The logistics industry continues to adjust to shifting consumer demands and struggle with pandemic-related headwinds, including general market volatility. These challenges have pushed freight procurement into the spotlight over the past couple years. Shippers are beginning to realize that their tried and true RFP methods will no longer keep them competitive in a changing market, pushing them to consider new, higher-tech options.
Transfix announced its newest offering – a next-gen sourcing optimization tool, currently in beta mode – at the FreightWaves Future of Supply Chain Conference last month. The product aims to fix a broken system, taking freight procurement from an old school nightmare to an AI-enabled breeze.
“The RFP process is broken. It has clear flaws, and it feeds into a broken supply chain,” Transfix Co-founder and CTO Jonathan Salama said. “Shippers have to try their best to make data-driven decisions using anecdotes and fragmented information.”
While contracts may be advantageous when put in place, market changes can swiftly create hidden costs in the form of tender rejections, canceled contracts, repricing, higher spot premiums and wasted time. All these headwinds make it difficult to impossible to rely solely on the traditional RFP process to manage freight in today’s volatile market.
In order to optimize the procurement process, Transfix’s new product will consider the pros and cons of four different purchasing options for each lane.
- Existing contract
- New contract
- Spot
- Dynamic Cost-Plus
While most of these choices are fairly straightforward, the Dynamic Cost-Plus option allows shippers to benefit from real-time and AI-predicted prices instead of relying on historical pricing trends, which is typical of a traditional cost-plus model.
“There is a time and place for contracting freight. It is just not across your entire network once a year,” Salama said.
“Transfix’s data-driven approach allows shippers to take advantage of market volatility and not commit to an annual contract,” according to a Transfix media release. “This can benefit both shippers and carriers with lanes in seasonal markets, and with sporadic volume allowing them to build sustainable relationships.”
Once a shipper decides how to handle a lane, they will be able to execute the entire RFP process from within the tool, cutting out stressful, time-consuming steps like emailing carriers and updating spreadsheets.
“This solution will continually evaluate new opportunities and alert shippers when market conditions have shifted in their favor, prompting them to contract, re-price, or move to a Dynamic Cost-Plus scenario,” added Salama. “Our goal is to calibrate shippers’ transportation strategy to optimize service levels and spend to ultimately remove any potential inefficiencies in freight.”