Over the past two years, unrelenting supply chain obstacles propelled innovative manufacturing teams to optimize inbound freight to preserve profits and evade future disruptions. But this is more of an exception than the rule.
Logistics experts say companies often focus on high-priority issues when cutting costs—like reducing expenses in the top 80% of spend. If they tackle supply chain spending, they typically only streamline the outbound component when goods go from warehouses to stores.
Though understandable, these strategies underestimate the optimization potential of the inbound supply journey, which is the transportation phase between suppliers and manufacturers. If left unchecked, inbound freight spending can stunt growth and take a toll on overall profit margins. When international manufacturer YETI faced gross margin losses between 2021 and 2022, they attributed a large portion of the blame to increased inbound freight expenses, import duties, and product costs.
Amid high inflation, every chance to limit waste and save money on inbound freight is crucial—especially for those with small staffs, limited resources, and tight budgets. By harnessing transportation management technology and promoting transparency, manufacturers across all sectors can lower costs as prices rise and position their businesses for success.
Cut costs through visibility and coordination
Inbound freight expenses vary by industry—sometimes comprising the majority of shipping costs. When inbound freight is excluded from the total supply chain spending calculation, it can cause unexpected increased costs. According to McKinsey, buyers in chemical companies who negotiate supplier prices rarely consider inbound freight. These expenses can be between 8% and 12% of the cost of raw materials. It’s a missed opportunity to lower prices in negotiations.
To reduce costs, manufacturers should understand precisely where the money is going—including inbound freight, outbound freight, carrier services, and raw materials. Given projected increases in freight costs across all transportation modes, manufacturers must enhance collaboration between siloed teams managing supply and logistics. Spending visibility identifies areas of overlap and wasteful budget allocation.
Transportation management systems (TMS) can help provide visibility by transparently reporting carrier rates and vendor costs for each purchase order. With insights into the components of supply chain spending, departments can seamlessly coordinate and stay within their budgets—without sacrificing the quality of the end product.
Simplify decision-making with streamlined logistics
Overworked supply chain leaders using multiple transportation services may have data scattered across several platforms. They use disparate systems and spreadsheets, making it practically impossible to understand the impact of individual bottom-line spending decisions or to get a comprehensive look at inbound freight activity.
Manufacturers must simplify and streamline inbound freight management to gain insight into the impact of future logistics decision-making on profits. A TMS connects various platforms to create a consolidated database of inbound freight metrics. By organizing an intricate network of carriers, purchase orders, performance measures, and invoices, automation can promote awareness and prevent excessive inbound freight spending.
With a single point of reference for shipping data, manufacturers can track freight costs back to individual purchase orders—making it easy to identify and understand specific expenses. If a supplier charges a manufacturer expedited carrier fees instead of the lowest cost option, logistics leaders can use a TMS to analyze the impact of the price increase on margins. From there, the logistics team can determine whether their budget can absorb the cost and pull back if necessary.
Standardize workflows and save resources with automation
With warehouses on different continents, many manufacturers don’t have a standardized, international process for managing shipping decisions. The result? A costly lack of consistency. Each warehouse can make different choices without standardization—potentially spending too much on transportation, approving unnecessary expenses, or selecting inefficient carriers.
For manufacturers, automation can prevent these unwanted costs by creating standardized, global workflows. Manual processes like carrier selection, freight invoice auditing, and load tendering are all automated with a TMS. Automating technology lowers costs by reducing the burden on logistics teams and completing tasks more efficiently. It ensures optimal decision-making at every level—from warehouse managers to C-suite executives.
Trend awareness for an unpredictable future
Global health crises, driver shortages, geopolitical conflicts—these unexpected events can throw off inbound freight schedules. They also cause ripples down the supply chain—ultimately delaying the transport of goods to customers.
Though these risks may seem outside of a manufacturer’s control, awareness of global market trends can help them anticipate future events and adapt inbound logistics. For example, as consumption returns to pre-pandemic levels and inbound demand decreases in the US, mindful manufacturers can prepare to ramp down raw material purchase orders and store less inventory.
While supply chain conditions continue to fluctuate, manufacturers who adopt automation can retain their agility. A TMS allows logistics teams to track shipment orders in real-time, quickly submit lost or damaged claims, and facilitate supply chain event management. With up-to-date shipping statuses and trend awareness, manufacturers can gain a deeper understanding of supply chains on a global scale—and optimize inbound freight accordingly.
Holistic supply chain optimization with a TMS
CTSI-Global’s Honeybee TMS™ applies a holistic approach to supply chain optimization—promoting real-time event visibility and streamlining order management. This approach helps manufacturers tackle the complexities of freight management.
From one unified source of truth, logistics teams can examine all aspects of global inbound freight, analyze trends, and identify improvements. CTSI-Global’s proprietary logistics technology provides comprehensive oversight and cost-cutting automation—empowering supply chain leaders to make informed decisions and agile adjustments based on the most accurate data.
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