Leveraging potential with inbound supply chain management, by AEB International
Written by Phil Lavin (pictured right), Sales Manager, AEB International
Striving to improve the efficiency of today’s global, multi-layered supply chains, many companies overlook the untapped potential of the inbound supply chain, which extends from the suppliers to manufacturers’ production centres or retailers’ logistics centres. Its management - i.e. controlling all workflows from procurement and goods receipt to supplying production or distribution centres -holds huge potential for optimisation. Five specific areas warrant particular attention:
Inbound transportation management
Longer delivery routes based on the growth of international procurement as well as on high transport intervals, which result from lower inventory levels and supply concepts such as “just in time”, make inbound shipping one of the most important cost factors in the supply chain.
Many businesses are discovering the benefits of organising and controlling their own inbound shipments instead of leaving them to their suppliers. Take retail giant Wal-Mart, who announced in 2010 that it would gradually take over control of its inbound shipments and manage its own fleet of trucks and regional carriers. This has the potential for significant cost savings, as large multinationals often handle much higher shipment volumes than their suppliers and can therefore negotiate better conditions with their carriers. Adding the inbound shipments also increases their total freight volume, giving them more leverage in negotiations and opening the door to comprehensive optimisations such as combined inbound and outbound shipments or all-inclusive milk runs.
Freight cost management
Companies who manage their own inbound shipments can also benefit from analysing their inbound freight cost management processes, i.e. the workflows associated with selecting, hiring, billing, and monitoring their transport service providers. The biggest optimisation potential lies in freight invoice auditing; freight cost calculation and carrier integration; successful, long-term partnerships with transport service providers; and the automatic reallocation of freight costs to controlling accounts, cost centres, departments and products.
Integrated loading dock management
Loading dock processes are a particular challenge, with unscheduled wait times and inefficiencies in inbound delivery and pickup processes adding to the cost. Companies that manage their own incoming shipments know exactly which goods are arriving at the production or storage facility, and with which carrier. Using time slot management software, they manage their entire loading dock activities quickly and easily, assigning and reassigning specific time slots as needed, and granting direct access to carriers for transparency and efficiency.
Inbound customs management
Complying with customs regulations is challenging, particularly across global, multi-level procurement networks. But businesses who manage their own inbound shipments also benefit from organising their own import processes: a 2011 study by the Aberdeen Group found that the cost of in-house import management was up to 85 percent lower than outsourced import management. Ideally, import management is embedded in the transport processes to ensure that incorrect, missing, or delayed import declarations don’t result in delays. Businesses with high import volumes should aim to declare and clear goods through Customs electronically while they are still en route. To facilitate this, the customs software should be integrated into the logistics processes.
Supply chain visibility and collaboration
Companies who organise their own inbound supply chain processes obtain greater transparency over incoming shipments and their current status. But even the most sophisticated IT systems cannot operate at their full potential without high-quality data. Visibility or track & trace tools monitor shipments, enabling supply chain managers to respond quickly to any problems.
Working with an exclusive, reliable group of suppliers also helps to establish high-quality transport processes. It’s much easier to calculate the individual links in the supply chain when the carrier uploads data about lead times and supply bottlenecks early on. And the more precisely a company can estimate which transport volumes will arrive at a site and when, the better it can plan and coordinate its own downstream processes, make better use of warehouse resources and improve the overall management of the logistics chain.
The efficient management of inbound supply chains leads to increased transparency across the process chain, greater control over the national and international supply chain, improved responses to disruptions and internal planning, higher cost efficiency and control, better information to pass along to customers, and the efficient utilisation of service providers and carriers. When choosing an IT solution to realise these benefits, particular attention should be paid to end-to-end system integration. Ideally, the entire inbound process should be managed in one system, eliminating interfaces, data redundancies and the likelihood of errors while ensuring transparency, efficiency, speed and stability. And this in turn increases a company’s competitive advantage – a major factor in today’s fast paced, globalised markets.
 Globalization – Linking Supply Chain Transformation to the Profit and Loss Statement, Aberdeen Group, September 2011.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”