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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Freight Procurement — What You Should Know?

Key takeaways

  • Freight procurement means selecting and overseeing the transfer of goods or resources from suppliers to a destination.
  • Transportation, warehousing, and storage are the three categories of freight procurement.
  • Proper implementation of freight procurement reduces expenses and risks while guaranteeing punctual deliveries and optimal operational effectiveness.

Freight procurement allows you to achieve your shipping goals timely and eliminates the need for multiple carriers. However, what is it exactly?

In this article, we are going to discuss what freight procurement is. We are going to tackle its role in the supply chain and the different types of freight procurement. Additionally, we are going to share with you some tips and show you the benefits of freight procurement when done right. 

Once you are finished reading this article, you will have an in-depth understanding of what freight procurement is. Thus, allowing you to improve your shipping goals.

What is Freight Procurement?

Freight procurement, also called logistics procurement, refers to the process of choosing, getting, and managing modes of transportation to move materials or products from the place of origin to the place of destination. 

The process can be tough due to multiple factors such as time constraints, locations, and the availability of transportation. 

Freight procurement can be divided into three kinds: subcontracting, direct procurement, and third-party logistics. For subcontracting, a company contracts another party to be responsible for transporting its products.

In direct procurement, a company selects a certain carrier or a group of carriers to transport its materials or products. The last kind, third-party logistics, refers to the way in which companies use independent freight brokers or forwarders to look for carriers that can meet their requirements to transport their products. 

Freight procurement is an integral part of business as it helps companies achieve their goals when it comes to the timely delivery of their products and eliminating the need to use multiple carriers just to transport their products. 

Furthermore, freight procurement can assist in identifying opportunities for cost-savings in shipping or transporting their products. 

The Role of Freight Procurement in Supply Chain

Freight procurement is a part of the supply chain. Its process is about purchasing materials or products from suppliers. This can happen through negotiations or auctions

In today’s supply chain, freight procurement ensures that the materials or products arrive on time and in the right amount of orders. This process saves a lot of money and makes deliveries faster. It also makes sure supplies are there when needed, which helps businesses stay competitive and continue their operations.

The Three Types of Freight Procurement

Freight procurement is crucial as companies need to ensure that their products are timely delivered to their customers while also taking into account how they can identify opportunities to reduce transportation costs. 

There are three primary types within procurement which are: transportation, warehousing, and storage. Each category encompasses different aspects of the procurement process, which are the following:

1. Transportation procurement

This involves establishing contracts with carriers who are responsible for moving goods from one location to another. This category is characterized by its swiftness, ensuring expedited movement of items. However, the convenience of speed may involve higher costs.

2. Warehousing procurement

Warehousing procurement entails partnering with providers of storage facilities. These facilities house goods until they are ready for delivery to their designated destinations. While this approach might introduce a relatively slower pace due to storage duration, it generally proves to be a more economical option compared to swift transportation.

3. Storage procurement

This type focuses on collaborating with suppliers of materials or equipment essential for business operations or production. This is integral to securing the resources needed to facilitate the manufacturing or operational aspects of the company.

Furthermore, the choice of procurement type depends on the specific requirements, time sensitivity, and cost considerations of the company. By strategically leveraging these categories, businesses can navigate the procurement landscape effectively, optimizing their supply chain and customer satisfaction.

Practical Tips For Freight Procurement

The following are the practical tips that you can use to improve your procurement goals or plans:

1. Ensure that you fully understand your product and the market

When you send your request for shipping, you need to be clear about what things you’re sending. Give all needed details to the shipping company, and fill in everything on the Safety Data Sheet. Keep private things confidential, but share as much as you can for an accurate price and safe shipping.

Additionally, it also helps your shipping process if you know your market well. That means understanding things like the capacity of the materials that can be shipped and the costs. You want a good balance between quality and price, so there are many shipping options. Knowing the market helps you pick the right shipping company.

2. Give all the important details to your transportation provider

From the transportation perspective, uncertainties mean more risks. However, when they know everything about what you’re shipping, then there will be fewer risks. 

Thus, you need to give all the needed information about your products such as the cost, how it’ll be loaded, when it will be loaded, and what equipment is needed. If you share lots of details, you can get a good price and great service.

3. Map out your schedule strategically

The schedule you pick is really important for the shipping and procurement process. When you decide the days and times for shipping, it affects how much you pay and how well products get delivered. For example, Mondays are important. Consequently, bad weather such as heavy rain or storms matters too. Thus, plan your schedule well to make sure your shipping happens on time.

4. Make sure that you have a backup plan

Since unexpected things can happen, it’s smart to have a backup plan for your shipping and procurement process. If something goes wrong or there’s a sudden problem, you’re ready. You know what steps to take, what resources to use, and who to call. For example, if there’s an issue, you might store a lot of things in special containers until the situation is fixed.

Benefits of Freight Procurement

Freight procurement, when carried out correctly, offers numerous valuable benefits for businesses:

1. Timely deliveries

Purchase orders issued to your competent suppliers ensure timely and accurate deliveries. This helps prevent the risks of costly delays, production interruptions, and customer dissatisfaction.

2. Cost savings

When done correctly, freight procurement can lead to cost savings in the long term. By establishing relationships with reliable suppliers and carriers, businesses can negotiate favorable rates, resulting in reduced transportation expenses.

3. Operational efficiency

By partnering with contracted providers for transportation and logistics, businesses can optimize resource allocation and cut down on overhead costs linked to managing in-house personnel.

4. Risk Management

Carefully choosing suppliers and carriers contributes to better risk management. Businesses can anticipate potential disruptions and create contingency plans to reduce the negative impacts.

5. Customer satisfaction

A robust freight procurement ensures consistent and on-time product availability, contributing to higher levels of customer satisfaction and loyalty.

Conclusion

In conclusion, freight procurement plays a crucial role in the successful management of supply chains and the overall operational efficiency of businesses. By carefully acquiring goods and services necessary to meet customer orders, companies can ensure timely deliveries, minimize disruptions, and optimize their resource allocation.

Additionally, careful attention to detail, such as providing complete information about your products to transportation providers, setting contingency plans, and aligning procurement decisions with strategic goals, leads to numerous benefits. 

Furthermore, embracing freight procurement strategies empowers businesses to navigate challenges, find opportunities, and build resilient supply chains.

Frequentlyasked questions

What is freight procurement?

What is freight procurement?
It refers to the process of choosing, getting, and managing modes of transportation to move materials or products from the place of origin to the place of destination.

Why is it important?

Freight procurement ensures that businesses get the necessary supplies to meet customer needs on time and within budget. It helps avoid delays, disruptions, and unnecessary expenses.

What is its role in the supply chain?

In today’s supply chain, freight procurement ensures that the materials or products arrive on time and in the right amount of orders.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics