The performance and activity classification of suppliers should be used in conjunction with the SKU inbound activity classification to segment the inbound logistics activity into nine or more segments.  As a minimum, specific inbound strategies should be developed for A items inbound from A suppliers, A items inbound from B suppliers, … , to C items inbound from C suppliers.  This segmentation will suggest an initial rationalization of the supply base and a streamlining of the alternative logistics programs for specific inbound flows.

 

The logistics information system should support a segmented logistics policy with logistics strategies developed uniquely for ABC x ABC supplier-SKU segments. An example appears in Figure 1 below.  The figure presents an inbound logistics strategy developed for a recent client.  Suppliers are classified by size and performance into A, B, C, and D categories.  Seven commodities and A,B,C, and D classes of items based on unit sales and item popularity have been specified.  For each cross-section of suppliers and items an optimal inbound logistics strategy is recommended based on improvements in customer service and logistics cost reductions.  The optional strategies include:

 

  • Vendor managed inventories (VMI) for stable, popular items coming from reliable suppliers;
  • Cross-docking for time-sensitive products;
  • Traditional warehousing and delivery for slower moving products and commodities;
  • Consignment inventory for promotional items; and
  • Outsourcing to wholesalers for the slowest moving items in all categories.