There is a profound difference between inbound and outbound logistics – inbound deals with the delivery of raw materials or goods coming into a business, while outbound logistics refers to goods leaving the business. Inbound logistics operations involve a relationship between suppliers and a business, while outbound relates to the business, its products and its end customers.
When businesses start using a TMS, they often focus first on outbound logistics processes because these operations are less complex. However, according to the Aberdeen Group, a business can spend more than 40% of its annual freight budget on inbound operations. A more efficient inbound freight program can streamline processes and achieve greater savings.
There are 3 fundamental issues that occur when a company doesn’t manage its inbound operation:
· An excessive number of inbound deliveries leads to congestion, greater idling times and higher unloading costs.
· Little visibility into arrival times and deliveries wreaks havoc at the dock and warehouse.
· No standard routing guide or compliance procedures opens the door to inefficiencies, driving up the cost of goods and introducing additional problems throughout the supply chain.
How can businesses begin to streamline their inbound operations?
As a starting point, businesses should collect data on their freight volumes, frequency and cost for shipments being shipped inbound. This will help them to understand what to measure and how to recognize improvements.
It’s important that companies partner with suppliers to determine the most cost-effective shipment method – whether customer pick-up (CPU) or supplier controlled (VDS). After determining the shipping method, the next step is to implement a standard routing guide for supplier compliance procedures to change inefficient supplier behavior that are driving costs into the supply chain. Companies can also establish a dynamic rate allowance program by leveraging technology to calculate the best possible vendor allowance for every shipment based on actual carrier rates.
Once a company has established control over how their inbound goods are being shipped, they can focus on what constitutes an optimal inbound order. Part of the routing guide should establish a set of carriers for all shipments whether CPU or VDS to increase opportunities for consolidation. Consolidating shipments to make fuller trucks reduces the number of deliveries and all the associated costs.
A freight industry technology leader, Kuebix has been named to Inbound Logistics Top 100 Logistics IT Provider for 2018. This accolade is given to providers whose solutions are central to solving transportation, logistics and supply chain challenges, and serves to reinforce Kuebix’s commitment to helping businesses streamline their inbound operations.
Additional, more detailed inbound logistics management best practices can be found in The Art of the Inbound.