alternate.
Dr. Caplice mentioned that the inadequacy of a failed routing guide illustrates that relying solely on RFPs and contract carriers may not suffice for ensuring supply chain efficiency. He advocated for cultivating a portfolio consisting of dedicated contracts and dynamic relationships.
As transportation costs remain likely to rise, Dr. Caplice recommended specific adjustments for supply chains. He advised considering pre-bid awards for essential routes to core carriers with reasonable target rates to maintain consistent service levels. Another suggestion was to calibrate the carrier mix without necessarily doubling the carrier base but ensuring a variety of asset and non-asset providers, thereby providing flexibility in a tightening market. Lastly, he cautioned against setting high expectations for savings during bidding, especially in an inflationary context, as this could lead to service disruptions.
Despite the challenges, Dr. Caplice expressed optimism about the future of supply chains. He noted the influx of talent, technology, and investment in the sector over the past five years, which has significantly enhanced how organisations assess their performance and manage costs. He reassured listeners that amidst the uncertainties, adhering to core principles and focusing on crucial carrier key performance indicators (KPIs)—such as on-time delivery and acceptance ratios—remains vital for long-term success.
Source: Noah Wire Services
Subscribe to Industry Updates
