Inbound vs. Outbound Logistics: Roles in Delivery

In this post, you’ll discover the difference between inbound and outbound logistics.

Specifically, we’ll tackle their meanings, roles, and activities involved in delivery logistics.

So if you’re looking to know more about the operations that help you navigate your entire supply chain, then you’ll enjoy this post.

Let’s start!

What Is Inbound Logistics?

Inbound logistics is the process of bringing materials and other necessary goods into a business.

It includes the following steps when it comes to dealing with supplies:

• Ordering
• Receiving
• Transportation
• Storage
• Management

The inbound logistics meaning covers everything your business requires to create the final product that you can sell.

The Role of Inbound Logistics in the Supply Chain

Inbound logistics directly impacts the production procedures of the business.

When done correctly, it can minimize the waste of materials and reduce manufacturing costs.

Careful management of inbound logistics costs leads to more cost-efficiency further in the supply chain.

An efficient inbound logistics system affects the final product that the business sells to the customers since the quality of the products depends on the raw materials utilized in the production.

If inbound logistics processes are under your control, you can also negotiate reduced carrier rates and establish more accurate inventory management.

Saving on transportation costs and storage helps increase the long-term ROI.

Since inbound logistics is the very first stage of the supply chain, it can cause harm to all the other segments if something goes wrong with it. Issues with inbound logistics can even temporarily stop production.

Despite the importance of inbound logistics in supply chain, many companies tend to overlook its benefits and focus more on other business activities.

Let’s take a look at some additional benefits of functional inbound logistics:

• Ability to predict or spot problems in the supply chain
• Predictable cost of raw materials
• Improved inventory management
• Steady production rates
• Better vendor relationships
• Lower receiving costs

Key Activities of Inbound Logistics

Let’s go through four key inbound logistics activities:

Sourcing Materials

Buying raw materials is usually the first step in the manufacturing process.

Every business needs to have an understanding of which raw materials they need, the quantity that is required, and to find reliable suppliers.

Maintaining records of raw material orders is crucial since it helps businesses avoid over or understocking.

This activity also calls for continuous coordination with suppliers in order to manage inbound transportation and delivery.

Receipt of Goods

As soon as raw materials are ordered from the supplier, the business needs to take care of load appointments, manage inbound warehousing, and reserve the docks so the new items could be unloaded.

If this part is done correctly, the stakeholders will be able to efficiently receive and unload the goods, and store the inventory.

Balancing Supply and Demand

Making sure the business has enough incoming materials to meet customer demand is another component of inbound logistics.

There are several reasons why hitting the right spot when it comes to sourcing materials can get challenging:

• Economic conditions
• Seasonality
• Selling cycle fluctuations
• Competition
• Pricing volatility

The most efficient way to keep a balance between supply and demand is to rely on technology and data.

Choosing the right software could help you compare the incoming inventory to the order volume, predict future orders based on order history, and monitor the status of inbound deliveries.

Reverse Logistics

Reverse logistics is another segment of inbound logistics. It is the practice of processing order returns and exchanges when the orders are sent back to the warehouse and the items need to be inspected and restocked into the inventory.

Some items are returned unused and undamaged, while some will need to be refurbished, or even entirely disposed of.

The Importance of Inbound Logistics for Delivery

Any type of inefficiency in the upstream logistics also causes issues and delays in the final product delivery.

It happens because gaps in inbound logistics operations can disturb and pause production, leading to the overall loss of resources and delays in all the next segments of the supply chain.

For businesses, product availability is the most visible result of inbound logistics in value chain. If the product is not available for order, the customers are likely to turn to your competitors.

Up to 43% of shoppers would buy from a different store if the product they wanted was out of stock.

Inbound Logistics Example

Let’s go through a step-by-step example of an inbound logistics process:

1. The business chooses suppliers, negotiates the prices, and purchases raw materials.
2. It makes the payment and receives a receipt from the supplier.
3. The supplier ships the order, sends an automatic notification to the business, together with tracking information.
4. The order arrives at the proper facility.
5. The staff unload the order and verify the condition and the number of goods so they could confirm acceptance.
6. Finally, the goods are moved to the materials storage facility or the warehouse, depending on their future use.

What Is Outbound Logistics?

Outbound logistics meaning covers the process where goods are stored, moved, and distributed for delivery to customers.

The main elements of outbound logistics are:

• Warehousing
• Distribution
• Transportation
• Last-mile delivery

Outbound logistics refers to all the actions involved in preparing orders for delivery and actually delivering them to the end customer.

The Role of Outbound Logistics in the Supply Chain

Outbound logistics in supply chain management focuses on the demand side of the process.

Order fulfillment, picking and packing, and delivery are essential steps of outbound logistics.

Outward logistics teams need to monitor storage and distribution, as well as production, in order to maintain an optimal movement of goods. If the production rises to meet customer demand, shipping and delivery must scale accordingly.

Keeping production, storage capacity, and demand in sync can be eased with the use of automated software.

Businesses need to make sure they keep enough inventory to meet the unsteady customer demand, without creating extra costs for additional storage space. Careful inventory management reduces the overall outbound logistics costs.

The most important role of outbound logistics in value chain can be defined with the seven Rs:

• Getting the right product
• To the right consumer
• In the right condition
• In the right quantity
• At the right cost
• At the right time
• At the right place

Outbound logistics also plays a significant role in customer satisfaction.

As today’s shoppers’ expectations continue to grow, businesses need to provide fast and even free delivery whenever they can.

In fact, 45% of consumers are unlikely to continue shopping from a business if they experienced a late delivery.

While 40.5% of online shoppers prefer e-commerce stores that offer free shipping.

Consumers expect fast and creative delivery options, as well as real-time information about the status of their order.

When order fulfillment, package preparation, route management in last-mile delivery, and other components of outbound logistics are done efficiently, businesses can achieve higher order accuracy and provide tempting delivery options.

Successful management of outbound logistics helps companies cut unnecessary costs, reduce transportation risks, and improve customer service.

Let’s go over some of the largest benefits of outward logistics:

• Faster delivery times and more on-time deliveries
• Fewer delivery failures and errors
• Fewer cancellations and order returns
• Lower operational and shipping costs
• Fewer damaged items
• Reduced loss in transit
• Improved customer loyalty and satisfaction
• Better company reputation

Key Activities in Outbound Logistics

Take a look at five key outbound logistics activities:

Warehousing and Storage

In order to continuously meet the demand for new orders, there should be a surplus of items in your storage.

The average inventory to sales ratio among US companies was 1.26 in May 2021.

The purpose of warehousing is to keep your products safe and ready to be prepared for shipment.

You can use your own warehousing facilities, or rely on the outbound process in a warehouse owned by an external provider.

Inventory Management

Inventory management is a significant step in the supply chain. It refers to tracking stock quantities in and out of the warehouse.

The key purpose of inventory management is to know where the inventory is at any point in time, and how much of it is in stock and available for new orders.

It tracks inventory items from order to delivery, and helps businesses figure out how much new stock to order and when.

Many third-party warehouses offer inventory management as one of their services.

Picking and Packing

When the order is confirmed, the staff can pick the required products from the inventory.

Ideally, the warehouse uses a management system that updates the inventory levels and adjusts the count of the products that were sold.

The products that were picked are then being packed and prepared for shipping. The staff labels the packages with shipping information, and the couriers take them over.

Transportation

In downstream logistics, transportation refers to the process of shipping orders to distribution centers.

At this point, outbound logistics transportation is usually done by large trucks or planes.

Large quantities and long distances could pose challenges at this stage.

Last-Mile Delivery

Last-mile delivery refers to the segment where the order is sent from the distribution center to the recipient’s address.

This part of outbound logistics is usually managed by a large number of smaller delivery trucks or vans.

It is the step that directly affects customer satisfaction.

The Importance of Outbound Logistics for Delivery

Outbound logistics processes influence the way products are distributed and delivered to the final consumer.

A flawed outbound logistics system can cause delays in delivery, which then lead to additional expenses and customer dissatisfaction.

However, when outbound logistics is done right, it provides improved visibility into shipment distribution. It allows your business to provide better customer service offering real-time shipping updates.

Here are some tangible benefits of outbound logistics operations on the quality of delivery:

• Improved delivery speed. 63% of today’s online shoppers expect three-day delivery for domestic shipments as a standard. Businesses with well-optimized outbound logistics choose the most efficient routes for all their deliveries, taking into consideration factors like vehicle capacity, location, and more.
• On-time deliveries. Great outbound logistics helps businesses be prepared for all the factors such as business hours, driving times, vehicle capacity, and more, that could disrupt their delivery accuracy.
• Fewer failed deliveries and canceled orders. Proper loading is an important part of outbound logistics. It ensures higher order accuracy and improved delivery speed. Moreover, efficient route planning and rerouting when necessary, lead to fewer failed delivery attempts.

Outbound Logistics Channels Explained

There are three types of distribution channels in the outbound logistics process, and they involve four different elements:

• Producer
• Wholesaler
• Retailer
• Customer

Let’s take a look at the structure of the three kinds of channels:

1. The first channel uses all four components. When the product is manufactured, it uses two intermediaries to get to the end customer: the wholesaler and the retailer.
2. The second channel eliminates the wholesaler and the product is sold to the retailer that further sells it to the customer
3. In the third type of channel, the manufacturer sells the product directly to the end customer.

The channels of distribution are other companies, and sometimes even individuals, that sell and deliver the product to the end user.

For example, a company that produces milk might have several supermarkets and stores in its distribution channel.

Distribution channels store, market, and sell the products. Choosing the right channels that will increase your revenue is one part of outbound logistics management.

Great distribution channels will have functional logistics themselves, and they will promote the product according to your branding, marketing it to the right type of client. They should help increase the positive impact of your outbound logistics in value chain.

Outbound Logistics Example

Here is a step-by-step outbound logistics example from an e-commerce business:

1. The customer chooses a product and places an order on the company’s website.
2. The warehouse confirms the order and the staff does the picking.
3. The warehouse staff now packs the items and prepares the order for shipping.
4. Freight trucks pick up the orders and drop them off at the proper distribution center.
5. Delivery drivers pick up orders that belong to their area.
6. The order is delivered to the consumer’s address.

What’s the Difference Between Outbound and Inbound Logistics?

Although both types of logistics focus on the transportation of items, there are some significant differences between inbound and outbound logistics.

1. Inbound logistics deals with the purchase, storage, and transportation of goods to the company’s production facility, while outbound logistics deals with order preparation and distribution of packages to consumers.
2. While inbound logistics is focused on raw materials sourcing, outbound logistics handles customer service and product distribution channels.
3. With inbound logistics, the company interacts with suppliers, while in outbound logistics, the interaction happens between the company and its clients.

Although different, upstream and downstream logistics work together, each maintaining its own role within the supply chain. Or delivery logistics.

If you want to know more about this topic and others, we can help.