Although it saddens me that most companies will not adopt optimization technology until they realize they cannot solve the transportation network puzzle without it, totally missing the savings opportunities that lie in sourcing, I was glad to see that the recent article on solving the transportation network puzzle in Logistics Management relayed the need for optimization technology in transportation network optimization. It is the case that that the sheer size and complexity of these networks means technology is required to perform the analytics that enable harvesting the value.
Furthermore, it is no longer the case that a carrier will give you discounted rates just because you have lots of freight. Given the current, and almost continually rising, price of fuel, the cost to maintain their fleet, and the relatively low rates many of them quote the first time around (to try and shave a round or two off negotiation and keep their trucks moving), many providers are no longer able to offer deep discounts unless they want to go out of business, like many of their financially weak breathren have done over the past few years.
Unless the carrier has excess capacity to fill, chances are the buyer will not be ble to wrangle the deal they’re looking for. And, as the article points out, unless the buyer exposes enough information about their needs, and allows the carriers to bid on specific lanes or flows, the buyer will never know that a carrier could have offered a better price in that region and the carrier will never know that they can be guaranteed the specific slice of the business that they can serve cost effectively — and keep quotes down.
And unless the buyer has the right tool to analyze the bids at the lane level, the buyer will never be able to slice the award properly as a large model will have hundreds, if not thousands, of lanes and dozens of carriers bidding on lanes in one or more groups. This generally results in tens of thousands of quotes, depending on volume, which is impossible to analyze in a spreadsheet when regional or volume discounts are also being offered by larger carriers for a minimum percentage of the business. But a modern decision optimization solution can analyze such a scenario in minutes, and allow the analyst to build and solve dozens of “what if” scenarios to understand the impacts of a given decision.