International competition and market uncertainty has caused many organizations to scale their operations globally, which in turn has made logistics networks quite intricate. Changes brought about by increased globalization, technology advances in communication and manufacturing, changes in consumer expectations and preferences, and increased demand for social and environmental responsibility, have forced companies to revise their processes to increase efficiency by reducing costs and eliminating any waste and slacks, in order to maintain profitability. Additionally, inbound logistics management is not an exception.
The inbound side of logistics, which comprises procurement and pertinent materials management activities, is receiving a lot of focus as businesses continue to find new ways to manage shipping costs. Vendors using conventional Transportation Management Systems (TMS) focus on logistics planning, but fail to address the events that occur on a day-to-day basis. The problem revolving around execution is intricate, and proficiency in logistics, coupled with well designed software systems are vital in controlling the escalating costs and inefficiencies of inbound logistics.
What are the challenges of inbound management?
Inbound freight management is extremely important as it accounts for about 40-80 percent of total freight spend, which accounts to 3.6 - 5.2 percent of total sales for most companies. In order to better manage costs, companies require better visibility into orders and shipments, enhanced collaboration with suppliers and carriers, and more control of inbound shipping processes. Currently, the processes can be termed as inconsistent at best, considering that:
- Real-time freight tracing and tracking is unavailable, making it hard to identify what is in transit, its location, time of arrival, and its costs
- Suppliers ignore the carefully optimized plans and routing guides provided on how to ship materials
- Cost information is hard to obtain
- Increasing freight costs – truckload rates, ship rates and international air rates
- Existing manual systems are difficult to scale with growth
As such, shipping managers require a practical way to gain control of the inbound freight problem, which could involve the use of current technology and specialized management services.
How can these challenges be overcome?
As mentioned above, it is clear that managing inbound shipping is difficult, but there are manage practices that enable organizations to increase visibility, manage processes, and gain control of their costs. Basically, managed service is aimed at reducing costs, solving the issue of supplier compliance, and involving logistics expertise on every inbound shipment through automation and outsourcing logistics services to a proficient team.
Introducing these two components in your inbound logistics services will yield different results depending on the degree of automation, breadth of expertise, and the integration of all players in the ecosystem. Properly managed service providers employ an LMA – Logistics Management Automation system and connect their suppliers directly into the system. By using the LMA system, managers are able to implement rules and process, and change them swiftly when need be.
The LMA promotes supplier compliance by making customer requests readily accessible. Once suppliers are certain that there are no errors when this system is in use, they begin to appreciate the managed service, which ultimately leads to customer satisfaction. On the consumer side, customers are able to trace and track inbound shipments using the same LMA, which offers complete visibility and process control over the whole inbound logistics element of the global supply chain. That said, a managed service must satisfy several requirements for it to effectively manage all elements of inbound shipping, including:
- Monitoring and enforcing business rules
- Managing shipment scheduling, processing and execution
- Managing contract negotiations and renewals
- Processing shipment for all modes of transport
- Offering the option to trace and track shipments for multiple clients
- Demonstrating logistics proficiency in carrier relationships
- Providing shipment settlement
- Understanding and managing reverse logistics
- Providing comprehensive real-time reporting
- Seeking dynamic, just freight bidding for surface and air transportation, as need be
The optimal performance of such a system requires a combination of logistics expertise and logistics management software. The former involves hiring professionals to monitor the processes, carry out modifications as exceptions arise, and propose long-term changes based on the changes in the international shipping environment. The automated system, on the other hand, offers numerous benefits, including the ability to secure the best pricing for ad hoc shipping and when applying pre-negotiated carrier contracts to regular inbound shipping, and the delivery of more informed shipping history when negotiating new contracts.