4 Things You Want From Your Inbound Logistics Partner
These days, purchasing managers and logistics managers at manufacturing companies are looking to make wholesale improvements to their inbound logistics operations. I’m talking about streamlining the flow of goods coming into your business. For many companies, that could mean thousands of raw goods and parts that must be routed and tracked. Manufacturing companies that have traditionally managed inbound logistics internally are outsourcing the function to third-party logistics firms.
For small and midsize manufacturing companies, the cost of creating and maintaining a state-of-the-art inbound logistics operation can be too costly. For instance, a department could comprise two or three specialists who operate a sophisticated and somewhat expensive TMS (Transportation Management System). Additionally, the tribal knowledge that logistics experts accumulate with experience can’t be bought off-the-shelf. Who are the best carriers? Which carriers are always late for a pickup? Who can you call when it absolutely has to be there in the morning?
In my experience, if a company is spending $200,000 to $2 million in freight charges, it is a good candidate to work with an inbound logistics partner, usually a 3PL.
For all but the largest companies, CEOs would rather invest money in capital equipment or pay more engineers than invest in an internal inbound logistics operation. So, the biggest challenge for many companies is how do you choose an inbound logistics partner? With this article, I’d like to take some of the mystery out of the process and give you several criterion that will help you make an easier decision.
At LPS, (Logistics Planning Services) we support numerous manufacturing companies’ inbound logistics operations. Some we manage the flow of goods from a few suppliers into a factory to manufacturers juggling thousands of parts from scores of suppliers. In outbound shipments if something arrives a day late the world doesn’t stop. But if an inbound shipment is late an entire production line can be shut down, and millions of dollars can be lost. Here are 4 things you want from your inbound logistics provider.
Purchase Order Management
A good inbound logistics partner is a company that does a great job at managing POs (purchase orders). Find a company that has well-honed processes for following and tracking POs from the supplier to the manufacturer. Your logistics partner will track hundreds of POs written by your company’s purchasing managers and given to suppliers around the world. These parts have to be picked up on-time and delivered on-time. And many are sent to meet just-in-time delivery requirements.
Strong Information Systems
Behind every great inbound logistics program is a TMS that tracks all your shipments. Make sure your logistics provider offers intuitive, easy-to-use systems you can access yourself anytime, anywhere. Most are accessed over the web via computer, tablet or smartphone. IT systems that are quick to learn are important because your suppliers will be accessing them, too.
Better yet is aligning yourself with a company that has in-house developers, which gives your logistics partner the ability to customize its software to match your needs perfectly. At LPS, for example, we have eight full-time developers creating dynamic systems that support customers’ operations. Agile development is essential for any modern IT capability.
There are a lot of moving parts to inbound logistics. When evaluating partners make sure you have visibility into their processes and they align with your needs. You need to be comfortable with their blocking and tackling basics. Most inbound logistics operations are built around a handful of processes:
- Bill of lading—usually handled by the supplier shipping goods to you.
- Dispatch—which is sending the carrier out to pick up your goods.
- Tracking—gives you insight into when the load is picked up and if it’s on time.
- Charge verification—confirms that the carrier charged you for what they said it would cost.
Most manufacturing companies want competitive pricing from their logistics partners. Who doesn’t? But trust often trumps low price when choosing an inbound logistics company. Hire a logistics company with deep industry knowledge, or what I refer to as tribal knowledge.
For example, if you know that supplier X often doesn’t have the freight ready when you show up there every Thursday at 3 p.m., we’re going to remind that supplier. That’s just being a good logistician. At LPS we provide hard bottom line savings with our buying power, but often it is the soft and intangible costs that can add up when you don’t have the right partner.
You can access the company’s systems all day long, but sometimes you need to rely on your inbound logistics partner to help you get that special shipment to your factory in Peoria. That takes deep knowledge of carriers: Routes, price, availability, reliability and more. Around the clock access to your logistics partner is essential. Does the company offer you a go-to person or persons you can call, email or text anytime?
As your business grows, you’ll also want your logistics partner to grow with you. Is the company flexible enough to give you more services and support as you grow? Make sure they have bandwidth.