American retailer finds savings by reducing carrier base

An operations assessment was the first step

To begin, NTT DATA gained a comprehensive understanding of business procedures, requirements and expectations. The team conducted staff interviews, lane evaluations, risk mitigation analyses and a compliance overview for the various product offerings available across retail sites and omnichannel operations.

After the operations assessment, the teams applied a cleansing process to all historical transaction-level data collected by the retailer. This process allowed consultants to assess, analyze and aggregate the data while incorporating forecast demand requirements. NTT DATA also created draft networks using various aggregation schemes. These included any provided transportation network changes.

A carrier evaluation

The carrier evaluation determined criteria for which carriers to consider — by both lane and product type — per company requirements. NTT DATA leveraged their experience and proprietary resources to evaluate the current carrier network and compare it with their own carrier database. Based on this assessment, the client selected carriers and invited them to a sourcing event.

Having arrived at carrier specifications and requirements, bid response parameters were set to support carrier review. These defined bid constraints for lane definition, fuel and accessorial charges and network statistics for inclusion in request for proposal (RFP) documents. Finally, NTT DATA completed bid packages, training materials and hosted a kick-off meeting to set expectations for the first round of carrier bidding.

NTT DATA posted bid packages to a bid optimization tool for the carriers to access. This kicked off the bidding process and served as the first line of carrier support, answering any technical and process questions and sending periodic FAQs for distribution. After the first round of bidding, the teams evaluated carrier responses and performed high-level scenario analyses.

Next, consultants worked with the retailer’s staff to identify which carriers were eligible for round-two bidding. The teams calculated rankings and target rates using round-one data, carrier-market benchmarking data and historical rates. As in round one, NTT DATA provided support to carriers during the second round of bidding and compiled round-two responses for validation analysis.

On to the final round

After round two, NTT DATA again evaluated responses for accuracy and worked with the carriers to correct any errors. The team then ran a series of scenarios through the bid optimization tool. These considered carrier capacity constraints, business constraints, carrier incumbency and the company’s network. Throughout the process, reports evaluated the impact of changes between scenarios.

The project team first nailed down outbound carrier awards. Additional scenarios shifted inbound volumes to those carriers awarded outbound freight at each facility. This systematic transfer reduced the total number of carriers and rolling stock required. Additionally, the effort achieved smoother operations at distribution centres and reduced overall empty miles and driver hours. By making it possible for carriers to make pickups immediately after deliveries, the retailer gained additional value from its carrier network.

Building on these efforts, NTT DATA provided a tweak sheet to make final adjustments to the proposed awards based on face-to-face negotiations with carriers.

Measurable results

After the procurement event, the client achieved a 44% reduction in its carrier base. They also increased the amount of freight awarded to asset-based carriers to save 7% in per-truckload costs. The sourcing event also achieved a balanced network by supporting inbound carrier volumes that led to improved outbound execution.