Spreadsheets be gone
CombineNet offers an alternative to Excel for parsing transportation procurement bid information.
By Eric Johnson
In a world of dynamic technological advancements, many shippers still rely on a basic piece of software included in every new PC and laptop to help them decide which transportation bid to accept on a specific piece of cargo.
Microsoft Excel is still commonly used by shipper transportation procurement teams to make buying decisions on, literally, millions of different transactions.
Until a few years ago, Bayer AG, the Leverkusen, Germany-based pharmaceutical giant, was one of those companies.
'In the past, we used Excel sheets,' said Lars Bluethner, lead ocean buyer for Bayer.
Bayer's transportation procurement involves about 1,500 port pairs, five container types, and prices from up to 50 different carriers.
'It's a lot of information to process,' Bluethner said. 'We have nine sourcing team members in total. All those members can have different requirements within Bayer, and theoretically all these sourcing teams can have volume on the same port pair. But a common tender allows you to leverage the volume and tender the complete ocean business in one event.'
Realizing that using spreadsheets to make bid determinations was not the most efficient use of staff time, Bayer sought a technology vendor who could help optimize its bidding. The company settled on CombineNet, a Pittsburgh-based transportation procurement technology provider.
'Usually when we collected all the data, we then analyzed it,' Bluethner said. 'But it's difficult to consider aspects like transit time, transshipments and carrier quality using Excel. The procurement power was not really in our hands. What we were looking for was a way to increase flexibility and procurement power. We didn't want to waste time on data crunching, we wanted to really spend more time with the analysis of the data and understand the market.'
CombineNet 'seemed to be the best tool available,' Bluethner said. 'We're very happy with the tool we have now. Today we're not asking teams to provide us the allocation. We're asking teams what kind of service requirements they need. For example, if there's one port pair where we need a 25-day transit time, we enter this information in the system as a rule. And we can make a scenario already that's pretty realistic. It gives us a lot of flexibility.'
CombineNet's customer list reads like a who's who of major global shippers: Coca-Cola, Johnson & Johnson, General Mills, IKEA, Heinz, Owens Corning, PepsiCo., Procter & Gamble, Sears and Staples. There are also service providers, like the A.P. Moller – Maersk Group and Panalpina.
|'It's not so much the time we reduced. It's not spending so much time on data crunching. We are procuring on a higher level. That's the main advantage.'|
lead ocean buyer,
Bluethner said Bayer has cut 10 percent to 20 percent of time off its procurement process using CombineNet.
'It's not so much the time we reduced,' he said. 'It's not spending so much time on data crunching. We are procuring on a higher level. That's the main advantage.'
One important aspect of the tool is that it enables the core team to work at the same time on bids.
'We're running the whole process with the tool, from loading of data to award,' he said. 'It's a big advantage. If the carriers have any problem with upload, it shows where the problem is. The carrier can correct it very fast and upload the data again.'
Speed is one of the system's main advantages.
'You can define all the rules and backgrounds and get a result within seconds,' he said.
Bluethner said it's not always about getting better prices in general.
'Since the requirements are being provided neutrally without naming the carrier, the procurement team has more flexibility and power in the final negotiation and allocation process,' he said. 'This puts us in the position to reduce the gap considerably between the best bid and the allocated rate. That's the main advantage we see with CombineNet. You can define the rules neutrally independent from the carrier. We need to have a certain number of departures per week and we need security of supply, so we can't always go with the cheapest bid. We are spending less but ensuring our supply.'
By better ensuring transportation capacity, the system helps Bayer balance the needs of its operations and procurement teams, he said.
'If you ask operations to allocate volume, they have a focus of security of supply,' he said. 'Procurement is focused on price. Now, there's a balance. It's 'tell us what we need,' and 'we'll get you the supply.' And we still have the possibility to discuss if the requirements defined are really necessary, because we can make the extra cost visible.'
Bluethner said using CombineNet has not affected the number of carriers Bayer uses, but it's changed the mix of those carriers.
'We have a high concentration ' 90 percent of volume is with 15 carriers,' he said. 'But there are some regions where we need some niche carriers.'
Bayer was by no means alone in relying on spreadsheets to make procurement decisions. According to an American Shipper report, 2010 Transportation Procurement Benchmark Study: Leveraging Automation to Manage Market Volatility, 38 percent of respondents used manual or spreadsheet-based processes to support procurement. Thirty percent used either a general purpose procurement system, a transportation specific procurement system or the procurement module of their transportation management system. Another 29 percent used a hybrid of those systems, or outsourced their procurement.
In other words, as of last summer, two out of every five companies was eschewing procurement technology. (The next installment of American Shipper's transportation procurement benchmark study was conducted this spring. (The July 2010 report is available at www.AmericanShipper.com/Procurement.)
For Greg Holt, director of marketing for CombineNet, it's hardly surprising when customers migrate to his company's system from spreadsheets. 'We get asked a lot who our biggest competitor is,' he said. 'Our biggest competitor is still Microsoft Excel.'
CombineNet has steadily gathered steam the past decade as a company that helps shippers streamline their buying decisions, stripping out cost and letting shippers specify their service requirements while wading through procurement processes with dozens of carriers on countless lanes.
The company's reputation has been built on simplifying these complicated sourcing decisions, using a robust engine that lets shippers formulate multiple scenarios in seconds. The company has also been active in alerting carriers that bid for shippers' business that technology should be embraced and not avoided.
In a conversation with Holt and Bob Dusch, CombineNet's director of professional services, they said CombineNet is eager to shed the reputation that its technology is merely applicable to major global shippers, like Bayer, with complex tenders.
'CombineNet was looked upon as the company to go to for these episodic once-a-year type bids,' Dusch said. 'We sponsored a study that legitimized what we thought was going on in the industry. There's a whole space in the middle ' procurement spend that was not being put through general purpose sourcing tools because it fell in between the easy to manage tools and the bigger, more robust tools. What we've done is bring our suite into that space where you might use a Microsoft Excel ' companies that organize their lanes in Excel and use their sourcing system as a sophisticated e-mail system. We feel like we're shedding that image of sophisticated consultants with sophisticated technology. Now we're in that middle space.'
Holt added that smaller shippers with only a few lanes can significantly benefit from the automation and decision-making power of such solutions.
'The biggest shippers, with the biggest networks, that was our reputation,' Holt said. 'But at the same time, if you're a truckload shipper with only a couple hundred lanes, you're still making pricing decisions. Using tools aimed at less complicated transactions, you might save 10 percent the first year, and squeeze some more costs out the second year, but the rate of return is diminishing. You hit a wall of diminished returns. This tool enables them to go to those same suppliers and find new sources of savings, either through conditional offers or other types of expressive bids that create efficiencies in the network. So we've come from the ranks of elite companies to now driving value on sourcing events with 35 items and six suppliers.'