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

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
• Transportation
• Receiving
• Materials Handling
• Storage and Warehousing
• Inventory Management
• Expediting
• Distribution
• Tracking
• 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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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
• Transportation
• 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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

Source: https://www.saloodo.com/logistics-dictionary/outbound-logistics/

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.

Source: https://www.sellerapp.com/blog/inbound-outbound-logistics/

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.

Source: https://www.interlakemecalux.com/blog/inbound-logistics

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.

Source: https://www.skuvault.com/blog/outbound-and-inbound-logistics-what-they-are-and-how-to-optimize/

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.

Source: https://www.eurosender.com/blog/en/inbound-outbound-logistics/

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

Source: https://www.netsuite.com/portal/resource/articles/inventory-management/inbound-outbound-logistics.shtml

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.

Unless your business relies heavily on holding large levels of stock at all times, the idea of holding inventory that collects dust just doesn’t make sense. With “want it yesterday” levels of demand and JIT solutions, this is a thing of the past. Still, just in time occasionally requires just in case safety stock to accommodate the ebb and flow of todays supply chains.

Why the Need for JIT Safety Stock?

Recent upsets in global supply chain operations, a pandemic, trucking shortages, inventory shortages, delayed deliveries, international conflicts etc have made a mess of inventory management. These seismic shifts have undermined the ability to count on predictable replenishments of materials required to keep many operations running smoothly.

Under extreme conditions, such as what we saw during the beginning of the pandemic, we see how consumer demand has the ability to eat up existing inventory virtually over night.

The pandemic created extreme stockout Issues

Under “normal” conditions, safety stock would be used as a reliable buffer against calculable, predictable ebbs and flows in the logistics landscape.

Now faced with unprecedented cost increases, a “Great Resignation”, and companies being forced to do more with less, the bullwhip fallout of the pandemic has created voids within supply chains around the world.

In order to fill the gaps, lean manufacturing and Just in Time (JIT) inventory strategies need to be reassessed to adapt to what is essentially the new normal: a highly disrupted and unpredictable flow of goods on a global scale.

Hence the need for a hybridized JIT safety stock.

JIT Inventory Management and the Kanban Process

The JIT method of inventory management relies on the premise that stock can be rotated according to a predictable availability of materials. Unfortunately, this method doesn’t account for the unpredictability of consumer demand. Nor does it account for the ripple effect that occurs when one stage of the value stream suffers from a materials shortage causing previous stages to grind to a halt.

Kanban Principles

In a similar fashion, the Kanban manufacturing process developed by industrial engineer Taiichi Ohno at Toyota, relies heavily on the steady control of work-in-process directly attached to customer demand. As finished goods approach the point of replenishment, the value chain engages to produce inventory to fill the void.

Each stage of assembly maintains a level of work-in-process inventory waiting to move on to the next link in the production cycle.

The beauty of Kanban is in utilizing minimal JIT inventory counts. The problem is, if there is a disruption in material supply, each operation in turn is affected on down the line.

What is the Key Risk of JIT?

The inherent risk of the JIT method is the potential for the domino effect. Cascading problems happen when the JIT inventory chain breaks down:

1. Delayed Delivery: Shortages or circumstances cause the vendor to be unable to maintain a delivery schedule
2. Stock-Out: Results in lost sales, lost gross profit and damaged customer confidence
3. Inventory Carrying Costs: Lost sales create backups which increase carrying costs from holding inventory

Just as on an assembly line, if a problem occurs at one point along the process, it affects further points downstream. In the context of the supply chain, there are a number of other factors that can easily become points of failure including:

• The pick-pack-ship process
• Transportation
• Port transit
• Customs clearance
• Dependencies on local suppliers

Ultimately, the real crux of the problem though is rooted in the hyper-sensitivity to time itself. In other words, if time was not part of the equation, there wouldn’t be a problem.

Is the JIT Method Still Valid?

Because the alternative to not using a JIT method of production automatically implies holding excess inventory, yes, JIT is indeed, still absolutely valid. But the process itself needs to adapt to remain agile enough to weather the highs and lows of an unpredictable supply chain.

One innovative solution to managing inventory in a hyper-paced market is offered by re-thinking how existing warehousing and transportation fit into the supply chain.

Using bank-based financing at exceptionally low interest rates, inventory is moved off supplier and customer balance sheets through a cost-effective globalized network.

With the ability to fulfill just in time deliveries, the result acts very much in the same way as holding safety stock.

problem: less flexibility through limited supplier dependencies.

JIT Safety Stock and the Global Market

Not every company operates in a linear market where demand is consistent enough to warrant a predictable level of safety stock. Yes, the food industry for one would be an exception. But if you’re attempting to count on a consistent, dependable and timely supply of buffer inventory between North America and China, you may have issues.

Moreover, in order for JIT to be effective, your suppliers should ideally be in your back yard. They should also consider your business a top priority.

In terms of the state of the global supply chain and lean manufacturing methods using JIT, there are no massive upheavals – for the moment.

In a recent article posted by SupplyChainDive referencing a Gartner research report, the response to a poll on increasing safety stock showed a total of 54% percent of respondents were either currently investing in inventory, or were planning to within the next two years.

In other words, JIT manufacturing methods are still very much and accepted by global industries.

Managing JIT Safety Stock

There are a number of key factors that you can use to calculate the amount of safety stock to keep on hand. Main factors include:

• Inventory velocity
• Current demand
• Future Demand
• Sales volume
• Supplier lead times

Generally speaking, an ideal level of safety stock should be inventory quantity consumed per day multiplied by lead time required in days.

But how do you manage safety stock levels when key predictive factors are highly unpredictable? Namely, lead time and customer demand during that lead time.

Safety Stock diagram

Mitigate Points of Delay

Set expectations through visibility. Transparency in every aspect of the supply chain goes a long way. For instance, partnering with dependable logistics providers who use WMS softwares and cloud-based inventory tracking lets both vendors and suppliers keep an eye on material flows.

Knowing where your products are at any given point in time alleviates stress and, in the case of a business owner, empowers them to make informed decisions on how to manage stock levels should they begin to run low.

Adopt a VMI (vendor managed inventory) strategy. If your suppliers are willing to take responsibility for ensuring inventory availability, and can be counted on to deliver, you increase your ability to have stock on hand when you need it.

Partner with suppliers who have a history of dependability. Company cultures stem from the people that control how the company operates. When a supplier has a consistent reputation for delivering the goods on time and in good order, it’s generally a good bet.

Final Thoughts

Who wants to carry excess inventory? Nobody.

Just in Time methodologies in supply chain management offer minimized inventory levels, equalized balances between receivables and payables, and reduced capital costs. What’s not to like?

Does safety stock guarantee continuity and stability? Not necessarily, but if your business does use a JIT strategy, it is possible to find the sweet spot that balances carrying charges against the potential for lost sales. Either way you’re better off with safety stock than without it.

The brilliance of  the Lean concept is in doing more with less. Developed by Taiichi Ohno at Toyota, who initially applied it in the industrial production field as a method to continually improve operations and reduce waste.

Since the middle of the last century, this method, and its offshoots such as JIT (just-in-time manufacturing), has had a huge impact on the business of logistics and how goods flow from manufacturer to end-user.

What is Lean Logistics

In simplest terms, lean logistics refers to the system of identifying and eliminating wasteful activities from the organizational supply chain. The underlying motives being to increase the flow and speed of products, and reduce costs thereby gaining competitive advantage in the supply chain market.

Principles of Lean Logistics Methodology

The objective of lean logistics is to shorten the order cycle time. Ultimately, it’s a constant search for efficiency, which can be broken down into several phases or principles:

Pinpoint activities that add value for the customer

In the warehouse for example, picking operations are divided into various phases. Each of these can be broken down into subprocesses using tools such as value-stream mapping which focuses on highlighting all the tasks that make up a specific process.

Identify waste and opportunities for improvement

In logistics, lost time is often a major component of waste. To efficiently identify these opportunities, it’s essential to standardize tasks, maintain cleanliness and organization throughout an installation.

Create an optimized process flow

Design a new, more effective working method in terms of time spent and measure its impact on service quality. This means doing away with unnecessary tasks identified as wasteful.

Along with organizational changes, this phase can involve investments in new technology or systems that help to eliminate processes that take up extra time and fail to provide value.

Create pull strategies that minimize inventory

No one wants to continually manage static inventory. At any given time, stock held in the warehouse determines a large part of logistics costs.

Pull manufacturing methods, as opposed to push strategies which are based on producing according to sales forecasts, operate on attracting sales first, then swiftly supply the product.

Continue to standardize new processes and maintain change over time

To do this, the involvement and motivation of all workers is key. They have to be provided with the latest training, adopt new habits, and practice these much-needed skills in a fluid process. Once a mindset is set to expect regular change, acceptance of new processes is much easier.

The Fight Against Waste

Let’s look at its characteristics and how it can be minimized. Waste can be classified into four major groups:

1. Storing Excess Stock

The cause is usually linked to excess production, sometimes spurred by inaccurate demand forecasting.

In an attempt to maintain stock supply, “safety stock” inflates the problem and actually “covers up” poor supplier management and/or disorganized material flows.

This leads to increased storage costs due to squandered warehouse space and low-turnover stocks that are seldom replenished.

What’s the solution from a Lean logistics perspective?

Work on the factors you can control (as opposed less predictable factors such as demand forecasting). There are several strategies that can be implemented in the warehouse:

• Take advantage of Cross-docking, which keeps stock stored to a strict minimum.
• Use the just-in-time system (JIT), in supplier management and warehouse organization.
• Shorten lead times – with respect to suppliers and intra-logistics processes. Shorter lead times tend to lessen the problem of being overstocked.

2. Bottlenecks and Wait Times

Lean logistics is based on reducing the difference between execution times (the working time you pay to your employees) and standard times (the time you charge to the customer).

There are various causes usually related to a poorly designed work methods, operator workload imbalances, or incidents left unresolved.

What’s the solution using Lean logistics?

• Use a WMS – warehouse management system. This specialized software helps process huge volumes of information and organize it by prioritizing process optimization.
• Measure and monitor each operator’s workload to balance and minimize excess idle time vs overloaded time.
• Have a preventive maintenance plan for the handling equipment, automated systems, and inevitable equipment failure.

3. Unnecessary Movement

Picking and prep tasks take up the most time in the daily activity of the warehouse. Therefor poorly planned picking lines slow productivity such as wasted trips or extra movements.

What’s the solution using a Lean logistics methodology?

• Automate load handling to reduce intra-logistics transportation times. Automation also improves safety and achieves excellent results in processes with repetitive movements. Similarly, stacker cranes can work in combined cycles leveraging all movements by carrying loads.
• Improve order preparation using WMS picking routes feedback in the warehouse. Prioritize goods consolidation or groupage and adjusting times to dispatch schedules.

4. Errors in Processes

Product returns and processes that are unnecessarily repeated add significant waste to operations.

Luckily you don’t have to reinvent the wheel to reduce processing errors. Top firms in the logistics sector (of which many use Lean logistics) are known for combining excellent service with a reasonable price.

How? Mainly two reasons: they frequently get it right the first time allowing them to charge more, plus they’re backed by exceptionally efficient service.

How do you mitigate processing errors using Lean logistics?

• Analyze the causes for returns. Again, a robust WMS system helps to drastically reduce returns stemming from mistakes in order prep and enhance the overall service quality.
• Be diligent in identifying incidents that impact timing. This helps eliminate the need to do the work twice or repeat tasks.

The Importance of Lean Thinking

The aim of lean thinking is to instil a mindset of eliminating organizational waste from all processes along with any inventory that is not supporting operational and customer needs.

In practice, Lean Thinking is a continuous cycle of looking for perfection through maximizing product value and eliminating waste. This process ensures that clients do not have to pay for a lack of organizational waste and efficiency.

Alongside the processes in Lean Logistics, Lean Thinking involves four principles that ensure minimal waste:

1. Value Specification – The value of the customer is specified and incorporated along the entire supply chain network.
2. Value Stream Mapping – The value of processes along the entire supply chain network are measured. From the perspective of the client, processes are identified that do not add value to the product.
3. Creation of Product Flow – The valuable processes are incorporated into the system. The factors are minimizing downtime, reducing interruptions and reduction of inventories.
4. Establishing Customer Demand – Customer demands are given appropriate importance in the manufacture of a product. This demand information is processed and made available in all stages of the supply chain.

The Impact of Lean Thinking On Logistics

Any organization that incorporates the concept of lean thinking into its supply chain management benefits immensely from reduced environmental impact and improved customer service.

This ultimately increases the velocity and flow of the supply chain.

In terms of corporate culture, the lean thinking process emphasizes total ownership cost, rather than focusing on individual factors of cost such as transportation or warehousing.

Since inventory carrying costs usually make up for about 25-40 % of the entire logistics cost, a lean thinking approach relies on a total cost concept and keep the focus on individual cost drivers such as warehousing, transportation and inefficient sourcing practices.

Making important decisions depending on the total ownership cost has a significant impact on logistics as inventory carrying costs usually make up for about 25-40 % of the entire logistics cost. Without a lean thinking approach, organizations disregard this total cost concept and therefor continually deal with individual cost factors such as warehousing, transportation and inefficient sourcing practices.

The Bottom Line on Lean logistics Methodology

The underlying premise of the Lean logistics concept is that, when a customer buys a product, they’re not paying for the inefficiencies that don’t add value to the supply chain. At the same time, this methodology combined with Lean Thinking, aims to eliminate the waste that reduces a logistics company’s ability to be profitable.