Create
a project team. Call
on the expertise of your procurement and logistics representatives, and draw
on each department's need for specific cost information to better manage the
process. An IT member or advisor may also be a valuable addition.
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Define
the project goals.
Decide what you expect to accomplish when this project is completed. Is it to
simply reduce costs, improve vendor relations, gain better inventory control,
create vendor managed inventory, attain control over inbound orders, or
better utilize a dedicated fleet?
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Determine
key performance indicators (KPI). Create a baseline or benchmark
of current performance, and determine KPI, which might include supplier
performance (order acknowledge, order fill rate, ship on time), carrier
performance (accept shipment tender, on-time pick-up, on-time delivery),
exception summary reporting, and customer and supplier satisfaction metrics.
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Classify
and quantify current inbound operations. Evaluate your current inbound
shipments and classify by who controls the freight (prepaid or collect),
where the freight costs lie, and whether the carrier is selected via a
routing guide.
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Consider
investing in TMS technology. Transportation management
solutions and business-to-business connectivity can provide both a systematic
approach to your inbound processes and financial controls. http://www.FreightMasterTMS.com
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Evaluate
best landed cost by supplier. To calculate best landed cost,
you must be able to allocate freight charges plus fuel surcharges plus
assessorial fees to get the true picture of your costs. Select a software
tool to help you rate and re-rate shipments based on all available scenarios.
Ask these questions: Does your organization really want to take on the
freight? If a supplier is larger than you, it may have better freight rates,
but what is being invoiced in the cost of goods? This is where the visibility
to freight costs segregated from the costs of goods gives an organization the
opportunity to control expenses.
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Survey
supplier technology capabilities. Make sure they have EDI
capabilities, and a supplier portal with a web form to provide "ready to
ship" information. Don't underestimate the amount of work required to
"cleanse" the data from suppliers.
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Prioritize
suppliers for quick results. In any project, delivering
quick wins or payback should be a goal. Prioritize your suppliers by ease of
implementation and largest payback. Typically these are non-compliant collect
suppliers or new suppliers where you can influence the freight terms.
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Execute. Communicate the
plan in advance to all involved parties, both internally and externally, to
get their buy-in to the process. Then implement the targeted changes.
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Measure/monitor
compliance and performance. Share with your suppliers how
their performance will be measured. Establish routing compliance reviews with
each supplier and ensure data is available for analysis by both parties at
any time.
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