The power of predictive procurement in logistics

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The integration of digital tools, particularly predictive procurement, has revolutionised the logistics landscape, transforming them from mere add-ons to indispensable assets for companies seeking to optimise their operations and stay ahead in a dynamic market.

Embracing these advancements is not just a choice but a necessity for companies aspiring to thrive in the ever-evolving world of logistics.

“As the number of carriers increases and the portfolio of lanes that transportation teams manage increases, digital tools have become critical for delivering decisions at scale,” Edmund Zagorin, Chief Strategy Officer and Founder of Arkestro, said.

A game-changer in airfreight?

One of the groundbreaking advancements in logistics management is Predictive Procurement Orchestration. This innovative approach utilises data to generate customised predictions regarding rates at the lane level before soliciting quotes from suppliers. By reverse-engineering successful processes based on predictive outcomes, logistics companies can streamline their procurement procedures, saving valuable time and resources.

“Predictive Procurement Orchestration is an approach that reverse-engineers successful processes based on predictions of desirable outcomes,” he explained.

Traditionally, logistics procurement involved a laborious process of collecting and comparing rates from various carriers, leading to delays and administrative bottlenecks. Predictive procurement tools eliminate these inefficiencies by providing faster ‘best and final’ rates, enabling logistics teams to make more informed decisions swiftly.

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Preparing for ‘what if’ scenarios

Predictive procurement aids in optimising procurement processes and helps in preparing for ‘what if’ scenarios.

“Predictive procurement tools are often useful in producing and ranking possible scenarios for awarding business across a group of carriers in the supply base. Whereas traditional tools require that carriers provide quotes to generate ‘what if’ scenarios, predictive tools can assist with ‘what if’ before the execution of a procurement event. That can help teams that solicit supplier rates better target their desired outcome,” Zagorin highlighted.

In logistics, a tremendous amount of the risk associated with short capacity, delays, and bottlenecks is due to the administrative workload and cycle time associated with collecting and comparing rates.

“This is because only one link in a chain of data exchange between shippers and carriers needs to fail for the whole process to grind to a halt – if a carrier takes a long time to create a quote for rates, then the shipper must wait to receive that quote before negotiating or approving. That’s why simply increasing the throughput and precision around quoted rates can improve the performance of transportation teams, resulting in fewer shortages,” he outlined.

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AI adaptation

As the airfreight industry experiences fluctuations in demand, AI-powered predictive procurement enables companies to be better prepared for potential peaks and troughs. By quickly evaluating the desirability of carrier offers and adapting to market changes, companies can optimise their freight spend and maintain a competitive edge in the industry.

“As we move into a world where a certain percentage of freight spend is likely to stay in the so-called ‘Spot’ market, quickly deciding the desirability of a carrier’s offer on rates becomes more critical. Troughs and peaks are part of this volatility. As more and more spending takes advantage of changes in the market by being aligned with ‘Spot’ market allocation, we see predictive procurement as an enabling layer for speed,” Zagorin continued.

Despite the undeniable benefits of AI and technology in logistics, some companies may still be reluctant to embrace these innovations due to perceived costs or unfamiliarity. However, the cost of remaining stagnant in a rapidly evolving industry far outweighs the investment in adopting digital tools. Leaders who proactively leverage AI to unlock value in their logistics operations are witnessing substantial benefits, while those who resist change risk falling behind their competitors.