Companies can trim their distribution costs by better managing their inbound transportation, but the key is getting control of it, distribution executives said.
The executives, speaking at an inbound transportation seminar sponsored by the New York-based Center for Logistics and Transportation, all agreed companies must first gain control of the inbound traffic process.This may seem basic but some large companies do not know who controls their inbound transportation, said Paul A. Lacouture, vice president, operations, NYNEX Material Enterprises Co.
In some companies, he said, inbound freight is handled by the purchasing department, in others, by the traffic manager, or the warehousing and distribution people, or even the manufacturing personnel.
But it should be handled by just one department, said Peter D. Sweeney, manager, transportation programs, Nabisco Brands Inc. of Parsippany, N.J.
This helps all staffs communicate with each other directly through a central contact and is of immense help in emergencies, he said.
Mr. Sweeney said the Parsippany, N.J.-based company has a $250 million annual freight bill. You must educate purchasing people that there is an expense whether they see it or not, Mr. Sweeney said.
After gaining administrative control, companies next should determine what their distribution focus will be - either service, cost performance, or price, he said.
This entails knowing the intricacies of volumes of inbound traffic and emergency shipments. Without this information, it will be difficult to sell your position to upper management, he said.
Then companies should develop an internal process for channeling all distribution deals through a central office, ensuring conformity, he said. You must gain organizational support, if other departments are out cutting their own deals, the process won't work, he said.
When negotiating, bring all the information vendors need, Mr. Lacouture said. They need to know how much business you're bringing to the table, he said.
A crucial item is establishing a measurement system for discounts, he said. Discounts in relation to percent of sales are difficult to gauge because different products sell at different percentages, he noted.
NYNEX prefers to use common carriers for its inbound freight to save money but uses its private fleet for outbound freight for more flexibility. Customers like our personal touch so much they give us the keys to their buildings, he said.
Getting a handle on inbound freight is vital in light of the decline of LTL carriers, said David E. Lynch, operating vice president, transportation and imports, Caldor Inc.
As more and more people drop out of the marketplace, the remaining carriers are not that flexible, he said. He added that the rate advantages shippers enjoy now will end soon.
He said the Norwalk, Conn.-based firm chooses its carriers on the basis of equipment, service, geographical coverage and financial strength. But the most important factor, Mr. Lynch said, is value-added services such as electronics capability.
He describes some of these services as electronic data interchange links to its carriers and each of its 117 stores, automatic labeling in some warehouses and electronic billing.
He said the company is online with a household goods company whose computer link-up allows customers to get answers even when salesmen are out of the office.
Value-added service is how Caldor beats its competition, Mr. Lynch said.