Inbound logistics includes everything you need to create your products and services, from sourcing and procurement to reverse logistics. It covers all the activities that bring products or materials into your business. Each stage of the inbound process has costs, and finding savings and efficiencies depends on how well your supplier relationships are working. When inbound transport, warehousing, and inventory management are outsourced to third parties, this creates management challenges.
Why do we need to develop collaborative relationships with our key supply partners? We want to a) reduce costs, b) make process improvements, and c) encourage innovation in products or services. The first two seem pretty straightforward, but to achieve c), we need to be open and transparent and focus on building trust.
Collaborating with suppliers means developing partnerships for mutual benefit. We need to create an environment where opportunities for innovation and continuous improvement can be found and implemented. This means providing a platform where suppliers of goods and services can work with the buying organisation to solve problems jointly.
This starts with finding dependable suppliers and partners offering the most competitive pricing and consistent quality. Prioritising and leveraging these key relationships create a “win-win” situation. This approach generates business value for both the buyer and supplier. The most successful relationships are based on openness and information sharing. Opening multiple channels of communication is a good start.
Your chosen suppliers and service providers may be reluctant to share transactional data or details about their processes. Some organisations have problems working openly, thinking that sharing operational and financial information leaves them in a weaker negotiating position. Old adversarial relationships with strategic suppliers need special attention. They drain resources and waste management time. Finding common ground on which to build trust is the first step.
A lack of information on inbound activity causes some companies to carry extra inventory, make purchases too early, and suffer delays in customer deliveries. Where there is no tracking system or method to schedule and monitor incoming deliveries, mistakes are made, delays occur, and the customer is impacted. Accessing the right solutions can rectify the lack of technology tools and processes to support inbound activities.
Open and transparent communication means sharing real-time online data. Your suppliers need to share information about their own sources of supply—partners and subcontractors (your Tier 2 suppliers)—locations, product traceability, and transactional history.
The major cost drivers for inbound logistics are purchasing, supplier management, transportation, receiving, warehousing, material handling, and inventory management. If you are working with a third-party logistics (3PL) or 4PL provider, use their expertise to create ways to improve your processes.
Cloud-based software solutions such as Transport Management Systems (TMS) have made data-sharing safe and secure, and it is easy to use via dashboards and alerts. Outputs include performance metrics that can be compared to your preset key performance indicators (KPIs). Some newer products apply the latest tools, including AI, Machine Learning, and Blockchain, to support supplier collaboration. Data analytics can provide insights into your suppliers’ cost structures.
Risk mitigation
Supply risks are real and constantly changing due to political instability, weather effects such as flooding and temperature, and staffing issues such as strikes. Supply chain management should have risk assessment tools available to identify possible disruptions and take steps to mitigate them.
A compliance agreement with your key supplier explains your requirements and penalties for errors such as late delivery or not following agreed routes. Such an understanding can reduce transport and warehouse costs, improve speed and accuracy, and increase customer satisfaction. Your compliance standards should be reviewed regularly, and each key supplier should be assessed against these to avoid regulatory or safety failures.
Sustainability
Companies are considering the importance of a commitment to sustainability and environmental protection in their choice of suppliers. Metrics jointly agreed upon by both businesses are most likely to succeed. Select those performance measures (KPIs) relevant to both and specify how and when those KPIs should be measured. Examples are carbon emissions, savings in energy and water use, and elimination of waste.
Effective partnerships based on shared information reduce costs, improve service delivery, and stimulate mutual growth. An accepted best practice is to develop solid relationships at key operational touchpoints and various management levels. Leveraging technology in inbound logistics can reduce costs, improve efficiency, and increase competitiveness while enhancing supply chain visibility.
SCCG can offer unprecedented expertise in optimising all aspects of your supply chain, from purchasing to reverse logistics. Contact us by using the contact form below.