Benchmarking as the basis for successful freight purchasing

INTERVIEW

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Freight purchasing: a complex and challenging taskFreight purchasing has become an important strategic instrument

for global companies. Critical to shipper success are market

knowledge, market information and the ability to act flexibly and

strategically.

Freight is traded on international markets for air, ocean and

land transportation, which are characterised by complex, global

value-added networks. These markets are volatile with enormous

fluctuations in price and capacity and they are influenced by

external factors such as trade conflicts, geopolitical crises and new

political and legal regulations.

Freight purchasers negotiate not with one but many transport

service providers, often with very different offers and

requirements. In addition to favourable prices, important decision

criteria include delivery times, quality and customer service levels.

All this makes freight purchasing a complex and challenging task

that shippers can best meet with profound knowledge of global

rate levels and current market trends, along with the application

of best practices.

Tim Consult recognised the importance of market knowledge and

best practices for successful freight purchasing as early as 1999.

At that time, the logistics manager of a large chemical company

approached Tim Consult to test industry-specific market strengths

and weaknesses. Using a valid benchmarking methodology, the

Mannheim-based consultancy compared the characteristics of

this customer with other companies in the chemical industry.

This methodology, developed in-house, maintained client

confidentiality and met compliance rules – an absolute novelty

at the time – and allowed the customer to make a well-founded

assessment of its own position.

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Who are the experts?

Christian Dolderer Initiative Manager Europe Road & Rail

Clemens SchapelerInitiative Manager Global Ocean Transport

Christoph BrunsInitiative Manager Global Air Cargo

This first cooperation laid the foundation for

the series of market intelligence initiatives

(MIIs) from Tim Consult including the Market

Intelligence Initiative Europe Road & Rail (1999),

the Market Intelligence Initiative Global Ocean

Transport (2002) and the Market Intelligence

Initiative Global Air Cargo (2008). Unlike other

consultancies, Tim Consult provides mode-

specific benchmarks for land, ocean and air

transportation, achieving a holistic market

overview.

Today more than 100 companies belong to the

Tim Consult MIIs community. Logistics and

supply chain decision-makers from almost

all industries benefit annually from these

validated benchmarking results. They gain

market knowledge, best practices and intensive

exchange of experience within the community.

We have taken this opportunity to talk with

Christian Dolderer, Clemens Schapeler and

Christoph Bruns, the people who lead the Tim

Consult MIIs, about their work.

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Christan Dolderer:

Our members entrust us with their freight

data and of course this is highly sensitive

information. We are aware of our responsibility

and ensure confidentiality and compliance

with clear rules and processes. This is the first

important aspect of our approach.

Based on our own methodology, we carefully

segment and harmonise all influencing

variables for our analyses. Data quality is our

top priority. We therefore work with reliable

data such as agreements in use and actual

contracts. For benchmarking we only allow

shippers to participate. In this way we avoid

the potentially tactical, price-driving influences

of carriers and other service providers. We

benchmark across industries and company size,

strictly differentiated according to the actual

influencing factors and transport requirements.

In this way we guarantee a high degree of

comparability and reliability. Sector and size

comparisons and the analysis of strategic

approach to freight purchasing are steps based

on this and complete the result and, above all,

any recommendations for action.

Clemens Schapeler:

For our members, we are always close to the

market, observing not only freight rate and

capacity developments but also external factors,

market changes and new trends. We make these

analyses available to our community members

in the form of regular market radars, individual

analyses and personal consultations.

In addition, our specialist conferences are an

important instrument of our MII work. At our

Update Conferences, we provide the very latest

market overview and prepare for the next round

of benchmarking. At our Annual Conferences,

we present the results of our analyses, offer

keynote speeches by renowned experts and,

above all, ensure an intensive exchange of

ideas between all participants. This means that

our members are always a good step ahead of

market developments and know whether they

are achieving competitive freight rates and

service levels.

Tim Consult developed its own benchmarking method. What are the characteristics of this method?

What do you say to a shipper who asks about the advantages of joining your initiatives?

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Christoph Bruns:

We are reluctant to argue only with cost savings

because, in our opinion, market knowledge and

best practices bring greater benefits in the long

term than supposed selective cost savings. But

in fact our members achieve cost savings of 2%

to 8% in the first year of joining our community,

depending on the industry and mode of

transport. In the medium term, these savings

level off at between 5% and over 8%.

Christian Dolderer:

Our community unites almost all industries,

with both large corporations and upper

medium-sized companies represented. As a rule,

our contacts are the logistics and supply chain

decision-makers and freight buyers of these

companies. They all face the challenging task of

organising the transportation of their products

at the lowest possible rates, in a short time and

with high quality on volatile global transport

markets.

Community members share a similar

perspective. They observe and analyse diverse

markets and obtain answers to their strategic

and operational questions. The community

offers them the necessary protected, legally

secure space.

Every year, new members are added with

new requirements and different experiences.

Everyone benefits from this wealth of

experience: in monetary, strategic, operational

and individual term

Are there any tangible monetary advantages?

You speak of the community. How can we imagine such a community?

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Christoph Bruns:

In addition, as a consulting firm, we can provide

support in the optimisation of transport and

supply chain management, freight procurement

processes and other logistics issues. We do this

within the framework of individual consulting

projects.

Clemens Schapeler:

Tim Consult has been analysing the global

markets for land, air and ocean freight for

over 20 years. We have been consulting global

shippers for just as long. This has enabled us

to build up an enormous amount of market

knowledge and we know the processes and

mechanisms of the global transport markets in

detail.

With the analysis of all modes of transport

and the access to our market knowledge we

offer our community members a complete

market overview. Globally active companies

receive specialist expertise and support for the

procurement of their worldwide land, air and

ocean transport from one source.

You offer benchmarking per mode of transport; other providers do not. What is the advantage of your approach?

MII EuropeRoad & Rail

MII GlobalOcean Transport

MII GlobalAir Cargo

MII North America Truck & Intermodal

• round trip • singel trip• unbalanced roundtrip

• packed incl. reefer & bulk

• FTL• LTL• contracted & spot

• 90,000 lanes• 6 bn €/year freight

spend• 7 m FTL/year

• port-port • pre-carriage• on-carriage

• dry cargo, reefer & tank

• FCL• LCL• inland haulage

• 18,000 port pairs• 6 bn $/year freight

spend• 7 m TEU/year

• airport-airport • pre-carriage• on-carriage

• general cargo (main & lower deck)

• dangerous goods (PAX/CAO)

• temperature controlled

• 35,000 lanes• 1.5 bn $/year freight

spend• 600 kt/year

• round trip • singel trip• unbalanced roundtrip

• packed incl. reefer & bulk

• FTL• LTL• contracted & spot

• 30,000 lanes• 4 bn $/year freight

spend• 4 m FTL/year

Market Intelligence Initiatives

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How exactly can we imagine the workings of MII Europe Road & Rail?

Christian Dolderer:

Most European and international shippers

still spend most of their freight budgets

on land transportation. The freight market

is characterised by missing transparency,

unknown sub-markets and complicated

tendering processes. Making the right strategic

decisions here is a major challenge. We support

our community members with comprehensive

benchmarking, best practice and transport

network analyses. With more than 90,000

transport routes and almost 8,000 different

transport micro markets, we achieve detailed

coverage that enables us to obtain a clear

picture of the regional cost, capacity and

demand situation.

“The freight market is characterised by missing transparancy.”

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Clemens Schapeler:

Ocean container transportation is the backbone

of world trade. In difficult and complex times,

particularly when markets are highly volatile,

critical success factors are global value

networks, reliability and stability.

We support our community members through

these challenges, enabling optimal results

by providing comprehensive freight rate

benchmarking of ocean transports (port-to-

port) including pre- and on-carriage to final

destination (door-to-door). We look at 18,000

port pairs and 7 million TEUs per year, so we can

offer our members a comprehensive overview.

“Critical success factors are global value networks, reliability and stability.”

Christoph Bruns:

The volatile global economy is creating a

difficult situation in the airfreight market.

Changes in the calculation of fuel cost

surcharges, changes in airlines’ fleet portfolio,

new security guidelines and much more make

it necessary to continuously adjust purchasing

strategies.

We support our community members in

all strategic and operational decisions. For

our comprehensive benchmarking, we look

at 600,000 tons of airfreight per year and

analyse 35,000 airport pairs, ex- or including

pre- and on-carriage as required. We consider

shipment structures, service criteria and goods

characteristics.

What do you offer to the global ocean transport community?

What is the daily routine like for MII Global Air Cargo?

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Clemens Schapeler:

Our community members turn to us with

very individual questions. Here, too, we try to

provide answers quickly and flexibly.

Christoph Bruns:

Especially in such difficult times, it becomes

clear how important it is to have profound

market knowledge and to closely track current

market developments. In our analyses, we take

the shipper’s viewpoint and this can sometimes

differ significantly from media reports. We

are glad to give our community members this

critical knowledge advantage.

Christian Dolderer:

We acted – and did so quickly and flexibly. Since

the beginning of the coronavirus crisis, we have

been providing our community members with

up-to-date information on developments in

the European land transport market, the ocean

freight market and the air freight market.

For further information:www.timconsult.com

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