Inbound freight management is evolving in the wake of new technologies and services that offer end-to-end visibility in inbound freight processes. The period of supplier-controlled operations is also ending, but some remain in their dominant positions. As a result, they may violate the rules and standards within the inbound freight routing guide, but that is changing as well. Suppliers and vendors may now be subject to tightening compliance violation costs in inbound logistics. Shippers need to know how to use such costs as leverage over suppliers and retake control of inbound expenses once and for all.
What Are Compliance Violation Costs in Inbound Logistics, and Why Aren’t Shippers Using Them?
Sadly, there is not a way to define the exact compliance violation costs in inbound logistics as a whole. However, major retailers have stringent criteria for managing such violations, including temporary suspension from third-party marketplaces. If the issue becomes habitual, permanent bans may be used to enforce compliance. Of course, smaller shippers fail to enforce compliance for several reasons, including fear of supplier retaliation, lack of access to suppliers, lack of working capital to manage freight, uncertainty regarding digital transformation, misinformation about the implementation of new technology time constraints and more. However, improving compliance will offer significantly more benefits than risks, namely enhancing control and visibility within inbound freight operations.
Benefits of Better Compliance With the Inbound Routing Guide
Shippers that enforce compliance with the inbound freight routing guide can reap the benefits through improved inbound freight management. Some benefits of improved adherence through enforced compliance violation costs in inbound logistics include:
- Reduced inflated freight costs. More control over inbound freight costs and visibility into them ensures projected freight spend is actual freight spend.
- Greater use of freight consolidation to reduce costs. Freight consolidation effectively reduces the number of inbound shipments arriving at your dock, freeing time for truckers and improving inbound flows.
- Improved supplier communications. When suppliers understand and fulfill their obligations to the inbound freight routing guide, communications will improve.
- Reduced late deliveries and missed pickups. Better communications contribute to fewer inconsistencies or errors, including reduced late deliveries and fewer missed pickups.
- Increased accountability among shippers. Enhanced accountability among suppliers will encourage all suppliers to work together more efficiently which is what Walmart has accomplished by requiring vendors to make real changes in inbound freight visibility, such as the implementation and mandate that all fresh food producers utilize a blockchain-based technology.
How to Use Compliance Violation Costs in Inbound Logistics to Enact Change
Shippers can use compliance violation costs in inbound logistics to force suppliers and vendors to adhere to new guidelines and standards. The practices for doing so are as follows:
- Use the “streamline management” talking points.
- Offer to be the leader with your suppliers on all things inbound to your facilities.
- Outsource logistics management.
- Deploy a state-of-the-art TMS.
- Consolidate freight to avoid compliance violations that result from too many invoices/shipments.
- Decentralize the data tracking process, i.e., consider blockchain applications in your supply chain.
- Use sensors and automated data capture and identification (AIDC) to identify when issues arise.
How to Drive Inbound Freight Savings thru Improved Vendor Compliance Management
Evolve Your Inbound Freight Management Practices Now
While shippers have leveraged all sorts of technology and capabilities to improve outbound freight management, inbound freight management often falls by the wayside. Inbound freight management is traditionally thought of as a vendor and supplier control process, and shippers have felt the sting of relatively little control over inbound freight for decades. However, changes within companies of all sizes, including mandated compliance with pre-determined inbound freight routing guides, including dynamic routing guides, has changed the game. The remainder of 2019 will see more companies continue to force suppliers and vendors to adhere to their policies, and failure to do so will result in permanent changes to the supply chain. Fortunately, vendors and suppliers that’s take the time to understand these facts, as well as shippers that implement compliance enforcement, including penalties, will reap the benefits of higher profitability.
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