All facets of your logistics processes are important. When the inevitable problems come up, whether inbound or outbound, they can affect production, customer service, and ultimately profits.
Are you in or are you out? In terms of logistics processes, “in” would imply resources and materials coming in to your business to facilitate production. “Out” would be finished goods on their way to their final destination. The continuous movement of these flows are the processes that make up inbound and outbound logistics.
Virtually every business that handles physical goods relies on inbound and outbound logistics processes in order to operate from day to day.
Moreover, when these processes are optimized, other processes benefit in turn. On the inbound side, things like restocking and developing new products become easier to coordinate. And on the outbound side, fulfillment to customers runs smother with more shipments arriving on time.
Familiarizing yourself with the intricacies and dependencies of all inbound and outbound logistics processes gives you a clarity on how to better manage your resource flows and remove potential bottlenecks.
What is the Difference Between Inbound and Outbound Logistics?
Inbound logistics focuses on the movement of materials into a company, while outbound logistics involves the movement of finished products out of a company.
Perhaps one of the best ways to illustrate the difference between inbound and outbound logistics is to use an example we’re all too familiar with:
Have you ever had a notification of a delayed shipment?
If you need the shipment for processing your own goods, that’s inbound logistics. If the shipment is supposed to be on its way to fulfil a customer’s order, that’s outbound logistics.
One other point to consider is that the very nature of inbound vs outbound implies some form of median between the two. For all intents and purposes we can consider this point the receiving warehouse or centralized distribution centre.
Inbound vs Outbound Logistics Core Differences
|CORE FEATURE||INBOUND LOGISTICS||OUTBOUND LOGISTICS|
|Flow of Goods||Inwards|
|Order confirmation & processing|
Picking and Packing
|Function||Obtaining goods and materials the company needs to manufacture products||Meeting customer demand and supporting sales processes that generate revenue|
What Is Inbound Logistics?
Inbound logistics involves how raw materials and goods flow into a company. This includes such steps as ordering, receiving, storage, transportation and management of incoming supplies. In other words, the inbound logistics process focuses on the supply portion of the supply and demand equation.
Specific Inbound Logistics Activities:
- Sourcing and Procurement
- Ordering and Purchasing
- Materials Handling
- Storage and Warehousing
- Inventory Management
- Reverse logistics
Depending on how a company handles incoming goods, industry type and buyer-seller relationship, the company may manage its own inbound logistics or outsource it.
How to Optimize Inbound Logistics
In a larger sense, optimization of any company process creates an opportunity for growth through redistribution of resources. With inbound logistics, this means faster, leaner, more agile and cost-efficient operations. It also means assessing every process, identifying strengths and weaknesses, and then making the necessary improvements.
- Measure current performance.
Examine potential inefficiencies concerning expenses, waste, quality degradation, redundant tasks, information gaps, and delays when optimizing inbound logistics. Consider hidden or intangible expenses like inventory carrying costs and the repercussions of subpar customer service, which can add complexity. Additionally, assess your operations against industry standards and competitors for comparison.
- Analyze choices.
Monitor the impact of your choices on both cost and efficiency within the scope of optimizing inbound logistics. Key cost influencers in inbound logistics include procurement, supplier oversight, transportation, reception, storage, material handling, and inventory control.
- Develop strategies to counter inefficiencies.
Recognize the need to balance trade-offs among various activities. Employing automation and analytics empowers a more data-centric approach to decision-making.
- Build strong supplier relationships.
Robust supplier partnerships can result in advantages like improved terms, shorter lead times, cost efficiencies, and enhanced stability amid market changes. Placing importance on communication enhances your suppliers’ comprehension of your operations. Establishing a supplier compliance strategy outlines your specifications and repercussions for errors, such as late deliveries or deviations from route guidelines. This approach can lower shipping and warehousing expenses, amplify efficiency and precision, and elevate customer satisfaction.
- Use a Warehouse Management System (WMS)
Warehouse Management System (WMS) software enhances warehouse efficiency by optimizing tasks such as receiving, storage placement, inventory control, and order picking.
- Use a transportation Management System (TMS)
A Transportation Management System (TMS) software automates, oversees, and enhances freight operations. It evaluates shipping quotes and service levels from various carriers, arranges shipments, and monitors their progress until delivery. These insights enable businesses to cut expenses, enhance efficiency, and achieve comprehensive transparency within their supply chain.
- Combine deliveries:
Shipments categorized as Less-than-Truckload (LTL) typically entail elevated shipping expenses and extended receiving durations. Challenges in consolidating these shipments may arise due to varying handling requirements, such as refrigeration for specific goods. In scenarios where achieving full truckloads is problematic, enlisting a third-party logistics provider (3PL) allows for merging partial loads from multiple customers.
What Is Outbound Logistics?
With outbound logistics, the emphasis shifts to the demand side of the supply-demand dynamic. This entails the storage and transportation of goods to the final customer or end user, encompassing stages such as order fulfillment, packaging, shipping, delivery, and associated customer service.
Specific Outbound Logistics Activities
- Warehouse and Storage Management
- Distribution Channels
- Inventory Management
- Delivery Optimization
- Last-mile Delivery
How to Optimize Outbound Logistics
Optimizing outbound logistics requires efforts designed to improve relationships and negotiations. Technologies can be used to figure out optimal delivery networks, plan routes, organize schedules and, ideally, reduce costs.
- Understand faster delivery systems.
n order to comply with swift shipping criteria set by carriers, it might be necessary to establish product staging within distribution centres. This could involve organizing shipments according to distribution centre directives and customizing packaging to align with their specifications. Certain sectors, such as wholesale food supply, might utilize a lumper service at distribution centres, engaging third-party personnel for trailer loading or unloading. The objective is to expedite operations, enabling quicker turnaround and driver rest periods. It’s crucial to ascertain whether lumping services will be employed by the distribution centre, as these additional costs need to be factored in.
- Adopt current inventory strategies.
The prevalence of Just-in-Time (JIT) inventory and other swift replenishment techniques has shifted away from the traditional practice of delivering substantial orders to customers with considerable time gaps. Given that JIT customers generally lack ample storage space for excess products, adjusting your outbound logistics to align with these inventory trends becomes essential. This adaptation might involve accommodating a higher volume of Less-than-Truckload (LTL) orders.
- Build and improve partner relationships.
Build strong partnerships with essential outbound logistics stakeholders – both customers and freight providers. If your industry involves sales to significant retailers with intricate supply chains, these partnerships could yield valuable insights. Establishing a rapport could prompt data sharing on your product’s performance, facilitating refinements in production, order fulfillment, and shipping. Close engagement with freight carriers can provide insight into strategies such as concentrating business with a select few shippers, potentially improving control over pricing and service level agreements.
- Use smart route planning.
Implementing automated route planning can minimize delivery waiting and travel times. These time savings have the potential to lower fuel expenses and enhance customer satisfaction.
- Consider partnering with a 3PL provider.
For many businesses, the details and expenses tied to outbound logistics render outsourcing to a third-party logistics provider (3PL) a strategic decision. The substantial scale of 3PLs affords them volume-based discounts and negotiation advantages, translating to potential cost efficiencies on your end. Leveraging the expertise and specialization of 3PLs also allows for agile scalability, aligning your operations with shifting business demands.
Inbound and Outbound Logistics Processes
The individual processes of inbound and outbound logistics can be broken down into multiple specific steps. In aggregate, they’re designed to enable the smooth movement of goods and products into and out of a business.
Benefits of Efficient Inbound and Outbound Logistics
Taking the time to identify and analyze key KPIs within your logistics systems is time well spent. As bottleneck and inefficiencies are identified, they can then be corrected to help improve operations, save resources and create a better overall flow of goods.
Benefits of Inbound Logistics
Along with lower costs for raw materials and more reliable supply sources, businesses can take advantage of the many benefits of efficient inbound logistics. The following are a few of the major benefits of efficient inbound logistics:
- Lower shipping and receiving costs
- Predictable raw material costs
- Improved product quality
- On-time deliveries
- Steady production rates
- More economical inventory management
- Ability to spot supply chain problems
- Stronger vendor relationships
Benefits of Outbound Logistics
With outbound logistics, the last link in the chain is the customer who must be kept happy. An efficient outbound logistics process not only helps retain customers, but also confirms that nothing is missing, broken or defective. Some of the benefits of more agile outbound logistics include:
- Faster and more on-time deliveries
- Less transit damage and loss
- Fewer order cancellations and returns
- Reduced delivery failures or mistakes
- Lower costs of operations
- Higher customer satisfaction rates
- Stronger brand recognition
- Better company reputation
Inbound and Outbound Logistics FAQs
Here are a few inbound and outbound logistics related frequently asked questions readers ask:
What is outbound logistics in simple terms?
Outbound logistics refers to the transportation, the storage and the delivery of goods to customers or other businesses. It relates to the sales of goods (out of the company) i.e. the outflow of goods from the production line to the end user.
What is the difference between inbound and outbound transportation costs?
Inbound logistics involves the efficient and cost-effective flow of materials and goods into a business, while outbound logistics involves the efficient and cost-effective flow of goods and services out of it.
Is supply chain inbound logistics?
Inbound logistics is a supply chain operation tasked with ensuring that a company is supplied with the products or services it needs to do business. Directly related to supply-chain procurement, inbound logistics includes the processes of product acquisition, goods receipt, storage, and stock management.
What are some issues that may arise in outbound logistics?
Challenges of Outbound Logistics
- Managing the increasing complexity of customer orders.
- Determining the most efficient shipping routes.
- Meeting delivery deadlines.
- Complying with shipping regulations.
- Coordinating with operations, suppliers, and carriers.
- Handling returns and reverse logistics.
What is an example of inbound supply chain?
Let us suppose that you are a car manufacturer. Now, all the raw materials that are incoming to the plant for further processing are inbound activities. In this phase, transport for steel, rubber, plastics, glass and other things to the factory is still required.
How to calculate inbound logistics?
There are many metrics to measure the performance of inbound logistics, including error, defect and on-time delivery rates for shipments Some calculations to consider are:
- Freight cost for a pound of raw material
- Freight cost as a share of total production costs
- Time and expense to receive incoming shipments
- Number of times staff handle goods
Do You Need an Experienced Logistics Partner?
If your company is involved in production and moves goods and materials, you have logistics needs. To create a more efficient logistics network, count on Brimich Logistics and Packaging to help streamline your outbound logistics operations today.