Procurement in Transportation the Role

For instance, FleetNav, developed by Maptuit Corp., is designed to be used in conjunction with a vehicles in-cab navigation and routing system. This program makes suggestions based on many fleet-specific variables, including “existing fuel purchase arrangements, the amount of fuel onboard, the size of the fuel tanks, and the out of route miles required to fuel at a particular station” (Leavitt, 2006). With optimization programs such as these, companies found that they were able to save as much as 4 cents per gallon (Ibid).

As an indirect result of the recent fuel crisis, carriers have found themselves under an enormous amount of market pressure to provide environmentally friendly, or “green,” transportation alternatives. Sustainability has become a major business driver, stemming from a combination of fuel price worries, foreign oil concerns, and consumer sentiment about global warming. More and more, companies are creating green procurement procedures and insisting that transportation companies meet their sustainability requirements. This often involves monitoring CO2 emissions and using biofuel.

Monitoring CO2 emissions involves an additional procurement step for carriers. While it is not currently mandated by federal regulations, many shipping companies are feeling pressure from clients and consumers to comply with international standards of CO2 emissions. In Europe, carriers are subject to environmental regulation and must absorb the cost of procuring and implementing CO2 tracking technology. Some large companies have decided to skip this procurement altogether, opting instead to develop their own carbon emissions measurement software (Green Transportation Report, 2009).

Procurement of biofuel has been a difficult road for the transportation industry. Ethanol, made from corn products, seemed to be the answer to the non-renewable resource problem and for a while it was also proving helpful in keeping fuel costs low. The high demand, however, caused ethanol prices to rocket upward, and many carrier companies found it no longer economically feasible (Kanellos, 2007).

Whatever difficulties transportation companies may have complying with demands for green transportation initiatives, the marketplace is begin to reward those who have implemented environmentally friendly changes.

A 2008 survey found that 62% of participating companies expected to see “both a financial and public relations ROI on their green investments over the next three years” (Green Transportation Report, 2009).

Conclusion

The recent economic downturn has led many industries to seek cost-cutting measures in all areas, but especially in transportation procurement. This has put tremendous pressure on transportation prices and increased competition in a market that was already highly competitive thanks to deregulation. As companies streamline their transportation budget and renegotiate fees, the transportation industry also finds itself rethinking its procurement practices. This is especially the case in fuel procurement, where volatile fuel prices and client demand for more environmentally friendly fuel practices has led companies to renegotiate fuel purchasing terms and take advantage of software that allows on-route fuel price comparisons.

The push for “green” transportation is the variable most likely to have an impact on procurement within the transportation industry in the future. If the U.S. joins many developed nations in regulating carbon emissions, the procurement of emission tracking software and fuel efficient technology will replace fuel expenses as the central procurement concern of the transportation industry. If we can take Europe as an example, however, we can predict that those companies that do invest in a “green” procurement process will see a sizeable return on their investment.

References

Gonzales, Adrian. (2009, May 21). Transportation Procurement is “Hot” Right Now. Logistics Viewpoints. Retrieved from http://logisticsviewpoints.com/

2009/05/21/transportation-procurement-is-hot-right-now/.

Leavitt, Wendy. (2006, June 1). Fuel Optimization: Not a Penny More. Fleet Owner Magazine. Retrieved from http://fleetowner.com/mag / fleet_fuel_optimization_not/

Monczka, Robert, Robert Handfield, and Larry Giunipero. (2008). Purchasing and Supply Chain Management. Florence, KY: Cengage Learning.

Kanellos, Michael. (2007, Dec. 20). Growing Pains for Green Transportation. CNET Year in Review. Retrieved from http://news.cnet.com/Year-in-review-Growing-pains-for-green-transportation/2009-13833_3-6223159.html.

Green Transportation and Logistics European Report. (2009). Retrieved from.

Leave a Reply

Your email address will not be published. Required fields are marked *