Making changes that promote effective inbound logistics management can have a significant impact on your organization’s procurement department and team members. Unfortunately, many in the industry still uses the terms procurement and inbound logistics interchangeably, but procurement involves much more than merely managing the logistics of moving products from vendors and suppliers to your building.
Meanwhile, according to Tom Andel of Material Handling & Logistics, the field of procurement is experiencing a crisis operating at 20-percent lower costs and with 27-percent fewer people than the majority of companies. Unfortunately, it is not possible for every organization to take advantage of world-class procurement professionals, and globally, procurement-generated cost savings have declined in recent years. For shippers to remain competitive, they need to understand the challenges of procurement in the age of e-commerce, the day to day work that procurement professionals conduct, and a few best practices for improving procurement through better inbound freight management.
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Challenges of Procurement in the World of E-Commerce
The challenges of managing procurement in the world of e-commerce are complex and far-reaching. In traditional supply chains, procurement involved a handful of suppliers and vendors, but the modern supply-chain, powered by e-commerce, requires thousands, if not millions, of potential vendors. Every inbound parcel or inbound freight shipment represents another vendor or supplier that may be involved in the inbound logistics management of your organization. Furthermore, many shippers do not genuinely understand procurement processes when thinking about inbound logistics. Instead of thinking of procurement as another inbound logistics process, shippers should use the term “purchasing” in its place, as explained by Aaron Pittman of Supply Chain Beyond. At the same time, the procurement team is responsible for much more than just purchasing, notes Jason Scheer of Inbound Logistics.
For example, procurement professionals are responsible for maintaining the safety, environmental, functional and financial matters relating to purchases, the use of tools and technologies to make purchasing decisions, determining what products and services will fulfill business needs and more. At the same time, they must follow new practices to ensure they consider suppliers and use those that meet specific criteria, determine what products to review and define the shipping -related processes for managing inbound freight resulting from such purchases. Although many of these activities involve some purchasing activity, procurement professionals also collaborate relating to customer service, labor management and more. In other words, the procurement of personal is basically responsible for the originating actions that contribute to every activity within your supply chain. This level of complexity is what results in higher costs, more stringent inbound logistics processes and additional stress.
Effective Inbound Logistics Management Includes Managing Much More Than Procurement
Procurement is about much more than purchasing, and supply chain optimization, which sounds great, requires many processes and changes to make a difference truly. Improving inbound logistics processes, leveraging inbound logistics technology and gaining end-to-end visibility through connected sensors and wireless devices, will enhance your inbound logistics process. As a result, less time is spent by procurement professionals determining what actions are necessary when making a new procurement decision, such as developing a new supplier relationship. Moreover, enhancing supplier relationships are critical to the successful deployment of new systems and capabilities, especially as new products come online and the diversity of products available in the global market expand.
Tips to Improve Inbound Logistics and Streamline Procurement
After you understand the difference between inbound logistics and procurement, it can be challenging to figure out how to enact meaningful change with inbound logistics. Fortunately, shippers that follow these steps, as explained by Rick LaGore via Global Trade Magazine, can successfully strengthen their inbound logistics strategy and streamline procurement operations:
- Understand non-controlled costs. Specific costs will always be outside of the scope of shippers, with some costs often residing within the vendor’s purview. However, recognizing these uncontrollable costs is essential to avoiding unnecessary increases to inbound freight spend.
- Analyze inbound freight costs. All inbound freight costs should be analyzed with latest-generation techniques and algorithms to understand where costs arise and how to avoid them in the future best.
- Negotiate with suppliers. Even the most micromanaging of suppliers may be willing to negotiate terms processes and managing inbound freight. It cannot hurt to ask.
- Implement processes and technology to track performance. Failure to track the performance of suppliers and vendors remains a top reason for higher inbound freight spend, but implementing procedures and technology that track and automate performance measurement, including using a TMS, will help.
- Prioritize supplier relationships. Your business will always encounter suppliers that seem willing to abandon you, but it is in these cases, where you must prioritize supplier relationships based on the impact of inbound freight costs.
- Invest in the right talent. Even the experience and capability of the talent on your team will affect the performance and success of inbound freight management. Make sure your organization is working with trained, well-qualified individuals.
- Outsource when it makes sense. Outsourcing logistics is an excellent way to put the control and hassle of managing inbound logistics and procurement in the hands of a third-party. In fact, this is an important reason more companies are turning to third party logistics providers (3PLs), such as Cerasis, to manage inbound logistics, as well as ensure the proper and comprehensive use of freight data.
- Experiment, using data, notes Shreyas Bhat of Inbound Logistics, to simulate scenarios and decide how and when your company must evolve procurement processes, as well as inbound logistics.
Lessen the Burden on Your Procurement Team With Better Inbound Freight Management Now
Your organization’s procurement team has a mountain of responsibilities and managing the various activities of inbound logistics adds to their mounting burden. Instead of trying to leave inbound logistics in the hands of your procurement department, take the upper hand and ensure procurement team members have a healthy, intelligent and technology-based way to seamlessly make procurement decisions and reduce the costs associated with such decisions. In other words, make the changes necessary to improve effective inbound logistics management in your organization by choosing an established partner, such as Cerasis.
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