Unlocking cost reductions in logistics implies a direct need to improve warehouse and facility inbound logistics and outbound order fulfillment. Unfortunately, inventory control remains at the fringe of proactive logistics management. Organizations have spent years creating lean logistics strategies that are highly susceptible to disruption. However, the integration of last mile logistics, also known as final mile integration, with existing supply chain systems can overcome the top challenges of poor data application in inventory management, streamline all logistics processes, and generate strong returns. As a result, shippers and supply chain executives need to understand a few things about final mile integration to make it successful.
Ported application and inventory management results in a direct increase in the inventory carrying costs. Meanwhile, the demand for more capacity across both outbound and inbound logistics has never been higher. According to Seth Holm of Freight Waves, tender rejections by carriers have risen for seven consecutive weeks, and that trend is only likely to increase. Part of the rejection rate does involve the ability of warehouses and shippers to replenish stock before shelves run dry. In other words, operating on marginal stock means that demand will outpace capacity and inevitably lead to higher costs for both inbound and outbound logistics. Since the final mile is involved in both phases of logistics and continues to form most logistics spend, a lack of shared data creates inventory management inconsistencies.
According to Logistics Management, an example of this problem is as follows:
“OMS software includes specific functionalities that can give shippers a high level of confidence that the inventory will be there when they need it. This is critical because it eliminates the possibility of selling an item and then finding out that the last one on the store shelf sold an hour ago (but wasn’t entered into the system yet because the retailer’s point of sale [POS] system isn’t integrated with its OMS.”
Without integration to ensure the proper data sharing through both the OMS and POS, the final mile logistics management process becomes obsolescent and lacks value. Clearly, today’s carriers are more confident in their ability to reject freight, and as a result, shippers are struggling to secure appropriate line haul carriers and manage both the inbound and outbound transportation lifecycles. However, a solution exists in the form of final mile integration.
Final mile integration involves using technology to streamline the sharing of data and information from supply chain systems to third-party platforms and beyond. It is an endless, connected process that involves terabytes of information and necessitates real-time access to information. After all, carriers are less likely to reject a tender when they understand the full scope. With respect to final mile logistics and its role in inventory management, the final mile without data is immensely uncertain. What happens when a facility lacks a proper dock for unloading? What happens when a shipper cannot receive products during certain business hours? Vast uncertainty is everywhere in the modern world, and those same concerns apply to business-to-consumer logistics as well.
Instead of hoping carriers have a clear picture of what is expected, shippers can eliminate all doubt and provide carriers the information needed through final mile integration. Furthermore, integration of final mile is critical to taking advantage of multi-model capabilities to effectively transform final mile logistics into a hybrid LTL and final mile strategy. It sounds confusing. However, the possible rewards far outweigh the appearance of a higher upfront cost. Essentially, working with a system that leverages final mile integration ensures the quoted price is what shippers pay for logistics, allowing for more resources to be used in reordering inventory, connecting with consumers, and better planning for the demand changes.
Achieving integrated final mile logistics can be complex. Imagine the typical steps of building an integrated final mile strategy in-house. Shippers would need to find and secure all available carrier and distributor fleets. They would need to create logins for each system, and even using email will quickly prove inefficient. However, shippers can avoid these issues by following a few best practices to achieving final mile integration, including:
End-to-end improvements in inventory management and replenishment hinge on proactive logistics management. It is not enough to simply maximize efficiency on outbound logistics. Shippers and supply chain executives need to focus on the whole picture, including both inbound and outbound logistics, and how those processes always include a phase of final mile transportation. Final mile integration is the next frontier in reducing total freight spend and unlocking improvements in inventory management cost reductions.
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