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.