Reducing supply chain transportation cost-related risks with advanced contract analytics
According to FreightWaves, contracts rates have been underpriced for the market conditions for most of the past year, with compliance levels falling rapidly. This has led to surge pricing, making it tough for shippers to find “the sweet spot that balances price and service/compliance levels.” From the shipper perspective, balancing the risk of decreased compliance and service against price is a headache.
No matter whether you are a railroad establishing an agreement with a shipper, or a broker negotiating shipping rates, contracts are the lifeblood of the transportation industry, underpinning every relationship. This makes business analytics and contract management solutions mission-critical for developing insights needed to make the best business decisions around pricing, rates, and more, decisions that impact profit and reduce unnecessary costs through streamlined business functions.
As companies move to an advanced contract analytics state, they can reduce compliance risk, gain visibility into obligations or commitment that impact profits, and maximize commercial outcomes through better insights during contract negotiations. In this blog post, we explore the growing use of analytics in business decision-making in the transportation industry and their intersection with contract management solutions as a means of tackling market challenges and reducing transportation costs.
The current state of analytics in the transportation industry
In today’s changing trade environment, companies have a multitude of challenges to face in global supply chain management and operation. Various complexities in production, supply, customs, and documentation requirements have caused firms to become specialized in supply chain management. This management encompasses transportation costs, customer service, inventory management, and product fulfillment.
The greatest challenge for the industry is the integration of data points across all these intersecting operations to prevent the format of data silos and gain greater visibility into the supply chain. A smooth flow of data for efficient use in analytics is, then, key to establishing an advanced analytics state.
Efficiency is the word of the hour in the modern transportation industry, but in some ways, the industry is being held back by various challenges around data modernization and the use of analytics for better decision-making and trend analysis. Some of the major factors that are contributing to this lack of analytical capabilities include:
Legacy assets are still in use
Even though the industry has made headways in digitalization, they are only halfway to the point of utilizing the true potential of their data. Companies are still adhering to traditional methods of data handling and manipulation, or are using decades-old tools to manage databases.
The presence of fragmented data
Fragmentation of data across the supply chain is one of the biggest concerns for industry players. This quickly leads to limited visibility over different business processes, and makes it difficult to unify the supply chain and streamline operations management. It’s almost impossible for collective data to be extracted from numerous sources and integrate it into a centralized location for analytics purposes.
Low-quality and inconsistent data in records
Different data handling methods or disparate data storage across departments or functions results in inconsistency of data, making it very difficult to reconcile data and establish a single version of truth. Data quality is often not up-to-par, with databases unable to handle unstructured or semi-structured data that is being generated.
Taking a step back, it becomes clear that transportation companies need to establish a strong integration between their supply chain management and contract management software to ensure cross-departmental collaboration, data consistencies, and improved agility to react to unexpected changes. Market channels should be centralized to optimize decision making and gain oversight into the market. Centralized supply chain models will then feed data into a business analytics tool, and use the insights to model sales trends. This is the only way to gain early insights on potential issues and maximize commercial outcomes.
Contract management in the transportation industry
The digital transformation of the transportation industry and the use of effective contract management systems make it easier to anticipate less-then-profitable conditions during negotiations, and become more resilient in responding to market changes. To improve collaboration, gain a holistic view of contract data across the organization, and obtain a competitive advantage over competitors, transportation companies use contract management systems to meet all contract-related requirements and drive more value from contracts.
We talked a bit about analytics above, and effective centralization of information. This analytics picture has a big play in the contracting space. Due to changing regulations, existing contract often become non-compliant. But if there isn’t a process in place to track these changes, changes to documents are not captured. A lack of integration between contract management systems and other business systems, clauses can’t be enforced and there are lapses in tracking different attributes.
A unified, analytics-driven contract management platform drives more resilient transportation management. With contract analytics, companies can maximize commercial outcomes through analytics-powered insights during negotiation — before a contract is even signed! With enhanced visibility comes reduced risk through tracking of obligations, commitments, and expiries (including in P3 scenarios). These contract management solutions can offer capabilities that encompass automation tools, risk mitigation, and supplier management.
This is a shortened version of the original article. To know more about how procurement and supply analytics benefit the transportation industry, read the full story here.