It’s time to make inbound freight a priority and begin reaping the benefits of a program that creates win-win rewards for all supply chain partners.
Frequently overlooked and often pushed to the bottom of a shipper’s supply chain agenda, good inbound freight management can help companies improve shipment visibility, save money, and enhance customer service—all of which add to the bottom line and boost profitability.
Unfortunately, few shippers make inbound freight a priority, and even fewer consider it a strategic supply chain initiative. In fact, it’s often the “final frontier” for companies that are trying to cut additional costs out of their transportation spend.
Done right, inbound freight management does more than just help companies gain an understanding of where their shipments are at any given moment. It also stokes better supplier-carrier-customer relationships, reduces the need for excess inventory, improves reliability across the supply chain, and creates an atmosphere of accountability for all supply chain partners.
Three Steps to Effective Inbound Freight Management
Here are three steps you can take to start managing your inbound freight more effectively today:
1. Partner with your suppliers to lay out a plan of action. Determine the most cost-effective and efficient way to ship and unload your freight, and build a plan with your suppliers that benefits both parties. Your goal should be to reduce the cost of shipping, but there is no “magic number” for a percentage of shipments that should be vendor-controlled vs. customer controlled. Give your suppliers a choice so that they can select the most effective service and billing procedure. Then, implement a standard routing guide for supplier compliance. This will establish a set of mandatory guidelines that will be used for all vendor-controlled (VDS) and customer pick-up (CPU) shipments. Supplier compliance programs reduce your cost of goods by making your carriers and warehouse more efficient. In the event your suppliers fail to comply, they will share in your cost through violations outlined in the routing guide.
2. Create strong alliances with your carriers. Consolidate inbound shipments to full truckload wherever possible to reduce freight and unloading costs. Reducing the number of individual less-than-truckload (LTL) shipments will decrease the cost of freight, dramatically increasing the efficiency of your distribution center and significantly reducing unloading costs. Standardizing on a smaller set of carriers paves the way for this to happen. Think how much more efficient your operations will be with less trucks and less deliveries. For example, unloading 10 to 14 different LTL shipments can be five times the cost of unloading a single truckload. The customer and the supplier can share all of these savings through the efficiency of consolidated shipments and drop trailer programs. By consolidating your LTL pool, you can simplify yard management and maximize consolidation opportunities. Select carriers that provide attractive rates and superior service and try to limit that set to two to four different carriers, whether the shipments are CPU or VDS. This will give each carrier enough business to ensure LTL consolidation does not affect service levels. Having a strong partnership with your carriers also opens up other opportunities for additional savings such as backhaul agreements with LTL carriers to consolidate freight to single truckload for pick up by your own fleet for the final mile.
3. Leverage technology to your advantage. Utilize a transportation management system (TMS) to maximize inbound freight management. For example, leverage your TMS to implement an allowance program for freight costs and unloading expenses with your suppliers. In most cases, allowances are negotiated once or twice a year, and rarely take into account fluctuating costs and carrier rates. Oftentimes, market rates rise above negotiated rates. Therefore, it’s important that your TMS enables the creation of dynamic rate allowances to ensure savings on both TL and LTL shipments. This is done by calculating the best possible real-time vendor allowances based on actual carrier rates as demand dictates. This approach ensures the lowest cost of freight for all parties. Now that you’ve determined the best possible rate, a TMS will also automate tracking, scheduling and door assigned, which will directly reduce your labor spend. Finally, if you cannot measure something it is hard to improve it. An effective TMS will capture every piece of data for the cost of freight, unloading costs, supplier and carrier performance. The system should provide analytics in the form of reports, dashboards and scorecards that allow you to analyze your inbound freight program and identify opportunities for increased efficiency.
Ultimately, good inbound freight management facilitated by technology helps shippers achieve cost and productivity goals that very often get overlooked in the logistics space, where putting out daily fires and scrambling to find capacity are daily routines. By taking a step back and gaining a better understanding of your current inbound environment—then working with suppliers and carriers to come up with a plan of action to improve it—you’ll be able to leverage all of the market’s capacity, get the best rates, and gain better visibility over your end-to-end supply chain.
For additional insights and advice on this topic, download the “Art of Inbound” eBook.
Dan Clark, Kuebix Founder and President, is a logistics industry innovator. He possesses extensive operations and sales experience gained from years of working with leading freight carriers and companies with multimillion-dollar supply chains. Dan continues to deliver on his original vision of using best-of-breed cloud technologies to create an intelligent transportation system that returns control and visibility to freight shippers at companies of all sizes.