Shape Up Inbound Logistics

Collaborative and optimized logistics can help companies attack $200 to $459 billion opportunity that exists between enterprises, according to Yankee Group

Boston August 25, 2003 U.S. companies can reduce monthly inventories $117 to $293 billion and increase sales $83 to $166 billion by improving and extending processes beyond the edges of the enterprise, according to a new Yankee Group report.

The report, "Collaborate and Optimize Inbound Logistics to Become a Supply Chain Leader," outlines how companies that use collaborative and optimized inbound logistics (COIL) can reduce transportation costs, shrink inventory levels and increase replenishment frequencies across their network of suppliers.

"As enterprises continue to search for ways to differentiate their offerings and reduce costs, the need for edge-of-the-enterprise solutions, such as COIL, will become evident," said report author Michael Dominy, Yankee Group Business Applications and Commerce senior analyst. "Typically, more than 50 percent of the waste in extended supply chain processes occurs between enterprises or beyond the edge of the enterprise."

Companies in every industry are outsourcing and relying on a network of business partners to satisfy requirements faster and cheaper. Pull-based replenishment, based upon integrated planning and execution, is the linchpin to successfully synchronizing the extended supply chain network Dominy said.

Changes in demand and inventory trigger fulfillment between supplying and buying organizations. Fulfillment results in an inbound logistics process that must be jointly managed to ensure inventory arrives at the right time and place.

Added Dominy: "As opportunities to improve business results through streamlining internal processes and functions wanes, companies can either embrace inter-enterprise initiatives such as COIL or find themselves at a competitive disadvantage, left with long lead times, too much inventory and reduced profitability."