Executive Briefings

How to Take Control of Your Inbound Logistics

Companies have long relied on suppliers to manage their inbound shipments, but that attitude is changing. According to Greg Aimi, research director with Gartner, buyers might come to believe that a supplier is charging too much for the freight component of a product - or even making money on the shipment. "In certain circumstances," he says, "your scale and size might be able to generate more efficiency [on freight rates] than a small supplier."

Often the freight cost is "baked into" the total price, making it difficult for the buyer to assess that portion of the purchase. Breaking out the total cost into product and logistics elements can become the subject of negotiations between supplier and buyer. The success of that effort could depend on the relatively power of the two parties.

Still, says Aimi, the question of gaining control over inbound shipments is rarely an "all-or-nothing" decision. "You should not expect that you're going to take over the freight of every supplier. Even the best are achieving 60 to 70 percent of inbound control." In many cases, the supplier might be able to get a better rate, particularly if it has extensive experience in the mode at issue.

Buyers can convert ownership of inbound by changing the terms of freight, says Aimi, adding that there are multiple options that define the point at which the receiver actually takes control of a shipment. The key is to model the network and "see what makes sense." For example, if a retailer has a fleet of its own trucks that return empty, it might discover opportunities to maximize equipment usage through taking control of booking.  It might even end up selling the capacity - becoming, in effect, a carrier itself.

Once a consignee has taken over a portion of its inbound, it must then take steps to ensure that its choice of carriers is being followed by internal staff. Aimi says the task can be accomplished through the use of static routing guides, as well as a more dynamic approach that involves consultation with the supplier.

To view video in its entirety, click here

Companies have long relied on suppliers to manage their inbound shipments, but that attitude is changing. According to Greg Aimi, research director with Gartner, buyers might come to believe that a supplier is charging too much for the freight component of a product - or even making money on the shipment. "In certain circumstances," he says, "your scale and size might be able to generate more efficiency [on freight rates] than a small supplier."

Often the freight cost is "baked into" the total price, making it difficult for the buyer to assess that portion of the purchase. Breaking out the total cost into product and logistics elements can become the subject of negotiations between supplier and buyer. The success of that effort could depend on the relatively power of the two parties.

Still, says Aimi, the question of gaining control over inbound shipments is rarely an "all-or-nothing" decision. "You should not expect that you're going to take over the freight of every supplier. Even the best are achieving 60 to 70 percent of inbound control." In many cases, the supplier might be able to get a better rate, particularly if it has extensive experience in the mode at issue.

Buyers can convert ownership of inbound by changing the terms of freight, says Aimi, adding that there are multiple options that define the point at which the receiver actually takes control of a shipment. The key is to model the network and "see what makes sense." For example, if a retailer has a fleet of its own trucks that return empty, it might discover opportunities to maximize equipment usage through taking control of booking.  It might even end up selling the capacity - becoming, in effect, a carrier itself.

Once a consignee has taken over a portion of its inbound, it must then take steps to ensure that its choice of carriers is being followed by internal staff. Aimi says the task can be accomplished through the use of static routing guides, as well as a more dynamic approach that involves consultation with the supplier.

To view video in its entirety, click here