Many manufacturers have still not fully leveraged the potential value of directly controlling their inbound freight and to assess opportunities where this makes sense. Their customers, including a large part of the retail segment, were among the first to attain consignee control of their inbound freight, with more and more using those Transportation Management Systems (TMS) that are capable of inbound optimized routing (particularly for motor freight moves).
This includes multi-vendor sweeps (LTL or parcel to bundled LTL, multi-stop TL) and optimal selection of inbound pools vs direct consolidated shipping based on dynamic routing, rather than arbitrary routing guides. It also includes using outbound trucks (including dedicated fleets) to backhaul inbounds or returns back to DCs and then reloading back for new outbound runs. Increasingly, as the supply chain is slowed to balance the current recessionary environment and becomes better synchronized, intermodal conversions also represent another major cost savings avenue that can be applied to supplier inbounds (where they are controlled by the receiver). Our clients are among those progressive logistics organizations who have obtained break-through savings by applying an array of such techniques to the inbound arena.
However, even in 2009, there are numerous manufacturers, and still many retailers and distributors, not using TMS optimization and execution systems to maximize freight savings and reduce enabling costs. There are also many retailers who still do not control all of their inbound that could make sense to manage directly. Manufacturers continue to lag on direct management of applicable supplier inbounds and they can learn much from what retailers have long done from necessity.
For either group, we often recommend collecting data on supplier inbounds, and working with your purchasing department to obtain alternative “Customer Pick-Up” (“CPU”) quotes from suppliers for high-volume replenishment materials on a FOB origin basis. This reduction of direct costs (less the vendor’s freight allowance) can then be compared to cost for the consignee (inbound receiver) to route the freight directly (including having an optimization study done to look for inbound consolidation/mode shift savings), to identify where there are significant savings opportunities.
The tools and case studies are there…the various routing approaches can now be optimized and automated with less personnel effort…all putting expanded inbound control into reach of a greater number of manufacturers and offering improved yield on such programs in the retail and distribution sectors. Looking for your next arena for savings? Include your supplier inbounds in your plan of attack.