As the name suggests,inbound logistics refers to goods coming into a business. It involves transportation and storage of incoming goods. Similarly, outbound logistics refers to the logistics process for goods going out of a business. Inbound logistics include everything that your company orders from suppliers such as office equipment, raw materials, tools etc. whereas the same items will fall into outbound logistics category if your company is the supplier of these items. There have already been efforts taken to save outbound logistics and now its turn to spot opportunities in inbound transportation. Alike outbound logistics, the right processes and visibility can improve inbound logistics too.
Inbound transportation is as important for the success of a supply chain network as is outbound. It has been observed that most of the factors and process improvement measures that are applicable for improving outbound transportation are applicable for inbound too. The three main inbound logistics gaps are:
- The cost of transportation is affected by carrier rate, market, order quantity and pattern. To protect themselves from any kind of loss due to unknown costs, suppliers include a margin in your delivered price for inbound This factor keeps you unaware of the true cost per unit.
- Lack of fleet optimization is the second process gap. It has been seen that at times suppliers ship products to you just to clear their dock. When this happens suppliers fail to consolidate orders and optimize loading capacity of the trucks, sending you half loaded truck.
- Suppliers mostly structure their pricing in a way that if they are able to negotiate transport cost with the carrier then the extra amount adds to their margin. This gives the supplier an inclination to choose the lowest-cost carriers, regardless of service quality, thereby adding to their own profit.
In order to tackle these gaps it is recommended to have a structured, proactive, and visible inbound program to enhance processes and achieve savings. You must proactively be involved with your supplier. Prior to signing a contract with your supplier, it is recommended to consider current freight charges, and terms of sale, so that you have an upper hand during the negotiation process. A good inbound program can help you identify and correct the process gaps. It will also allow you to get a better understanding of the actual cost of goods and transportation rates. The other ways inbound program can help you counter opportunities in inbound transportation are:
- Review business processes and get reports on compliance levels of suppliers and vendors
- Monitor and gain visibility to pending, complete, and shipped inbound orders through a single data repository
- Receive advance notice of late shipments
- Consolidate shipments and optimize loads and modes
- Map your own internal purchasing processes
- Track improvements in your business processes, transport efficiency and cost savings
Thus, it is important to have a well-structured inbound transportation system to minimize delays,reduce confusion, improve service and performance, and certainly reduce costs.