If your company produces products, you know you need to procure the raw materials to make the goods. Or maybe you acquire the finished goods wholesale and repackage or sell them on your e-commerce site. These raw materials and other inventory must be received and stored somewhere before you turn around and ship out the final products to your end customers. There’s a name for this process: inbound logistics. So what is inbound logistics? It is exactly this — moving the goods from suppliers into your business through the supply chain. The procurement, transportation, receiving, and storing process is inbound logistics.
What Are Inbound And Outbound In Logistics?
Sometimes people get confused because there is an inbound logistics and outbound logistics process. The difference makes sense once you understand the concepts. You may already understand that inbound logistics operations involve how the raw materials and finished products enter the company. It also involves some of the supply chain management processes like ordering the goods, inbound shipments, receiving the goods, storing them, transportation, and inventory management.
Outbound logistics, on the other hand, includes the storage and movement of goods to your customers. The outbound logistics process includes storage, order fulfillment (picking and packing the order), shipping the order, transportation and delivery, reverse logistics plus delivery-related customer service.
Think of inbound and outbound logistics in terms of supply and demand. Inbound logistics is about supply – gathering and storing the raw materials to make the goods or the finished goods. The outbound logistics processes revolve around demand and getting the products to the customer. A company, whether a manufacturing plant or e-commerce retailer, will need both inbound and outbound logistics networks for its operations.
What Does Inbound Logistics Include?
There are a number of inbound logistics processes that companies use in their logistics operations. Understanding how these can impact your business and cost can help you decide on an efficient inbound logistics service. Let’s run through the major ones here.
To order goods and raw materials, you must understand your needs and determine who can meet them. This means sourcing the physical goods by finding and evaluating vendors. Once you have identified these vendors, you’ll get quotes for the inventory costs and negotiate prices and terms.
Your company will order the products and manage the timelines and logistics process to receive the inventory on time.
Part of the inbound logistics operation is determining what transit method to use. This is a big step because transportation costs are not cheap and a late delivery means lost opportunities and business. Delivery that is too early can mean additional labor or storage issues. With transportation, you’ll need to decide whether to use longer and more economic freight shipping or shorter and more expensive overnight air. Or something in between. It depends on a lot of factors.
Once your goods arrive at the distribution center, they must be received. You’ll need available labor to unload the trucks and reconcile the orders to be sure you received what you ordered and that it is in good condition.
Besides inventory sourcing, you’ll need to understand inventory management and how inbound shipments will be stored. The shipment must be stored in a way that the inventory is easy to find. This is where a warehouse management system comes in handy.
This step may seem a bit out of place, but it’s really not. Reverse logistics is when customers return goods they do not want or need, whether the finished goods are defective or unwanted for other reasons. Reverse logistics is the process of taking those goods back from the end customer and delivering them to your warehouse or distribution center for handling and tracking.
What Does Inbound Logistics Mean In Terms Of Business Benefits?
There are many business benefits to an efficient inbound logistics process. When done right, it can save the company money and help run operations more smoothly. Some companies find that a well-tuned inbound logistics strategy results in an improved flow of goods. A streamlined process means the products and inventory move easily and transparently between supply chain steps. Ultimately this means you’ll save money and time, and your staff can focus on other priorities. It also means fewer customer problems.
Monitoring inbound logistics closely can help you reduce your inventory costs by staying abreast of what you have and what you need. You can titrate orders depending on how much space is available and your forecasted sales, so you don’t use too much storage space or sink too much working capital into inventory.
What Does Inbound Logistics Mean In Terms Of Challenges?
Especially given the supply chain woes in the past few years, some companies struggle with inbound logistics costs and uncertainties. Those uncertainties can appear in the expected lead time to receive finished products or raw materials or in the unknown delivery dates. This makes it challenging to store enough goods to meet demand, while not overstocking.
Inbound shipping costs can be high. Companies can mitigate the cost by optimizing contracts and understanding what terms and shipping factors are most important to them. They can also monitor their invoices to determine if they are correct. Fortunately, there’s a solution for these issues, which we’ll discuss later.
Problems Solved By Inbound Logistics
It’s vital to work with suppliers that are communicative and reliable, but you don’t always know if this will be the case. Even tried and true suppliers can run into issues whether due to staff turnovers or issues from their vendors or delivery services. Maintaining clear lines of communication is a good way to stay on top of this.
A lack of transparency in shipping can be problematic for companies, as they can’t know if they can fulfill their orders, since they may not know if the inventory is going to be available on time. Knowing where shipments are at any given time and understanding when they will arrive is much easier now with real-time sensors and tracking options.
Companies can be challenged if they’re not properly staffed for inventory delivery. If too much comes at once, there may not be enough workers available to handle it efficiently. Too little inventory and workers may be waiting around with nothing to do.
Lastly, companies may not have good processes to handle returns, the returns logistics process. This is a time-consuming operation, especially for items that may not go back on the shelf for resale. Some may need fixing, and others may need evaluation or disposal. With each case potentially handled differently, it’s important that the company has a solid and understandable plan for staff to follow, which feeds into ensuring customers are taken care of quickly as well.
How To Ensure The Best Supply Chain Management And Logistics Management Process
By focusing on your inbound logistics process, you can improve your operations, shave costs and enhance the customer experience. Start by walking through every part of your inbound logistics operation. Use the steps we covered above and talk with the people in those roles, both inside your organization and outside of it. Getting input from multiple sources can help identify gaps or process improvements and your colleagues and vendors will be happy to help. After all, it can make their lives better as well.
Consider the manual processes you use, the digital tools, and key performance metrics if you have them, and identify your strengths and weaknesses. Look at industry benchmarks to see where you fall, as these benchmarks can be quite telling. Make plans for what you can improve and assign people to those tasks. Make them accountable while setting improvement goals. These goals can be financial, time-related, quality-related and customer service oriented.
Not everything has to be done yourself. You may decide it makes sense to use a third party logistics service (3PL) instead of running your own distribution center. You may realize you need warehouse management or transportation management systems to better handle your logistics, lower costs and improve service.
How Shipware Can Help Your Small Business
Even if you are not ready to make changes or don’t need to make big ones, there are steps you can take to lower your inbound logistics costs while improving your logistics network. Shipware can help you lower shipping costs through contract optimization invoice audit recovery services. We can also help you fine-tune your shipping solutions, saving as much as 21% on your yearly shipping costs.
With contract optimization, Shipware experts can help you identify the factors most important to negotiate with carriers, in order to save on your unique shipping situation. Our experts come from the carrier side and know the best-negotiating methods to help you succeed, and can help define a strategy and coach you through the process to gain the most savings and the best service terms.
Invoice audit recovery is an easy-to-use program where our system automatically analyzes your shipping invoices to catch any errors. The credits are automatically applied to your account, and Shipware is only paid if you realize savings as a result. Shipware’s tools and programs can help the smallest of shippers up to the largest, saving your business 1% to 9% in total invoice fees.
Contact us to learn more about how we can help you save money on your inbound logistics and outbound logistics shipping needs.