Inbound Logistics – What It Is, Why You Should Control It and How
Mar 26, 2017
Outbound logistics gets more attention than inbound. It’s easier to quantify and it’s what your customer sees! Inbound is embedded in supplier costs and often not controlled by you. If you’re looking for logistics cost savings, Inbound could be where you need to look.
What is inbound logistics?
Inbound logistics are all the processes related to bringing materials and products into your warehouse or facility. It includes receiving, storing and disseminating incoming goods or materials.
Why should you control it?
A business may spend more than 40% of its annual freight budget on inbound shipping, according to the Aberdeen Group. Improving efficiencies in your inbound program can minimize delays, save money and streamline processes. It is a significant area of opportunity.
How to improve it in your organization
Below are steps you can take to improve inbound logistics in your organization:
- Find your actual costs – Determine the freight cost for each SKU you order from suppliers. If they’re bundled with the product price, have your vendors break the shipping cost out for you.
- Know what to negotiate – Longer term contracts with carriers may help you get deeper discounts, but remember that shipping rates are only part of the equation. You need to negotiate a cap on fuel costs as well. Otherwise, fuel surcharges may eat away at your savings.
- Streamline your inbound shipping process – Create a predictable inbound shipping process. Start by collecting freight data on volume, frequency and cost for shipments delivered to your company. Look for ways to combine LTL orders from the same geographic areas to qualify for truckload rates. Set up rules for vendors to use when selecting which carriers to use for your shipments. Look at ways to minimize the number of deliveries arriving at once, to simplify the receiving process at your warehouse.
- Communicate with suppliers – Once you have a plan in place, you need to clearly communicate it to your suppliers. Send them a written notice and require that they sign off on it confirming receipt. Be sure to also add verbiage to your P.O.’s specifying how your orders are to be shipped.
- Emphasize compliance – Make sure your vendors know that you will not pay for shipping selected by them without your approval. This will help enforce compliance to your new inbound shipping policies.
- Set up a third party consignee billing account -- Have vendors use this account when arranging smaller shipments, under 200-250 lbs.
Many organizations focus on outbound logistics and don’t bother to control their inbound logistics. This can be a costly mistake! Working through the steps discussed above will help you contain the costs of your inbound shipments and simplify related operations as well. If you need help getting started or working through the process, American Group has years of experience. Give us a call at 866-553-6608 or send us an email at Rates@ShipAG.com to start gaining better control of your inbound logistics today.