6 Reasons You Should Control Inbound Logistics
If the pandemic has taught us anything it’s this—supply chains are brittle. If raw materials or parts don’t get to where they need to be on time, manufacturing plants grind to a halt, orders are not fulfilled, customers are unhappy, and the bottom line suffers.
A pandemic—and its knock-on effects of shortages—is not something companies can generally plan for. But the fact remains that disruptions can, and will, occur.
One way trade-dependent companies can mitigate the risk of critical shortages and reduce costs is by taking control of inbound logistics. Let’s look at some of the benefits of doing so.
Efficient Inventory Control
If supply chain efficiency is important to your operations, so too is an inbound logistics program. Managing inbound logistics helps you avoid delays and shortages of critical items. Taking control of your entire supply chain gives you visibility into how long critical goods take to arrive; how much buffer stock is needed to deal with unavoidable, but predictable, transportation disruptions.
With a clear picture of the cycle time between order and arrival, you can balance the opposing needs of “just-in-time” and “just-in-case” supply chain strategies. This allows for better inventory management as you are not understocking critical goods, or overstocking less important items.
Predictable Inbound Flows
When you exert greater control over the inbound movement of goods, you improve visibility and efficiency. This means your supplier will send shipments to you using your account with your preferred carrier at the service level you decide. As a result, you know exactly where your goods are, and when they will arrive.
When your vendor selects the carrier and service, you have much less control over when goods are delivered. Your vendor is almost certainly going to use the carrier and service level that suits them, not you.
Technology makes this process significantly easier. A transportation execution solution will allow you manage inbound shipments in much the same way as you manage outbound shipments. Alternatively, your supplier can execute the shipment via a desktop shipping weblink or web services message.
This means your supplier will send shipments to you using your preferred carrier, route, and service level. It is also possible to automate carrier selection using configurable business rules. Transportation execution solutions also make it possible to consolidate multiple shipments coming from different vendors based in the same region.
Delays are sometimes inevitable. Storms happen. Accidents happen. Sometimes a ship gets stuck in a canal, jamming up trade and impacting the supply chain for months.
Companies using a comprehensive transportation execution solution can track inbound and outbound shipments in the same way. All shipments, with any carrier, from any supplier, anywhere in the world, can be tracked from a centralized portal.
This visibility by itself is not enough, however. The power here lies in “exception management.” Should a shipment be at risk of missing its delivery deadline, you will be notified so that you can take proactive steps to resolve the issue.
In many ways, it is simpler for a company to purchase goods on prepaid or delivered terms. However, chances are you are paying for this convenience. You have outsourced the responsibility of managing and containing your freight costs to your vendor. Almost certainly, your supplier has added a mark up to this, turning their transportation costs into a revenue stream.
Leverage Volume Discounts
Another good reason to manage both inbound and outbound logistics is that it gives you greater bargaining power with your carriers for obtaining volume discounts. The larger the volumes you ship with any given carrier, whether inbound or outbound, the more leverage you have to negotiate favorable terms.
Controlling inbound logistics gives you leverage to negotiate surcharges and accessorial fees. All of these extra costs can seriously add to your overall freight costs. These should be on the table when you negotiate rates with carriers.
Trust, But Verify
Most companies have information silos. Your logistics department may have negotiated great rates with a carrier. However, when the invoice arrives, it is often paid without being checked for accuracy. As a result, your company could be paying for service levels not received or incorrectly added surcharges.
Freight bill auditing software solutions allow you to automatically reconcile carrier invoices for inbound and outbound shipments. Should a discrepancy be uncovered, the relevant personnel will be alerted.
Furthermore, this visibility ensures that your carriers are maintaining contracted SLAs. Freight auditing is an integral part of managing your logistics costs. High-volume shippers that pay freight bills without checking them for accuracy are likely to be overpaying.
Managing inbound logistics processes is sometimes referred to as the “final frontier” of supply chain management. Granted, it does take time and effort to set these processes in place. However, managing inbound logistics processes has a measurable impact on supply chain efficiency, and ultimately, the bottom line.