Inbound Vendor Programs
A lot of attention is paid to the control and management of outbound shipping to someone’s customers, but many times the expense of inbound vendor traffic and its impact on landed cost is overlooked. Sometimes because the buyers get no credit for managing freight costs of inbound shipping and expertise of the shipping staff is just that—outbound shipping where they see and touch the freight and meet with carriers each day. But whatever the reason, there is good cause to managing inbound vendor freight. But what is involved and how much energy and time will this take?
The first step will require a review of collected freight bills from those vendors who sell their product fob origin. Whether you route it or not you are paying for it. Nothing is free in this world. Second, you need to obtain a list from purchasing of all vendors, cleaned of all service suppliers. Once cleaned, a letter asking for cooperation needs to be drafted and signed by management, which will then be sent to the sales manager of the supplier. This survey will ask questions such as where does the product actually ship from, how frequently, who is being used now, and whether they offer a freight allowance (which is the difference for the cost of goods shipped fob origin or delivered).
This can be fairly tedious work since only half will respond in two weeks, which then prompts the need to follow-up with each vendor who didn’t respond to get their answers.
Once received, this information needs to be checked against the last few orders you got from the supplier to verify the weight and product description. Rate these shipments against your present carrier rates you have or feel you can get. This can cover loads, less-than-truckload, ocean, air, and parcels. At this point you can decide which vendors are worthy to be routed in the effort to reduce landed costs.
It would be good to tie any routing effort into a TMS system that is connected to your carriers. This gains the buyers’ support in your effort since they would now know when and where their shipments are without having to call the supplier when something is late. Buyers would know if it shipped on time and if it will arrive on time. Reports on such information can be pushed out. The accounting department needs to keep you abreast of any freight bills that come in from non-approved carriers, which should prompt a warning letter. Also, if an invoice from a vendor is showing a freight line item, a similar reaction should occur.
The whole concept of routing inbound vendor traffic does take a fair amount of set up and then it has to be administered to survive in the long term. Left to their own devices, a solid inbound routing program will dissolve over the months and years if not managed and reviewed.
It is also important to remember that freight allowances need to be updated on occasion. If there is a big spike in fuel surcharge costs the allowance will be increased accordingly. Communication with the supplier in a cooperative manner plus checking the reality each month or two will keep such programs alive and productive to the bottom line.
For more information, or a no-cost evaluation of your program, visit www.freightmgmt.com.