Controlling all incoming inventory and supplies could save you big money.
A boutique that sells shoes made in Italy. An electronics manufacturer that stores parts from distributors across Asia. A hotel company with nonstop procurement needs. Almost all companies receive incoming shipments of some kind – raw materials, supplies, product – but very few have taken a good look at that process to find ways to save.
"Less than half of our customer base actually takes control of their supply chain in its totality," says Matthew Hanna, a marketing manager with UPS. "That's a shame, because it's one area where customers can save money."Staying on top of what comes into your business can be just as critical to your bottom line as optimizing what goes out. And many companies simply leave their inbound logistics to chance, with vendor decisions or default shipping options chipping away at profits.
For Pro Marine, a marine engine parts manufacturer, a simple change represented a sizable savings. General Manager Tony December asked his suppliers to send shipments using his company's UPS account number. He estimates that with its UPS negotiated rates applied, the company instantly started saving about 35 percent in inbound shipping costs. And he says many of his vendors were unable to explain why they opted for a particular shipping mode or speed: "As soon as I hear, ‘This is just how we do it,' I know there's been no research as to why they're shipping that way."
When you're in control of your inbound logistics, you also know where your shipments are and when they'll arrive. You know who placed the order and where the costs should be allocated. Most important, all your key personnel know what's in each shipment, so everyone can perform at peak efficiency, from the manager who staffs the receiving department to the salesperson who tells your customers when products will become available.It's not just big manufacturers that benefit from better inbound logistics. Any size business of any kind can improve efficiency and save money by taking charge of what comes into the company. Stop leaving your inbound logistics to chance with these simple steps:
Seize your incentive. "The first thing you absolutely have to do is, you need to start using your account number for your shipments and take advantage of freight collect," Hanna says. "Start with your top three or four vendors. Let them know that shipments must be charged to your account number. Now you're building toward volume discounts."
Control your shipping speed. You may not need the materials you ordered until next week, but your supplier always ships air freight. If you had been in control of that shipment, you could have chosen to send it LTL (less than truckload) instead. When you use only the speed you need, you operate more cost effectively.
See what's in there. Somewhere in all the boxes in your receiving department is one "hot item," such as a part that must go out with an order today. But it's mixed in with boxes of supplies, inventory and returns. Typically, employees open half the boxes in search of the missing item. "An open carton leads to loss," Hanna says. "People have basically been rifling through inbound inventory, while outbound items are waiting to go out the door."If those workers had UPS Trackpad®, a hand-held device that monitors packages from dock to desk, they could have scanned the cartons as they came in and seen what was included without having to look for a packing slip or look through the box. The hot item would have been found much faster.
Monitor vendor compliance. Through UPS's vendor management technology suite, we can ensure purchase orders are on all incoming shipments. This means you can improve cost-allocation accuracy and understand your total cost of ownership.
Staff intelligently. When you're in control of your inbound logistics, you're in control of your staffing needs, too. With Quantum View® Manage, you can see the movement of incoming shipments – and staff accordingly.
Gain greater efficiency (and accountability). MGM Resorts International, a leading hospitality company based in Las Vegas, installed a UPS technology solution that connects its back-office procurement and inventory software system to simplify shipment scheduling and automatically ensure correct cost allocation through purchase order numbers. "We are very much trying to use all this to drive efficiency in our costs," says David Jeshurun, director of strategic sourcing in the global procurement division at MGM.
Plug everyone into the loop. If your sales staff can see only what's in stock right now, all they can communicate to customers is whether a product is available right now. But if they have visibility of inbound shipments as well, they can sell into the future. The next customer service call might go like this: "We don't have any of those in stock right now, but our next delivery is scheduled for tomorrow. I think I can fulfill your order the day after." That translates to greater customer satisfaction.
This story was originally published in the Summer 2012 print edition of Compass.
This free e-book "Enhancing Global Inbound Logistics & Operations [PDF]" can help you evaluate your inbound supply chain.