Simple Tactic:  Use Compliance Management to Eliminate Unnecessary Transportation Operating Expense

by Mike Starling

 Controlling budgeted transportation expense is a highly desirable thing, right? And you have a fairly large number of vendors that your company is purchasing product from, right? And you find that you and your staff spend an inordinate amount of time trying to determine the status of various inbound shipments, some of which you do have control over, since you are paying the freight. BUT, oh those pesky Sales guys who “Need this stuff for our customers” are demanding you track and trace the ever-popular “hot” inbound shipments as well. Only one problem: the shipment is “prepaid,” and you don’t control the carrier or the scheduled arrival at the DC. Does this ever happen to you?

Well, there are several things at work here that you need to think about.

⦁    For those inbound shipments that you do control (e.g., inbound collect), to what extent do you require from the vendor and the carrier a report that provides you and your staff visibility up the supply chain?

⦁    For those inbound shipments that you don’t control (e.g., inbound prepaid), to what extent do you require from the vendor (and his carrier of choice) a report that provides you and your staff visibility of the status of the inbound shipment?

⦁    For the Sales/Inventory Control/Purchasing requests to track that “HOT” inbound shipment for which the purchasing freight terms are “prepaid,” have you explained to the other departments that you have no control over this situation and that it should not be used as an excuse for some shortcoming on their part related to the terms of the purchasing contract or poor communication between sales/inventory control and the vendor? Clearly these drills are a waste of Transportation staff time and resources.

So, is there an easy solution to the above problems? Yes. The savvy Transportation Manager invests time and energy developing and implementing a Transportation Compliance program that puts the onus on the vendor or carrier to report benchmark KPI data.

This should start with a requirement for the vendor to notify the Transportation department of the date/time/PO# when the shipment will be ready for pickup, regardless of whether it is a prepaid or collect shipment.

NOTE:  Don’t let the Tail Wag the Dog here on your inbound collect. I worked with a client who was having problems getting timely inbound shipment deliveries from vendors. Found out that a) he did not require a minimum lead time notification to facilitate “on time delivery” into his DC. Vendors would call for him to come pick up his order — less than 24 hours before the PO due date into the DC. Vendors were not penalized for this, and as a result, he and his staff were constantly under attack for “poor transportation performance” on these inbound shipments. The solution:  it was up to him to tell the vendor when the shipment must be ready for pickup, and there would be a penalty charge for non-compliance. The problem went away in a very short time.

If it’s a prepaid shipment, they should also provide the name of the carrier, and ETA to the DC. And subsequent confirmation of shipment dispatch date/time/BofL reference number.

For the inbound collect shipment, your carrier should routinely provide you with similar information, plus actual delivery confirmation date/time/etc. at DC.

All of this should be documented and specified in a Compliance Management for Inbound Vendor Shipments program summary that includes a “non-compliance” charge for each KPI infraction. Why? Because there is a cost to YOU for THEIR non-compliance. Your objective as a Transportation professional is to optimize both Inbound Transportation Operations AND Minimize Operating Expense.

In order to implement such a program, all parties to the inbound purchase/shipment must be educated about the WHAT and WHY of the program’s goals and objectives. In addition, you need to stress that non-compliance will result in a chargeback at the rate specified in the document. The intent here is not to punish; rather it should be stressed that everyone benefits from an optimized inbound program. That is the expectation.

Finally, the Compliance Management program should be sold to upper management on its operational and financial cash flow merits, as their backing and support will be required when the vendor and carrier Squawk and Balk upon finding themselves faced with the reality of the first actual chargeback.

So, if you want a smooth-running inbound vendor shipping program, it could pay you (literally) to consider developing and implementing a Transportation Compliance program. THINK ABOUT IT!

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