Transportation and Third-Party Purchasing

Transportation is a specialized and important type of service buying. Few purchasing departments involved themselves with transportation issues before the early 1980s. However, legislation passed during the late 1970s and early 1980s deregulated the air, trucking, and railroad industries. This legislation allowed buyers to negotiate service agreements and rate discounts directly with individual transportation carriers. Previously, the U.S. government, through the Interstate Commerce Commission, established the rate (referred to as a tariff) that a transportation carrier charged. It was common for suppliers to arrange shipment to a purchaser and simply include the transportation cost as part of the purchase cost.

Purchasing personnel have become involved with transportation buying and the management of inbound and outbound material flows. It is now common for purchasing personnel to evaluate and select logistics providers the same way they evaluate and select suppliers of production items. Buyers are also selecting suppliers that are capable of providing coordinated transportation and logistics services for an entire company, including warehousing, packaging, and even assembly. Because many carriers now provide service throughout the United States, a buyer can rely on fewer transportation carriers. The cost savings available from controlling and managing logistics are significant.