Inventory Optimization For Logistics Teams

Published on
Jun 14, 2024
Written by
Michael Rentz
Read time
6 Minutes

Michael Rentz

Chief Revenue Officer

Container Lifecycle Management is a phrase we coined to describe the way logistics professionals conceptualize their jobs, and to describe our platform that mimics that process, the Container Lifecycle Management™ platform. But ultimately container lifecycle management (“CLM") is Inventory in Transit Lifecycle Management. Understanding this and implementing inventory optimization practices positions logistics managers as true business managers, because inventory, and therefore containers, are cash - or potential cash that is vital to running a business.

The concept of CLM covers a wide range of processes that fall under the umbrella of “logistics.” However, logistics is not a monolith, and logistics doesn’t consist of the same 2-3 tasks/objectives on a daily basis. Nor on a monthly, quarterly, or yearly basis for that matter. Logistics more so consists of managing 10+ tasks/objectives continuously, but while being able to quickly and intelligently prioritize, and reprioritize, the rank order of those tasks/objectives with regards to importance, due to unforeseen extraneous shocks to a company’s system or supply chain.

For example, when demand is very high, the most important task/objective of the logistics team is first, to keep the containers moving to ensure that they arrive on time and in a predictable manner. And second, to minimize unnecessary costs that typically balloon during periods of uncharacteristically high demand - demurrage, detention, chassis fees, per diem, etc.  

You could say the overarching objective in logistics, specifically international container logistics, is to keep the containers moving, but there is always a “B” to the “A.”  

It would appear as “keep the containers moving (Objective A), AND ….(Objective B)”.  

In the case of times of high demand, “keep the containers moving (Objective A), AND avoid and minimize unnecessary accessorial/equipment fees (Objective B).” That’s obviously easier said than done, and it doesn’t mean that there are not 10+ other tasks/objectives that need to be managed by the logistics team at the same time. Those others just aren’t as important as Objective A and B.  

A good logistics team understands all of this and build processes and implement systems that not only help them manage many of their specific tasks/objectives, but also allow the team and their systems to quickly recognize new extraneous factors, adjust accordingly, and reprioritize the importance of the task/objectives - and ultimately shift the attention of the team to the new priorities.  

A list of the “other objectives” that have been mentioned throughout this writing could be categorized and listed as accessorial fees, network flexibility, carrier selection, rate negotiations, and many more. All of these are important, but when there are unforeseen circumstances or changes in strategy due to new or updated business objectives, which of those issues takes priority?

Having full alignment of strategy, team, systems, and processes is necessary to perform as a fully functioning logistics unit that delivers beneficial, and great, business value. That is ultimately the goal and how logistics is evaluated – does the logistics team get the job done or are they getting the job done AND helping drive business objectives (increase revenue, optimize profitability, avoid unnecessary costs, reduce risk).

Shifting Bottlenecks and Shifting Objectives

Over the last couple of years demand has been unusually high, and the ports were the bottleneck in most supply chains. This made avoiding unnecessary accessorial fees such as demurrage and detention the other primary objective (Objective B) for most logistics teams.  

But what happens when new extraneous factors result in a drastic drop in demand, high levels of inventory, a fast and large increase in interest rates, and various areas of economic uncertainty like we are seeing now (April 2023)?  

For many supply chains the bottleneck has shifted from the ports to the Distribution Centers (“DC”), which means priorities must shift.  

In today’s world, many BCOs are struggling with having too much inventory on hand, rendering their DCs inadequate, putting a strain on their supply chains, and ultimately the company. The systems that were put in place or implemented to handle the very high demand during, and immediately following the pandemic, no longer work, and the supply chain is being scrutinized again as a growing unrealized cost, but this time because of the decreased opportunity to convert inventory to cash.

Inventory management and optimization, consequently, has jumped to the forefront for many companies’ priorities as holding costs increase. And in many cases, improving inventory management has fallen on the desk of the logistics team.

Inventory Optimization

Adding Visibility to Facilitate Inventory Optimization

To facilitate effective inventory management, and ultimately create inventory optimization to reduce holding costs, logistics teams need visibility into that inventory in-transit. They need to know which goods are in which containers, including all the details associated with those goods, and be able to seamlessly compare those goods in transit to the total inventory of their warehouses to make quick and reliable decisions regarding their entire inventory profile. 

Having visibility into goods in-transit allows businesses to explore new, creative ways to quickly convert their expensive inventory into cash, outside what may have been their traditional business practices. They can explore opportunities like selling goods before those goods arrive at their warehouses, creating a “warehouse on the water” concept.

The idea is that accurately forecasting and managing your finished goods-in-transit, then you can begin to sell goods while they are in-transit or at least avoid time-consuming bottlenecks (distribution centers) to make sure high-demand goods get to the customer quickly. This gets inventory off the company’s balance sheet faster, and helps the company avoid prolonged, high interest driven carrying costs.  

The strategies will vary by commodity, and certain commodities like just-in-time (automotive) or high velocity goods (retail), typically don’t list goods for sale until they are in their domestic warehouse. But this inventory management and optimization is what we like to call Inventory Lifecycle Management.

Inventory Lifecycle Management in Practice

To effectively manage and optimize inventory, logistics teams need reliable real-time visibility into where their goods are, how they are moving, and when they will arrive at the port and/or to the warehouse.

This starts with complete and accurate container tracking data and being able to associate the current PO and line-item details to the appropriate containers holding those goods. Because without complete and accurate container tracking data, logistics teams cannot reliably know where the goods are, or reliably predict ETAs.

Practically, a company could start small by identifying goods/containers that have cleared customs and are in route domestically (drayage, rail, transload, etc.) to their final destination warehouse. This domestic in route phase is typically the most reliable leg of the container lifecycle, allowing it to be a natural extension of the current warehouse. 

Accomplishing this would likely require containers to be packed at origin differently with changes to the company’s PO Management, and potentially adding new methods of deconsolidation and reconsolidation at origin or destination, with methods such as transloading.

However, if this process were to become highly predictable and reliable, the benefits could be huge for the entire business by improving the balance sheet, and saving a tremendous amount of money.

Utilizing the Container Lifecycle Management™ Platform for Inventory Optimization

While this might sound like a pipe dream, all of it is already possible with Gnosis Freight’s Container Lifecycle Management™ platform.  

It starts with connecting the CLM Plus platform with a company’s ERP to pull in PO and Line-Item details (SKU, quantity, volume, weight, cost, customer, etc.) for all the goods in every single container. This PO and Line-Item detail combined with Gnosis Freight’s own container tracking data allows for predictive analytics around when goods will arrive at a DC, or to a customer if doing a direct shipment.

Gnosis Freight’s proprietary “DC ETA” can be viewed at the container, PO, or individual goods level, enabling improved inbound container forecasting, inbound SKU forecasting, and DC labor scheduling based on expected container arrivals.

Next, by adding the Inventory Optimization Enhancement to CLM Plus, logistics teams have the visibility to know what is on the way to the DC, the amount of inventory at each DC, safety stock levels, what has already been allocated to each customer, and what their customer contracts stipulate in terms of goods to be delivered within specific timeframes.  

More importantly, it gives them the ability to allocate or redirect in-transit goods/containers to specific DCs or specific customers, including to specific stores or customer warehouse locations.  

Based on the logistics team’s desires, these allocations can be set up to happen automatically using Gnosis’ proprietary Inventory Optimization Algorithms to allocate or redirect those goods/containers based on current inventory levels and contractual obligations. Or those allocations can be done manually within the CLM platform, with the details being transmitted to the company’s ERP or WMS.

Logins with specific user roles and views can also be provided to internal stakeholders such as the warehouse, purchasing, finance, and sales departments to enable the logistics team to work alongside different business units more effectively to make real business decisions on how to optimize inventory together, especially inventory in-transit.  

Additional CLM Enhancements such as PO Management, Booking Visibility, Transloading, Scheduling, Drayage Optimization, and others can be added to help facilitate and streamline other processes involved in optimizing inventory end-to-end, or as we like to say, manage the entire lifecycle.

The Container Lifecycle Management platform is a paradigm shift in the logistics technology world. It empowers logistics teams to do their job while also enabling them to contribute to much more than just managing exceptions. It isn’t just logistics software, it’s business software. Logistics Managers are really business managers, and the Container Lifecycle Management platform empowers business through logistics.