Insights Into Strategic Inbound Optimization
As a business owner or manager of any sized company, you’re always looking to make informed, responsible decisions when it comes to logistics and shipping of your products. Cutting costs that decrease your overhead may seem like a smart move at the outset, but sacrificing quality doesn’t really save you money in the long run.
Wise business owners know that shifting resources and other approaches to improving inbound logistics can help your bottom line.
However, it’s not always easy figuring out where to begin when implementing a strategic inbound optimization initiative for your company. Studying current trends and best practices in other companies can offer some insight, but it’s impractical to go onsite and take a glimpse into the methodology of every single one.
Fortunately, The Aberdeen Group has recently surveyed over 160 companies in the areas of manufacturing, wholesale distribution, and retail who documented their approach to strategic inbound transportation over time. Those practices which emerged as being highly successful are worth sharing.
Implementing Foreign Trade Zones
To gain the best advantages of tariff and duty reductions, many companies are looking to Foreign Trade Zones (FTZs) as a strategy to optimize their inbound logistical costs and improve service. An FTZ is an area within a U.S. port that is designated for trade of commercial merchandise, but which is considered to be a foreign district for trading purposes. Because the goods are treated as outside the U.S., customs duties and tariffs are relaxed. A second benefit for implementing FTZ is that product components can be shipped, and then assembled in U.S. factories, which allows for higher levels of customization and fewer delays.
Establishing a Periodic Strategic Inbound Planning Process
In order to implement best practices, it’s wise to engage in a process known as Periodic Strategic Inbound Planning. Companies need to review available alternatives and weigh these against their forecast volumes and inbound logistics. The process essentially involves analyzing a few factors:
- Review the cost and service requirements, and balance these within your Strategic Inbound Optimization alternatives.
- Look at whether the benefits of FTZ implementation justify reshoring or nearshoring certain operations.
- Determine whether consolidating cargo shipments would provide cost or service advantages.
- Even if consolidated shipments make sense initially, also consider whether they fit within a long term strategy to optimize logistics.
Re-balancing Strategic Sourcing Shifts
Today’s global economy has led to significant changes in the supply chain, causing companies to shift the geographic location of their suppliers. As such, strategic sourcing shifts are necessary to optimize inbound logistics, with two approaches having become priorities.
Reshoring involves bringing sourcing operations back within the U.S., while nearshoring entails moving closer, such as Mexico and Latin America. As a result, companies must re-leverage their shipping strategies and costs to account for the new realities. The top 20% of companies surveyed by The Aberdeen Group reported that they engaged in a total costing analysis before implementing these shifts, and utilized the best practices for optimizing both rates and service.
Shedding light on the practices that proved successful for a cross section of manufacturing, wholesale distribution and retail companies is useful for businesses motivated to optimize their inbound logistics. The modern global economy requires companies to make wise decisions in the increasingly complex world of shipping, trucking, and other elements of logistics.