What is inbound logistics? How to optimize inbound logistics and outbound logistics to increase supply chain efficiency
By FarEye | October 13, 2022
Enterprises today understand how important it is to efficiently manage their supply chain network. However, it is equally important to understand how the processes of inbound and outbound logistics influence the overall supply chain.
Inbound logistics involves activities like transportation, storage, delivery of goods and raw material from suppliers to a business. Managing transportation from different suppliers and constant coordination is essential to ensure that there are no delays in the production line.
Outbound logistics focuses on essential processes to deliver finished goods to end-customers. Preparing cargo for distribution of goods, tracking deliveries, and optimizing routes for fast deliveries are some of the challenges that are commonly faced during conducting outbound logistics processes.
Both inbound and outbound logistics play complementary roles to ensure the success of the supply chain network. These processes can be time-consuming and complex if managed manually. That is where modern logistics technology can help.
Modern logistics tools run on an amalgamation of artificial intelligence (AI), machine learning (ML), and multiple algorithms and have become the key to efficiently manage both inbound logistics and outbound logistics to meet the consumer expectations with ease.
Inbound Logistics vs. Outbound Logistics
The inbound logistics process includes the inflow of raw materials from different suppliers to the manufacturing plant of the business. It can include activities such as sourcing of raw materials, storage and delivery of materials that would be utilized in the production process, and also includes tracking inventory. Outbound logistics on the other hand refers to the outflow of the finished product from the business to its end users. It includes activities concerning packaging, transportation and distribution, and customer service.
Inbound logistics focuses on the relationship between the supplier and the business, whereas outbound logistics focuses on the relationship between the business and its customers. Inbound logistics are concerned with material management and production, whereas outbound logistics are concerned more about the distribution of finished products as well as customer service.
On the whole, inbound logistics have a direct impact on the production operations of the business. It also impacts the finished product that is sold to the customers, as the final product is dependent upon the raw materials that are utilized.
Any inefficiency in the inbound logistics operations would also cause delays in delivering goods and cause the production to halt, leading to more losses and wastage of resources for the business.
Steps Involved in Inbound Logistics Processes
Inbound logistics processes can include the following aspects:
Purchasing raw materials is often the first step in the manufacturing of goods. As a business, you need to know which raw material is required in what quantity and find suitable suppliers. It is essential to maintain records of the same in order to avoid under or overstocking of raw materials. This step also involves constant coordination with the suppliers and having adequate transportation in place.
Receipt of Goods
Once the order is placed with the supplier, the business needs to make load appointments in advance to reserve docks for the unloading of inventory. This is done so when the raw materials arrive, the stakeholders know exactly where to receive the goods, assign an unloading area and store the inventory- all in minimal time.
Reverse logistics refers to the process that involves the movement of goods from the end-user or customer back to the seller or manufacturer. It can either be a return from the e-commerce site, or products that need to be refurbished or remanufactured or disposed of permanently.
Steps Involved in Outbound Logistics Processes
The outbound logistics processes can include the following:
Processing of Order
Firstly, the customer places an order for a product on the e-commerce website which is then confirmed by the warehouse. This is done through the warehouse management system.
Picking and Packing
After the order is confirmed, the workers then pick the relevant product from the inventory. The warehouse management system (WMS) then updates the inventory and adjusts the product count and the stock-keeping units.
The picked products are then packaged and labeled with the customer details which are then sorted by the carrier service.
Sorting and Shipping
Once the packaged goods are sorted, the freight trucks pick up the orders and ship them off at the relevant distribution center. Once the product reaches the distribution center closest to the customer, the delivery personnel pick up the orders depending upon their delivery areas.
The final step in the outbound logistics process is the delivery of the ordered product at the doorstep of the customer or the end-user. With regards to outbound logistics, customers can range from individual consumers to supermarkets.
Top 5 Challenges in Inbound-Outbound Logistics Process
1. Poor visibility of transportation operations
Poor visibility has always been a challenge that affects the revenue, efficiency, and overall productivity of a business.
Since inbound and outbound logistics processes involve multiple stakeholders, poor visibility into transportation operations is an even bigger challenge.
From the time the order for raw materials is placed with a supplier, businesses have limited visibility into the execution status. This results in inefficient planning and deteriorates the customer experience after the order is shipped, as they aren’t kept in the loop at various stages of the delivery process.
2. Increasing logistics costs
Transportation of goods makes up for one of the highest operational expenses and these costs are steadily going up, due to a variety of reasons including the increasing price of fuel, multiple modes of transportation, poor coordination, lack of visibility, high management, and administration costs contribute to the overall increasing logistics costs which are also ultimately passed on to the customers.
3. Inefficient in-plant operations
Inefficiencies in any in-plant operations can have a damaging effect on the overall revenue of the business. Wastage of materials, low quality of products, poor handling of materials, inexperienced manpower, and a lack of accurate inventory data are just a few examples of how inefficiencies creep in different in-plant operations. It not only impacts the profits of the business but also its competitiveness in the market.
4. Poor productivity of delivery fleet
In order to satisfy consumers, timely deliveries are imperative for every business in this competitive market. Poor productivity ofa delivery fleet can be due to inadequate driver performance, unnecessary stoppages, lack of optimized routes, and irregular maintenance of vehicles, among other factors.
If not tackled correctly, it can lead to increased operational costs, and delayed deliveries which decrease the trust amongst customers and impact the reliability of the business in the long run.
5. Lack of data-driven decision-making
Data is king in today’s world and a lack of data can make it impossible to make well-informed decisions and it also makes it difficult for logistics businesses to optimize their operations.
A lack of data also makes it difficult to assess risks with different suppliers or to monitor their performance. It can create hassles for customers if the core internal processes are not digitized and performed efficiently.
How to Optimize Your Inbound and Outbound Logistics Operations
With the help of modern technology and the array of options it offers, it is now easier for businesses to optimize their inbound and outbound logistics operations. The aim is to make the processes smoother, more cost-efficient, and enhance productivity.
Inbound logistics can be optimized in the following ways:
1. Increased automation
Automating the process involves optimizing routes for delivery using intelligent route optimization software that makes use of machine learning, analytics, GPS tracking, and dynamic routing to provide you with the most optimum routes.
It can help in enhancing productivity by tracking inbound delivery fleets, unloading of goods, in-plant operations, and saves the business plenty of time and money by adhering to their timelines.
2. Using an advanced logistics management system
Modern logistics management systems enable a business to stay up-to-date with the market scenario of freight charges and other dynamic factors that can adversely impact inbound operations. Being on top of the dynamic changes that take place in the logistics industry, businesses can save significant amounts of money by having adequate visibility over prevailing rates, as compared to just simply complying with the costs quoted by different suppliers.
3. Enhancing customer experience
Consumers today want end-to-end visibility of transportation operations of their deliveries. Optimization of inbound logistics processes also enables businesses to provide relevant information to their end-users, allowing them to track the whereabouts of their order at every stage.
An advanced modern inbound logistics management system would allow the business to plan their production and ETAs accordingly so that there are no discrepancies involved in their communication with the customers.
4. Developing vendor inbound compliance standards (VICS)
A logistics business often deals with multiple suppliers and vendors which makes it challenging to streamline their inbound operations. It is beneficial for the enterprise to design vendor inbound compliance standards which would act as guidelines for all stakeholders and avoid disruptions in the supply chain.
Outbound logistics processes focus on the delivery of goods to the end-users and optimizing these process includes multiple variables such as:
5. Building strategic relationships with third-party suppliers
It is important to build strategic relationships with third-party logistics providers, carriers, and suppliers to ensure efficient logistics operations. This can be done by analyzing their performances on the basis of key parameters like on-time in-full deliveries, pricing models, the volume of goods, business needs, and other shipping activities. Advanced logistics management platforms enable businesses to keep track of these factors and determine how third-party providers impact the business and can help the business to negotiate on shipping rates.
6. Optimizing communication
Since outbound logistics processes involve multiple stakeholders, efficient communication practices need to be put into place to ensure that the movement of goods is as per the plans.
Constant communication with warehouse managers and delivery personnel ensures faster decision-making and clarifies any doubts or confusion at every step of the way. Modern tools also allow businesses to optimize routes, track the location of the delivery vehicles, and thus, ensuring more transparency.
7. Cross-docking warehouse operations
Cross-docking refers to a practice wherein the workers sort out the incoming goods quickly and then load them onto an outbound truck. It reduces the time period for which final products remain in the warehouse thereby reducing the usage of warehouse space. It also allows quick inspection of finished products and increases customer satisfaction by ensuring delivery of good quality products and fewer returns.
FarEye’s advanced logistics platform is empowering enterprises across the globe to ensure seamless management of inbound and outbound transportation operations. It’s helping them save costs, boost profitability, enhance productivity, introduce robust automation and make delivery processes customer-centric.