The logistics industry is in a state of flux, and prices of today do not necessarily reflect the actual shipping costs of tomorrow. In addition, the growing complexity among carrier selection and options can make managing inbound freight pricing changes difficult at best. Unfortunately, this contributes to issues in deciding when it is time to adjust shipping directions for vendors and suppliers. Often, shippers realize their interactions are out of date well after the fact, resulting in higher freight spend. However, shippers that take the time to inform vendors of inbound freight pricing changes and directions via the inbound freight routing guide can avoid these problems.
The Challenges Arising From Poor Communication of Inbound Freight Pricing Changes
The problems with poor inbound freight management and dissemination of instructions for vendors are extensive. Poor communication with vendors and suppliers may result in significantly higher freight spend, as well as working with higher-cost carriers, delays to stocking in brick-and-mortar stores, and poor customer service. Unfortunately, vendors and suppliers that are still in compliance with outdated routing guides cannot be held accountable for a shipper’s failure to update the guide. Ultimately, shippers end up eating the costs of failure to maintain their writing; informing vendors of inbound freight pricing change as soon as they occur, such as through the use of the dynamic freight routing guide, can overcome these obstacles.
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Why Inbound Freight Pricing Changes Must Be Easy-to-Distribute
Inbound freight pricing changes must be easy to distribute and understand. It is impractical to give vendors a single carrier option, and this practice could result in higher costs when the carrier publishes a general rate increase (GRI). However, detailed inbound freight routing guides that are kept in an Excel format are also ineffective. Although vendors and suppliers may be able to use search functions, it is a time-consuming, laborious process. Instead, inbound freight pricing changes must be easy-to-distribute. In other words, systems must be intuitive, taking advantage of new resources, including a transportation management system (TMS) to empower suppliers and vendors with the right information at the right time, reports Jayne Marchesan of Talking Logistics. A TMS with an embedded, dynamic inbound freight routing guide handles the dissemination of information and gives shippers a way to proactively share changes to inbound freight pricing with all relevant parties.
How to Ensure Your Vendors and Suppliers Understand Changes
Utilizing a TMS is not the only way to ensure that suppliers and vendors know what to do with inbound freight pricing changes. As explained by Inbound Logistics, shippers must leverage the inbound routing guide to ensure that vendors and suppliers understand their responsibilities for shipping freight to your business, which includes:
- Balance your routing guides to correspond to market differences. Differences will exist in spot market rates, motor transportation, and more. Your routing guides must be balanced to consider changes in markets.
- Determine mode before selecting a carrier. Before choosing a carrier, it is essential to determine what type of mode will be used for transportation. Of course, this is an incredibly complex process, especially when shipments are sent intermodal.
- Align overall logistics with your guide. Your overall logistics strategy should align with the details and specifications with your inbound freight routing guide. As inbound freight price changes occur, it should trigger a review of your overall logistics strategy, and these changes should carry over into your inbound freight routing guide.
- Take advantage of data. The use of data is an excellent way to ensure changes to your inbound freight routing guide consider inbound freight price changes and reap real value. With an increasing number of carriers, third party logistics providers (3PLs), freight forwarders, and other parties involved in the process, the opportunities for application of data are limitless.
- Use technology. As noted previously, the use of inbound logistics technology is one of the most significant ways for shippers to share information and ensure that suppliers understand their responsibilities in response to freight price changes.
- Simple guides are easier to follow. Your inbound freight routing guide should also be simple to follow. That does not mean to avoid specifications for when to work with different carriers. Instead, shippers should make the guide intuitive, providing user-friendly tools and resources for vendors and suppliers to ensure freight is shipped via the appropriate carrier, mode, and timeline.
- Score vendor and supplier performance, providing feedback for how they can improve. Providing a way to score vendor and supplier performance, as well as adherence to the inbound freight routing guide, is essential to providing insights into line compliance issues exist and allowing such vendors to prevent them from recurring.
- Remember to revise your guide accordingly. The final step to ensuring suppliers and vendors understand inbound freight price changes is the simplest of all. The shipper should review the guide accordingly, taking advantage of dynamic freight routing tools that consider current rates, contracted carriers, and other information to make carrier selection easier.
What Does It All Mean?
Inbound freight management is only going to grow in complexity. Shippers that do not have a handle on inbound freight routing and management will see increased freight spend and risks that adversely affect consumer experiences. Instead of leaving it to chance, shippers should follow the eight best practices for using an inbound freight routing guide and ensuring it is up-to-date.