Inbound and Outbound Logistics
Logistics is the process of coordinating and moving resources – people, materials, inventory, and equipment – from one location to storage at the desired destination. Regarding eCommerce, logistics management involves a significant aspect of business operations. Furthermore, logistics is a considerable expense, with logistics-related spending coming in at more than $1.64 trillion last year alone. What are the main differences between inbound and outbound logistics? What are the main challenges, and how can streamlining logistics benefit your business? All this and more will be covered in today’s post.
Inbound vs Outbound Logistics
Inbound logistics is where goods and materials enter the supply chain to be sold to the customer. Outbound logistics is the process whereby the finished products are sold and delivered to the customer. Streamlining both aspects of logistics is crucial to the profitability and success of the company.
What is outbound logistics?
Outbound logistics involves storing and moving goods to the customer or end user. Outbound logistics includes the systems required to prepare, pack, and deliver packages. The steps include order fulfillment, packing, shipping, and customer service related to delivery.
Warehousing
In order to meet customer demands, a warehouse or storage facility is necessary to store surplus inventory. US Business Inventory/Sales Ratio is 1.33, up from 1.26 last year. You can store your inventory in your own warehouse or partner with a third-party provider. This is significant expense for eCommerce businesses. Whether you outsource your warehouse needs or handle them in-house, it is a crucial part of outbound logistics.
Inventory Management
Most eCommerce companies utilize inventory management software to maintain a consistent flow of orders and sales. Inventory management involves carrying adequate levels of stock to fulfill customer orders. It is a vital part of business management because it allows companies to boost profits and reduce overhead. There are many benefits to using an automated inventory management system, including improved accuracy and better transparency. Inventory management also includes:
- Product locations
- Quantities of each product type
- Profit margin by style, model, product line, or item
- Setting the ideal amount of inventory to have in back stock and storage
- How many products to reorder and how often
- When to discontinue a product
Streamlined inventory management can boost profitability and improve customer experience. It allows you to capture and fulfill every sale while simultaneously avoiding overstock.
Order Processing
When a customer orders through the sales channel, a notification is sent to the warehouse for fulfillment. The staff in the warehouse receives the order and verifies its validity. They ensure the product(s) are in stock and can be made ready to send out to the customer.
Picking, Packing, and Kitting
All items are packaged, sealed, and labeled for shipment at this stage. Once an order is received and verified, the order has to be carefully picked, packed, and prepped for transport. Some items or orders, like subscription boxes, also require kitting services, where more than one product is carefully assembled into one shipment or package.
Transportation
Transportation involves any method or mode to move goods from your storage warehouse to a carrier distribution center or direct-to-customer. When moving goods to a distribution center or fulfillment facility, larger vehicles like freight carriers, semi-trucks, and rail lines are used. Then products are separated into smaller vans or vehicles to be delivered to the end consumer.
Last Mile Delivery
The final aspect of outbound logistics is the last-mile delivery to the end customer. Whether the package is delivered to a home or office, this is the culmination of the logistics journey. If the final delivery is unsuccessful or the product arrives damaged, the product may be returned, triggering an inbound logistics process (returns).
What is inbound logistics?
Inbound logistics is when a company secures raw materials, goods, and supplies to produce products it will sell to an end consumer. It is the receiving or incoming part of the supply chain cycle. A few of the critical components of inbound logistics include:
Sourcing and Purchasing
The first step in inbound logistics is determining what materials, goods, or supplies are required to make your product. The next step is investigating manufacturers or suppliers of said goods or materials. Finally, a company will engage with the manufacturer to purchase and receive materials. Ensure that accurate records are kept from purchase orders so they can be reconciled with shipments.
Transportation
A manufacturer/vendor will provide a notification when goods are being shipped. A tracking number is supplied, which helps ensure warehouse and distribution teams are ready to receive the items efficiently.
Receiving
This part of inbound logistics involves receiving shipments at the warehouse or distribution center. Loading dock staff will evaluate the shipment for damages and accuracy. Once the shipment is approved, the goods are stored in a designated storage facility or moved to a secondary manufacturing or assembly area. All goods ready for customer sales are input into the inventory management system and carefully stored.
Reverse Logistics
The final aspect of inbound logistics occurs after a sale. Reverse logistics includes adding products back into the supply chain due to a product return. Check out 4 Ways to Streamline Returns Management.
Challenges of Inbound and Outbound Logistics
Inbound logistics challenges
The main challenges of inbound logistics include the following:
- Finding reliable and trustworthy suppliers
- Sourcing affordable suppliers and manufacturers
- Balancing inflow and outflow of goods to maintain adequate materials without overstocking
- Managing transportation delays and boosting supply chain resilience
- Maintaining receiving and quality control processes
Outbound logistics challenges
The main challenges of outbound logistics include the following:
- Hiring quality staff to manage order processing
- Maintain order accuracy and efficiency
- Negotiating transportation and shipping contracts to keep costs low
- Meeting delivery timeline expectations
- Reverse logistics management and process
Benefits of optimizing logistics
Inbound and outbound logistics are necessary for business operations to run smoothly. Without products, there are no sales, and vice versa without sales. Therefore, inbound and outbound logistics must work together for optimum success. Here are some ideas to optimize your logistics process.
Maintain optimal inventory levels
Having too much or too little isn’t ideal. If you order too much inventory, then you run the risk of paying high storage fees. If you order too little, you miss out on sales opportunities and run the risk of disappointing customers. To maintain optimal inventory levels, it is necessary to commit to regular inventory audits, offload slow-moving stock or deadstock, invest in items with higher turnover rates, and those products with higher margins. Successful companies regularly review demand forecasts and take physical stock counts. Striking the correct inventory levels will reduce overhead costs from storage, improve product performance and profitability, and improve procurement workflows.
Improve warehouse management
Implementing a streamlined warehouse management process that reduces human error will improve order accuracy, shipping efficiency and maximize storage utilization. Most companies will use software programs that help to automate inventory levels, trigger reordering events, picklist automation, and track shipment deliveries.
Partner with a 3PL to optimize logistics
If you spend more than 15% of your time managing your logistics, it might be time to investigate working with the 3PL. 3PLs are experts who partner with eCommerce businesses to handle inbound and outbound logistics. They manage receiving, warehousing, negotiating with shipping carriers, and returns. Some 3PLs, like Falcon Fulfillment, can provide flexible inventory storage in their fulfillment centers. Find out more about how Falcon Fulfillment can take the stress of managing logistics off your plate. Get in touch with one of our friendly agents today.
