Media Coverage
December 2009
Inbound and outbound can live in the same universe
Some cosmologists believe that for every particle of matter in this universe, there exists a complementary particle of anti-matter in another separate universe. Where exactly that universe is, is hard to say, but the theory is that if these two universe are to collide they will both be destroyed instantly as matter and anti-matter explode in a fireball of mutual annihilation. What is the relevance of this to logistics? In many warehouses and distribution centres, the inbound and outbound transport are treated as if they too are mutually exclusive activities that that would explode on contact if they are ever brought together. It is true that the inbound legs are usually paid for by the supplier and outbound leg is paid by the distributor, but everyone knows that nothing is for free so even if the supplier includes the inbound transport in his cost it is still being paid for.
To make this a bit more practical lets think about a typical medium size distribution business. Let us say the business is called Atlas stationery. Atlas is a reseller of stationery, envelopes and such from big manufacturers to shops and supermarkets. Of course any other commodity would do equally well for our example. The way that Atlas work is approximately once a week they place orders on their suppliers for replenishment stock which is delivered by the supplier. In addition, Atlas has fleet of their own vehicles delivering to their customers. The suppliers in turn have their own fleets and deliver to Atlas within their service promise usually within one or two days after the order is received.
This seems like a perfectly reasonable arrangement except when you think about a few things. First, both the supplier’s vehicles and Atlas’s vehicle return home from their deliveries empty. What if one of the suppliers is near to, or on the delivery path of one the Atlas vehicles? Wouldn’t it make sense to have the vehicle pick up the delivery and bring it back to the Atlas warehouse rather than returning empty? Second, Atlas, like many other businesses experiences both weekly and monthly cycles. They have higher deliveries at the beginning of the week after the weekend, but also experience higher volumes at the beginning of the month since their customers want to maximise their cash flow benefits. This means that the Atlas fleet is often under used at the end of the week and the end of the month. Vehicles stand idle or return from short trips before midday. Again, it would make sense to use these idle periods to pick up inbound deliveries rather than pay the supplier to make the delivery. The third point is that many manufacturers work 24 hours whereas the distributors may only work 8 hours a day. This means that the inbound loads may be available to be picked up at night when the distributor’s vehicles are again idle. It may be necessary to hire a second shift of drivers to do these night time pick ups, but at least the trucks are being maximally used and if the inbound deliveries are handled at night, they will not disrupt the day time dispatch activities.
In some environments where specialised vehicles with refrigeration or other adaptations are used the costs for these vehicles is even higher so not combining inbound and outbound deliveries is even more expensive.
Of course to achieve the efficiencies mentioned here a high degree of collaboration between the manufacturer and distributor is required, but in the end, both will benefit from the decreased cost of transport and we have never actually observed any negative effects (much les a huge explosion) when an inbound load is carried on an outbound vehicle.If you have any comments or questions, please e-mail me at david.lubinsky@opsi.co.za.
