In the age of enhanced visibility, evolving customer expectations and expedited shipping, logistics is the axis on which business success rotates. It’s wise to have it tilted towards the positives by learning all about the various aspects of this network, like inbound logistics, outbound logistics and how transportation management systems can aid their optimization.

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Logistics is the nexus of coordinating the product lifecycle, from sourcing raw materials to supplying its finished form to consumers. It contains several static and dynamic components like manufacturing, storage, movement, warehousing and reverse logistics.

Adopting logistics management solutions is crucial for businesses that deliver over multiple channels. As such, it achieves the following objectives for any enterprise:

• Lending visibility to supply chain processes like procurement, delivery and more.
• Expediting deliveries, thus boosting customer satisfaction.
• Securing revenue for the company.

Table of Contents:

• What Is Inbound Logistics?
• What is Outbound Logistics?
• Logistics Management Challenges
• Optimizing Logistics
• Optimizing Logistics Using Software
• Closing Thoughts

What Is Inbound Logistics?

Inbound logistics caters to the supply part of the demand-supply model while facilitating the influx of goods and resources into a company. The flow of materials is typically from the manufacturer to the company’s warehouse or fulfillment centers.

Inbound processes include material sourcing, ordering, receiving, scanning, sorting and storing.

Effective inbound logistics is about striking the right balance between ensuring a steady inflow of raw materials and preventing overflow of goods beyond warehousing capacity.

Most businesses adopt the just-in-time (JIT) approach to inventory management to achieve this.

When done right, inbound logistics can translate to real-time advantages like

• Steady availability of products
• High-quality products
• Reduced overhead costs
• Reduced wastage
• On-time deliveries
• Great customer experience
• High visibility into supply chain issues
• Strong vendor relationships

Inbound Logistics Steps

Before setting out to acquire goods, businesses forecast demands. This process includes close monitoring of trends, evolving market demands and consultations with experts to make intelligent decisions related to inventory management.

Demand forecasting informs businesses about what raw materials to order and, more importantly, how much to order.

Once that’s over, companies jump into acquisition. Let’s approach the supply process step by step.

Sourcing

The first step in the supply chain involves procuring goods from suppliers. Demand forecasts yield results about the materials you need and their quantities. Following this, businesses identify potential suppliers, receive price quotes and negotiate for the best deal.

Ordering and Purchasing

The actual purchase of material follows. The vendor and the company record the transactions so that the correct number of goods arrives at the right time.

Transporting

The manufacturer dispatches orders by the agreed-upon freight mode (plane, ship or truck). This step involves liaisons between the company and third-party dispatchers.

Receiving, Handling and Warehousing

Businesses receive the materials in their warehouses or fulfillment centers. Allocated personnel unload the carriers and scan the goods to ensure the correct quantities have arrived.

The goods are then either stored away for further processing or moved within the facility for the manufacturing to begin.

Storage conditions are a priority; perishables must be refrigerated, and personnel should put fragile items away with care.

Managing Inventory

Inventory management follows warehousing. The company cuts costs by adopting just-in-time inventory or sorting goods through multiple resource planning. Companies use features like barcode scanning and SKU tools to store items efficiently.

Distribution and Tracking

Orders are subsequently distributed to their final destination within the company or forwarded to the designated facility.
Further documentation awaits in the form of order receipts. Businesses track incoming orders against those receipts.

Reverse Logistics

A vital element of inbound logistics is the reverse flow of products from the customer into the warehouse. Returns occur due to defects, damages or delivery delays. This step is part of the process because goods flow into the company.

If the returned products are saleable, they move toward retail. Damaged products go to the supplier or alternate locations within the warehouse for storage.

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What Is Outbound Logistics?

This logistical process involves moving finished products out of a supply chain for distribution and retail. Materials often ship from the company warehouse to the customer’s doorstep or wholesale and retail stores.

A larger number of third-party liaisons feature in this step than inbound logistics. When goods arrive in the warehouse, the flow is often unidirectional, but the distribution channels are vaster and more deadline-regulated for outbound logistics.

Outbound strategies are vital because finished products might be more fragile or perishable than raw materials. This fact calls for optimal shipping conditions.

Now more than ever, customer experience is shaping the market, and an effective outbound strategy is a surefire way to boost a business’s brand value among consumers.

The benefits of robust outbound logistics are:

• Strong brand value with the right distribution channels
• Faster deliveries
• Reduced order returns
• Repeated purchases
• Lower handling costs
• Great business reputation

Outbound Logistics Steps

Customer-centric business strategies have come to characterize the market. It is no surprise that companies are increasingly adopting three-day or one-day deliveries, dispatching over omnichannel and drop shipping.

It’s all achievable with successful outbound logistics that feature steps like:

Customer Order

Outbound logistics begins with the customer ordering a product from the company website or any distribution channel.

Processing

The company processes the order and begins further documentation related to its quantity, delivery location and other particulars.

Workers pick the right inventory to source the item and fulfill the order.

Warehouse Management

Inbound and outbound logistics overlap at warehouse and inventory management points. The warehousing stage of outbound logistics involves keeping adequate quantities of a product in-store and in optimal condition.

Items are organized and prepared for delivery in the company warehouse.

Inventory Management

Companies generally deploy software to manage and maintain inventory levels. Businesses strive to balance speed and accuracy by sourcing strategic inventory locations for quick deliveries and regulating inbound supply volume according to demand.

The purchased item is replaced, and the reserve inventory is transferred to primary storage. This step may lead to manufacturing more products or procuring more raw materials from vendors to maintain adequate inventory levels.

Packing and Dispatching

Company staff labels the order and logs its details in the roster. They sort several orders by location, delivery window and freight mode. The order is now ready for dispatch.

Transportation

Depending on the mode of transportation, the order is shipped via truck or plane. Ideal transportation management involves strategic handling. For instance, large or heavy machinery is transported in smaller parts, and fresh items require temperature-controlled carriers.

Last-mile Delivery

This aspect is the most crucial and expensive step of outbound logistics. Delivery executives carry individual orders from intermediate storage facilities to the customer’s residence.

Last-mile delivery is where companies suffer from liabilities and high costs.

Any damage or inaccuracy is tracked back to the company responsible.

Additionally, last-mile delivery entails individual handling, unlike other outbound steps when workers can deal with large amounts of orders together.

Customer Feedback

For reputable businesses, outbound logistics don’t end with delivery. Only after the customer verifies the receipt and the sound condition of the product does the process conclude.

Companies collect feedback and expedite communication regarding any delivery or quality issue.

Inbound vs. Outbound Logistics

We’ve laid down the definitions of inbound and outbound logistics, demonstrating that they are two opposite-facing sides of the same coin. One seeks to bring supplies, and the other delivers to meet demands.

Even when their processes overlap (warehousing/inventory), their functions remain distinct.

The following chart shows their differences based on their definition, processes, direction, interactions and end goals.

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Logistics Management Challenges

1. Cost Control

A common pain point for both inbound logistics and its outbound counterpart is high supply, storage and delivery costs.

When cargo arrives at a facility, disorganized shipping costs the company. Lesser than truckload (LTL) is ideal for businesses that order infrequently, but repeated LTL orders ultimately take a toll on shipping prices and cause delays.

Worldwide fuel price surges are responsible for overarching expenses for outbound and inbound logistics. It’s not surprising that 70% of shippers in an Inbound Logistics report named transportation costs as the biggest hurdle in 2022.

Most companies try to err on the side of caution by ordering excess goods, the storage of which adds up to high inventory costs. This misstep occurs when businesses are inept at monitoring KPIs like sell-through rates, turnover and hikes in demand.

2. Lack of Visibility

Exclusive to inbound logistics, the inability to track arriving shipments causes some companies to order excess goods. The result is storage woes, wastage and widespread confusion.

Some businesses are still working without real-time visibility into inbound processes.

3. Supply Chain Fluctuations

If the world learned anything from the COVID-19 pandemic, it’s that supply chains can experience dramatic peaks and lulls. Companies without a sound inbound strategy have a tough time accommodating such changes.

A common blunder is a blanket solution most companies adopt: big orders that are expected to meet demands. The result is just the opposite. Large numbers of incoming trucks compete to offload at the same dock, which leads to rushed and poor handling.

4. Customer Demands

Today, customer experience sets industry trends. Consumers want swift, transparent and budget deliveries.

The report mentioned earlier goes on to state that 38% of companies struggle with ever-changing customer expectations.

Most businesses fail to fine-tune their last-mile deliveries, but despite being the final step of the supply chain, it’s the most valuable sculptor of customer satisfaction.

If this step is a miss, companies risk losing their reputation.

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Optimizing Logistics

Some schematic and attitudinal changes go a long way to revamping inbound and outbound channels. Optimize your network to deal with seasonal demand surges or supply scarcity.

Here are a few suggestions:

Cultivate strong vendor relationships: Good relationships with suppliers and last-mile carriers can reduce expenses, ensure steady goods inflow, reduce lead time and strengthen customer ties.

You can accomplish this by gradually increasing your order volume, showing appreciation for their services, and making on-time payments. Securing your company with a vendor compliance plan is another excellent way to go about it.

Partner with 3PLs: If you need to temporarily upgrade your stock for seasonal highs in demand, coordinating with third-party logistics services is a great way to organize outbound logistics.

3PLs reserve knowledge, specialization, and the capacity to quickly scale up or down your organization in response to market requirements.

Negotiate prices: Valuing better partner relations also allows for greater flexibility and cheaper transportation expenses.

Examining your company’s shipping analytics helps you understand the cost breakdowns for delivery. You can then assess where there is potential for price negotiation.

With free shipping becoming a must-have in the eCommerce world, lowering outbound logistics expenses will enable you to build a higher bottom line.

Adopt modern practices: Large orders supplied to clients at irregular periods are no longer common because of just-in-time (JIT) inventory and other quick replenishment techniques.

You must modify your outbound logistics to accommodate these stocking trends since most JIT customers won’t have much space to hold surplus goods.

A third-party logistics provider can combine a company’s partial loads with those of other clients if it has trouble fulfilling full truckloads.

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Optimizing Logistics Using Software

Technological innovation transforms logistical networks, bringing top-notch experiences for buyers.

It’s no surprise that the Inbound Logistics report shows that 68% of shippers have adopted software to streamline outbound and inbound logistics thanks to machine learning and automation benefits.

Here are a few more ways to deploy software to optimize your networks:

1. Inventory Management and Warehouse Management Systems

Warehouse management software streamlines collecting, putaway, stock management, sorting and other warehouse processes to maximize profitability.

The objectives of inventory management software include maintaining product quality and order accuracy while avoiding damage, loss, expiration and wastage.

Conduct routine inventory audits to prevent deadstock buildup and make way for new stock.

Adopt consignment inventory to move inventory without incurring extra expenses or overstocking.

2. Transportation Management Systems

A robust transportation management system helps monitor the health of your inbound and outbound logistics network. Deep analytical reports point out areas of improvement or cost reduction.

A TMS plans the delivery, tracks it through fulfillment, and compares shipping prices and service levels between shippers.

Moreover, visibility into real-time movements gives your company a competitive edge in the market. You can do away with engine idling, excess fuel consumption and unexpected breakdowns, thus saving you bundles of cash.

3. Enterprise Resource Planning Software

Businesses require an automated process for deducting freight and unloading allowances at the PO level.

The client’s TMS should then integrate this information into the ERP system so that the payment to the supplier is handled correctly and the value of the dynamic allowance is displayed.

Penalties from VICS program breaches are also tackled using the same automated system, so they are neatly deducted from bills upon payment.

A Pennsylvania-based food and beverages retailer reaped numerous benefits from logistics software, including compliance cover, LTL organization and cost reduction. Gary Kinneer, the Director, says:

“In the past, we had a couple of hundred LTL deliveries coming in per week and now we’re down to just 20 or 30 because we can use our TMS to combine the LTL deliveries from the consolidation points.”

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Closing Thoughts

Supply chain effectiveness depends on well-managed incoming and outbound logistics. Additionally, they significantly and directly impact client engagement, pricing, profits and sales.

We hope you have a working understanding of what inbound logistics is, the challenges of outbound logistics and how technology can optimize both networks.

How has software helped your business to optimize logistics? Let us know in the comment section.