Most Companies Overlook the Savings Opportunities Hidden in Their Inbound Freight
It’s a requirement today that companies constantly improve their supply chain efficiency to remain competitive and protect margins. Unfortunately, it’s common for many shippers to overlook some of the low-hanging fruit within their logistics network that makes accomplishing those goals easier.
Inbound freight represents one such missed opportunity. Taking more control over how the products and materials coming into your facilities are routed and any other inbound freight costs that your company is paying for is a simple way to reduce overall shipping costs.
At the same time, it’s understandable why many companies overlook this opportunity because inbound shipping costs can be hard to isolate. For instance, inbound freight is often included in the cost of goods sold by suppliers and do not show up as a line item on invoices. This is important because your suppliers are not as focused on finding the best shipping options when they know the costs are being passed on to you. Some may even be adding a margin to what the carriers charge.
Taking more control over inbound freight provides many other hard and soft-dollar savings and benefits as well. Better visibility, inventory management, and more informed production planning are all possible for companies that manage their own inbound shipping. Any company doing so will realize many short and long-term advantages.
How can a company know if there are inbound freight opportunities they are missing? Simple. If your company is paying the freight cost, you should control the carrier and mode chosen.
But First, Know That Supplier Location Matters
The cost of inbound freight can vary significantly depending on the suppliers you choose (even if you’re already managing the inbound shipping). The important thing to know is that distance and required transit time are usually the primary drivers of shipping costs.
So, when sourcing, be sure to consider the bigger shipping expense required by longer distances and premium shipping modes (such as ground vs. air) in the cost of the goods being sourced - regardless of who is routing the shipments. Companies need to make sure their supplier locations and the associated shipping costs are considered for their sourcing teams as much as the costs of the goods themselves. In other words, the procurement and logistics functions need to be in communication with each other. Once that is accounted for, there are many other ways better inbound freight management can provide benefits.
Hard Savings with Dynamic Routing Guides
Routing guides are a common (and necessary) way to establish protocols for suppliers and vendors so they’ll know how to route your inbound shipments correctly. But static routing guides that dictate which carriers to use in each situation aren’t enough.
The most efficient carrier option for a shipment of inbound materials for a previous order may not be the best option now because capacity availability and carrier rates can change frequently. Dynamic routing guides allow flexibility for how inbound shipments should be handled based on the current market environment.
Setting up a process for all inbound shipments to be arranged through your logistics department is one way to ensure this happens. Suppliers do not know your rates or the service performance of your carriers as well as your operations. They need instructions on what to do. And it is not just important that your suppliers have your routing guides, but you need to ensure the guides are updated frequently and kept up to date.
Better yet, making online booking tools, like EchoShip, accessible to them makes it easier to ensure that the best carrier choice is made based on costs and transit time without involving your internal logistics team. Directing suppliers to use your online portal will not only guarantee the best carrier is chosen for every shipment but result in a more efficient pick-up and delivery. Invoice accuracy will improve, and payment will be more seamless, too.
Most importantly, by taking control of your inbound shipments, your required delivery dates will be sure to be met at the best possible price. The good news is there are other soft savings and benefits as well.
Visibility and KPIs
As with most things process-driven, Key Performance Indicators (KPIs) can play a big role in realizing the full benefits of controlling inbound freight. And, with the added visibility of routing your inbound products and materials, your company will have a much clearer view of its supply chain. For your production planning, warehouse, and fulfillment functions, this is a huge help.
Many companies are getting better at using their logistics data to improve their shipping function and other parts of their business operations. But, lacking visibility into inbound shipping costs, a big part of that data-set is missing, making your shipping data less actionable.
In addition to better inbound transportation cost management, logistics budgeting becomes more accurate with the inclusion of inbound cost data. The result is your total transportation cost data becomes complete and more valuable.
Supplier Performance and Better Internal Alignment
The ability to manage the performance of suppliers improves with a holistic view of inbound shipping. Aside from the costs, companies will have more data points on other important KPIs. When suppliers manage delivery, important details can be overlooked or lost, such as knowing when suppliers are missing production completion dates or OS&D-type problems happen. In other words, suppliers can hide a lot of their own problems and mistakes by arranging delivery.
With better visibility into what’s happening with inbound materials, your operations can hold suppliers more accountable for their performance. You will also gain the ability to better align delivery times with your own production schedules and needs. Having tighter and more accurate lead times on inbound materials makes inventory management and order fulfillment more efficient.
Cost Savings and Control
Improving how you manage inbound freight will not only result in meaningful cost savings but also in increased control. Logistics visibility is a trendy topic in shipping these days, and for good reason. For many companies, inbound shipments are a blind spot in their supply chains. Taking control of your inbound freight is a quick way to fix that and provides many other strategic benefits.
As a leading 3PL, our team at Echo uses a unique combination of industry expertise, best-in-class technology, and award-winning customer service to simplify transportation management for our clients. Our logistics experts are here to help you select the best mode for your shipments. We evaluate your transportation needs, discover efficiencies, and deliver the transportation solutions that are best for your business, including when it comes to inbound freight.
Echo services all modes of transportation, including truckload, partial truckload, less than truckload (LTL), intermodal, and expedited.