The scenario may be familiar to many: A customer reports that their order has not been received, and it is discovered that the goods have reached your distribution centre… but never left it… causing a significant escalation of the issue, often reaching as high as the COO or even CEO.

This situation, while seemingly straightforward, often has a profound impact on both costs and sales, an impact that is frequently underestimated.

The Hidden Costs of Inbound Logistics Inefficiencies

Through our extensive experience across various industries, we have identified that such scenarios account for approximately 10-35% of non-deliveries. They also cause additional supply chain costs of 10-15% or more. These costs arise from various factors, including additional rounds of picking, packaging materials (pallets have become very expensive), and increased transportation needs, which subsequently contribute to a higher carbon footprint.

At the core of these challenges are inefficiencies and errors in product identification during the inbound process.  This not only demands an additional 2-5% in logistics resources, but also results in a similar percentage of working capital being tied-up in ‘stagnant’ inventory.

Challenges in Standardizing Supplier Processes

The root causes of these challenges can be traced back to the diverse standards and quality levels in inbound interfacing, labeling, and packing. This diversity leads to a predominantly manual and error-prone process.  Despite theoretical expectations, pallets are often not scanned and processed efficiently, resulting in inbound processing times ranging from a few hours to several days. This inefficiency means that while goods have physically arrived at your warehouse, they are not logged as available in the sales system, leading to frustration for both sales teams and customers as products seem to regularly disappear into a logistical black hole.

The persistence of these issues can be attributed to the prevailing belief that standardising interfacing, labelling, and packaging across all suppliers is the only solution. Given the diversity and scale of suppliers, ranging from very large (inflexible) companies to very small suppliers, such standardisation is often impractical.  Additionally, the tendency to view these issues as minor IT problems, delegated to the lower echelons of the IT department, exacerbates the situation despite the significant business impact.

AB Advisors’ Strategic Approach to Inbound Process Optimization

At AB Advisors, our approach to resolving this critical business issue is two-fold…

Firstly, we quantify the problem, demonstrating its comprehensive impact across the Value Chain to garner the necessary high-level support for a robust solution.

Secondly, we adopt a unique strategy, segmented into three key areas:

1. Standardisation of interfacing and/or labelling for the internal suppliers (e.g. our factories) to ensure a consistent and effective process. This often requires a re-evaluation of the information necessary to streamline the downstream logistics process.
2. Addressing large external suppliers, who, for various reasons, cannot adhere to the standardisation. Solutions here often involve a “middleware” for data translation or incorporating additional variants in the inbound process to accommodate these suppliers.
3. Managing the multitude of smaller suppliers by implementing simple, straightforward tools that enable efficient recognition and processing of incoming goods, thus significantly reducing processing time and associated delays without having to build an individual solution to cater for each of these small suppliers.

If this challenge resonates with you and you are seeking insightful solutions, we invite you to contact us for a complimentary consultation.