Still today the management of the inbound freight function is one of the most overlooked areas for significant cost reduction in many companies. Some estimates rate inbound freight costs as high as 35% of the total logistics cost for many organizations.
Inbound freight involves the management and control of freight from domestic and offshore suppliers, consolidation of vendor shipments, direct (drop) shipments to customers, multiple shipping points, and warehouse cross dock opportunities for replenishment and backorder processing. As result, reliability and visibility are the keys to effective inbound freight management and control.
The variety of processes supported by the inbound freight operation make its management a complex undertaking. Therefore, we should seek ways to balance our inbound freight operation by:
• Scheduling receipts during certain operating hours with suppliers and carriers
• Staggering carrier arrivals and departures in order to optimize your use of labor and equipment
• Encouraging Purchasing to put a preferred time and date of delivery on the PO
• Screening all receipt correspondence in advance for shipments which require special handling, restacking, repalletization, or rebanding
• Having exception procedures for processing priority, emergency, cross-docked or back order shipments
• Sorting and inspecting receipts to annotate any deficiency, discrepancy, damage, or loss discovered during delivery and unloading prior to acceptance
Effectively controlling the inbound flow of materials or product to your organization is a complicated process. It is becoming more complex as global risk conditions amplify throughout the supply chain and customer demands increase in terms of their expectations of service levels.
Remember that any savings in inbound freight costs can go directly to the bottom line. Most successful organizations who have paid attention to inbound freight view inbound freight management as controlling inventory in transit. Since your inventory is, in many cases, your largest asset, the management of this asset is critical to your business success. The proper management of this function plays a key role in achieving supply chain inventory, productivity, and service goals.
Compounding the difficulty is supply chain management's desire to effect cost reduction while maintaining reliable service. In addition to the more obvious and visible impact of inbound freight costs to overall profitability, the management of this area also affects inventory control, overall warehouse productivity, and customer service.
According to a C.H. Robinson whitepaper, "Without visibility to the inbound freight process, it is difficult to identify and influence the process gaps that cause variability in your supply chain." As you begin to analyze your inbound freight practices, you should establish objectives that will help guide your decision making process. Our consulting practice recommends that the following objectives, among others, should be established:
- Reduced freight costs to improve the "bottom line"
- Improvement in on-time deliveries
- Reduction in purchasing lead times
- Less handling and damage
- Lower inventory levels and reduced carrying costs
- Better vendor claims and freight loss & damage claims processing
- Improvement in warehouse productivity
- Increased customer service
So what are you waiting for?
This article is part of the monthly series which will be authored by ISM's Logistics & Transportation Group Board Members, who are current practitioners, consultants and educators. In future columns they will be sharing their views on a number of Supply Chain topics.
Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM's Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 260-7200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
Inbound freight involves the management and control of freight from domestic and offshore suppliers, consolidation of vendor shipments, direct (drop) shipments to customers, multiple shipping points, and warehouse cross dock opportunities for replenishment and backorder processing. As result, reliability and visibility are the keys to effective inbound freight management and control.
The variety of processes supported by the inbound freight operation make its management a complex undertaking. Therefore, we should seek ways to balance our inbound freight operation by:
• Scheduling receipts during certain operating hours with suppliers and carriers
• Staggering carrier arrivals and departures in order to optimize your use of labor and equipment
• Encouraging Purchasing to put a preferred time and date of delivery on the PO
• Screening all receipt correspondence in advance for shipments which require special handling, restacking, repalletization, or rebanding
• Having exception procedures for processing priority, emergency, cross-docked or back order shipments
• Sorting and inspecting receipts to annotate any deficiency, discrepancy, damage, or loss discovered during delivery and unloading prior to acceptance
Effectively controlling the inbound flow of materials or product to your organization is a complicated process. It is becoming more complex as global risk conditions amplify throughout the supply chain and customer demands increase in terms of their expectations of service levels.
Remember that any savings in inbound freight costs can go directly to the bottom line. Most successful organizations who have paid attention to inbound freight view inbound freight management as controlling inventory in transit. Since your inventory is, in many cases, your largest asset, the management of this asset is critical to your business success. The proper management of this function plays a key role in achieving supply chain inventory, productivity, and service goals.
Compounding the difficulty is supply chain management's desire to effect cost reduction while maintaining reliable service. In addition to the more obvious and visible impact of inbound freight costs to overall profitability, the management of this area also affects inventory control, overall warehouse productivity, and customer service.
According to a C.H. Robinson whitepaper, "Without visibility to the inbound freight process, it is difficult to identify and influence the process gaps that cause variability in your supply chain." As you begin to analyze your inbound freight practices, you should establish objectives that will help guide your decision making process. Our consulting practice recommends that the following objectives, among others, should be established:
- Reduced freight costs to improve the "bottom line"
- Improvement in on-time deliveries
- Reduction in purchasing lead times
- Less handling and damage
- Lower inventory levels and reduced carrying costs
- Better vendor claims and freight loss & damage claims processing
- Improvement in warehouse productivity
- Increased customer service
So what are you waiting for?
This article is part of the monthly series which will be authored by ISM's Logistics & Transportation Group Board Members, who are current practitioners, consultants and educators. In future columns they will be sharing their views on a number of Supply Chain topics.
Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM's Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 260-7200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
