5 Steps to Take Total Control of Your Inbound Logistics Costs (Part 2)

Posted by George Muha on Aug 1, 2016 12:07:37 PM

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In the second step of our five step process of taking control of inbound logistics we are going to learn out to create inbound routing instructions.  Why?  To take all the guessing work away from your vendors about your intentions of controlling inbound logistics, but of course!  

Part 2: Creating Inbound Routing Instructions

It is important to deliberate with vendors how to deal with you when it comes to shipping.  So it is necessary to generate a standard for all vendors so you can begin to take charge of your supply chain.

A good routing guide must break down for each vendor which carriers and mode (parcel, less-than-truckload, truckload, air freight, etc.) should be used based on weight, density and location.  Making certain no detail is left out is a must.  

I've seen way too many instances where the wrong mode was shipped with costly results because the inbound directions were limited or vague.  The point of the routing guide is to outline specifics so vendors don't have to be in a position of guessing how to ship to you.  So today we are going to create instructions vendors will have to live by when shipping to you.  

Draw Up Rules

First, you need to write down the rules you need your vendors to follow in order to make life easier.  Get some of your receiving, purchasing and accounting folks involved in these details.  These are unique to you so be specific.  The theme here is to outline all of the things that cut down on extra work for your company (i.e. like purchase order numbers your system needs to match, labels that help your receiving people unload faster, call before requirements to help your planning, etc).  

If you're blanking on what these standards are for you, here are some sample ones to help inspire you.

  • Make sure all shipments are labeled correctly and have the packing slip attached on the outside of the merchandise. 
  • All Bill of Ladings (BOL) and shipping labels must show the purchase order number.
  • Multiple pruchase orders to same destination on the same day must be consolidated on one BOL.
  • If you cannot meet the deliver date specified on the PO, you must notify XYZ purchasing manager.
  • LTL and truckload orders require a minimum of a 24 advance delivery notification.  Only core carriers have standing appointments at the distribution centers.

Once you've outlined the specific shipping instructions that work best for you, next will be to create a  consequence for not following your instructions.  The point of this is not to nickle and dime your business partners.  The point is to get inbound under control.  Including a financial penalty for not following your rules will usually ensure vendor compliance - which is what your are looking for.  Whatever these penalties are is up to you.  Just make sure they trigger vendor cooperation.  

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Example of a penalty:  Failure to comply with routing instructions may result in a "non-compliance" fee of $50.00 in addition to any other excess shipping costs XYZ company may incur as a result of not following the instructions.

Building a Routing Guide & Carrier Matrix

Supporting the routing guide with an easy-to-use carrier matrix will go a long way in helping to drive compliance.  The matrix should clearly outline the carriers a vendor should use based on whatever criteria you decide (like their geographical location, size of order, etc.).  This guildline should also include a breakdown of which mode should be used.

Below is a sample routing guilde and carrier matrix.  Feel free to use these samples of templates when creating your own routing procedures.  

Sample Inbound Routing Guide

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Sample Carrier Matrix

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Homework

Today's homework is to create a routing guide and carrier matrix that will tell your vendors how to ship to you.  We are not sending this out to any vendors yet.  All today's homework involces is creating these two iteams.  Feel free to copy the structure of the samples above with your company's instructions and carrier guide.  Now get some rest because in Step 3 we are goign to start putting real money into your pocket.

Topics: freight savings, logistics savings, inbound freight checklist

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