Inbound Freight Opportunities - Still There!

32 years after the enactment of the Motor Carrier Act of 1980, many organizations are still not taking advantage of the transportation savings and bottom line opportunities that can be theirs for the taking. There are many reasons for this phenomenon, but the prevailing one is that many companies still do not understand how to go about creating, executing and monitoring an inbound freight project. Here’s a quick primer I have found useful.

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.

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?

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.

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.

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

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.

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.

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.

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.

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.