The logistics business has been in crisis for well over a year, with no signs of relief in sight as freight prices continue to increase and capacity constraints worsen. Logistics is a somewhat arcane and opaque profession to most people, but it has recently gained public attention as current issues cause significant delays in manufacturing and people’s daily lives.
In this article:
- The capacity shortage
- Regional uncertainly of availability
- The effect on freight rates
Capacity and the effect on shipping rates
Large shipping corporations like Maersk and CMA CGM, two of the world’s largest, gain from the current crisis. Since they control a significant portion of the capacity on the principal supply routes from Asia to North America and Europe. The demand for their services has outpaced the availability of their ships, causing their costs to skyrocket.
Due to a scarcity of flights during the pandemic, air freight prices had already risen before ocean rates. Next, road networks in some geographies or countries, such as the United States and England, have begun to experience capacity problems, due to increased demand and a lack of drivers. This, of course, has an effect on prices.
The need for digitization in Logistics
Before the pandemic, digitization was a hot subject. But the effort to become digital has really taken off since then. Resulting in a surge in interest in logistics technology in the shipping business. Due to the delays and unpredictability of shipping, visibility has become one of the most important aspects of this profession, as many businesses want to better control their flow of goods.
Project 44 is a company that has had rapid growth in real-time visibility and is a preferred partner of many international corporations.
Logistics digitization and procurement
Despite the fact that logistics procurement is a small part of the logistics tech landscape, it is receiving a lot of attention these days. Traditionally, freight was purchased on a seasonal basis. With only a few occasions per year. One ocean RFQ with a six-month or one-year validity period, two air sourcing events per year at maximum, and perhaps once every two or three years a regional road transportation tender.
This method has radically changed as a result of pandemic-related delays. A shortage of capacity, significant price rises, and regional uncertainty of availability, and corporations now need to do more smaller events. Many organizations have been completing tenders using Excel, which is quite manual and time-consuming, and are now searching for automation and efficiency in freight service procurement.
As a result, logistics procurement platforms that specialize in optimizing the freight buying process are seeing a significant increase in demand for their services.
“We have seen a phenomenal growth of interest of companies that never considered technology before for freight procurement. Midsize companies that used Excel for many years and only did 1–3 tenders per year now want to digitize this process. That means there is an enormous growth potential for us but also for the niche of logistics procurement as a whole as before it was something mostly only very large companies were interested in.”
Pieter Kinds – CEO Freightender & TendrX.
This article appeared first on: https://log-tech.medium.com/the-demand-for-logistics-procurement-software-skyrockets-539239e8bc2d
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