Inbound and Outbound Transportation Strategy
Logically, the transportation strategy of many companies focuses on lowering cost and improving service in their outbound transportation networks. After all, outbound freight is visible to their customers and, more importantly, brings in the revenue.
But realistically a complete supply chain strategy must be as - if not more - focused on the inbound transportation of supplies that make up the end product being shipped to end users. Streamlining and controlling your inbound transportation is the most complete way to remove cost from your goods and lower your delivered price, while maintaining target margins.
So, how do you do this? By following the six-step process outlined here, you can control your inbound transportation and remove waste from your inbound process, while incurring the lowest cost possible for your outbound goods.
Step One: Collect current inbound transportation data.
Current inbound transportation data should be collected and modeled to represent the current state of your network. This data shouldn’t be strictly financial data either. It’s important to capture all of the potential origins and destinations as well as the characteristics of the shipments related to each origin/destination pair. With this type of data, you can review cost by each vendor and related inbound component. In addition, you can model potential changes in geography or shipment size and their impact on your cost.
Step Two: Identify your business objectives.
How does your inbound strategy relate to your company’s overall strategy? The purpose of this step is to ensure that you have a firm understanding of your company’s plan before you implement tactical and operational components of inbound transportation management. For example, if your company is committed to using local vendors as part of its corporate identity, it’s certainly more viable to implement an inbound transportation program of dedicated milk runs than an import strategy. The bottom line is, know the business objectives before taking action.
Step Three: Identify and establish requirements for vendor compliance.
After the strategy is understood and the inbound management tactics are in place, define clear and concise requirements for your vendor pool. These requirements should include the data elements your vendors must give you, when they are shipping their product to you, and the technology that will act as a communication conduit between you and the vendors. Web-based TMS technology allows your vendors to enter in the exact SKU and quantity for each of their shipments and gives you full visibility of your inbound supplies all the way in to production.
Step Four: Develop a carrier management solution.
This step will require most of your time. To procure a carrier base that can produce the desired cost/service mix, take a professional procurement approach. The procurement team should follow the five-step RFQ process that most supply chain professionals consider a best practice (well-defined lane data, qualitative questions derived from stakeholder interviews, issue of Web-based RFQ with help desk, bid response analysis with multiple scenarios, and final award). Once you establish the carrier base, you can focus on managing the suppliers and carriers on a daily basis.
Step Five: Implement inbound solution.
The first task in implementing your solution is training the vendors on the Web-based TMS. A phased-in approach is the most efficient method: Start with your top-volume vendors and work backward. Also, make training hands on and simple for your vendors to follow. Remember the simpler the data entry, the less noncompliance you’ll have to manage. Once vendors are familiar and comfortable with the TMS, you can focus on managing the day-to-day shipments in the same manner as your outbound (EDI load tenders, real-time track and trace, and electronic freight payment).
Step Six: Establish KPIs and metrics for continuous improvement.
Establishing KPIs and metrics is a critical final step to developing a complete transportation management strategy. With the proper TMS, you can generate daily reports that track compliance with your inbound program. The reporting capacity is limited only by the data captured in the TMS, so when setting your data requirements (Step Three) be sure that you select the data based on what you want to report. With thorough data, you’ll have the capacity to identify your expected savings and provide further analysis for additional savings. Inbound transportation management is an essential element to managing your supply chain. Controlling inbound costs is a great way to lower your cost of goods and allows you to offer your product at competitive prices, while maintaining healthy profit margins. Partnering with a 3PL that is expert in inbound transportation management allows you to reap the benefits of this control mechanism, while expending minimal effort on implementation. In addition, the right partner will provide you with world-class RFQ technology and a cutting-edge TMS for your inbound program.