Logistics is a huge industry with many moving parts. Inbound logistics. Outbound logistics. It can be confusing to determine the difference and understand how each impacts your company. But know that outbound logistics plays an outsized role in your company’s success. Whether you make your own products starting from raw materials or you resell finished goods acquired from suppliers, that storage and shipment process can lead you to either hit record profits or get into the red if not handled properly. Learning about outbound logistics and the best way to manage it is a wise business move.
What Is The Difference Between Inbound Logistics And Outbound Logistics?
Before we dive in, let’s get comfortable understanding the difference between inbound and outbound logistics. We’ll start with inbound logistics because it is earlier in the supply chain management process. What is inbound logistics exactly? The inbound logistics service is how you bring in raw materials and finished products to your warehouse or distribution center. To do so, you will procure or order the goods, transport them, receive them, manage them as they arrive, and then them. Reverse logistics is often part of the inbound logistics management process as well.
The outbound logistics process starts at the storage step and then proceeds to get the goods to your end customer. That means order fulfillment, which involves picking, packing, and shipping. It also involves transportation, including last-mile delivery to its final destination. Lastly, we can’t forget customer service throughout the process, ensuring that the delivery process leads to customer satisfaction.
The inbound and outbound logistics process can be separated by the ideas of supply and demand. Or even receiving and sending. The inbound logistics process is the supply side, i.e. receiving the materials. The consumer demand side is, of course, the outbound logistics services — the sending side. Consider the dividing line as the storage inside the distribution center, with storage straddling the logistics processes.
Companies need both for their logistics operations to ensure they receive the needed inventory and goods, and that they’re able to meet customer expectations through the outbound process of sending them the ordered items. Both logistics sides have costs and operational issues, and neither is more important than the other. They should work hand-in-hand and be considered part of the entire supply chain. Ultimately, it is one flow and process.
What Is Involved In Outbound Logistics Management?
Outbound logistics operations involve a variety of steps, starting with storage and inventory management, and ending in customer delivery. Here are some of the steps incorporated into the outbound process.
Inbound logistics receives the finished goods or raw materials at the warehouse or distribution center. As we previously shared, the storage and inventory management part is where outbound logistics begins. The incoming goods and products must be stored in an organized way so the pickers can find them, and they must be stored in the right conditions. That might mean in a temperature-controlled environment, or in a safe manner if they are hazardous materials, or stacked appropriately so nothing gets damaged.
It doesn’t help to have inventory stored properly if no one can find it and the staff doesn’t know how much is there. Inventory management is a key part of ensuring the right amount of inventory is available at any given time, that it does not expire, and that it can be located by the pickers when orders are placed. Inventory accuracy makes a huge difference to the bottom line. Warehouse management software is often used for this, as well as inventory management software. If you’re wondering“what is an inventory management system”, we’ve got you covered! Check out our blog post.
Order Processing And Fulfillment:
Customers place orders, and the logistics operation will process those orders and send them to the fulfillment center, presuming that the inventory is ready and available to send. Fulfillment operations receive the order, and the pick and pack logistics process gathers the needed inventory and sends it to be readied for shipping and delivery. At the same time, the inventory system should update in real-time to account for the pulled products. The order is packaged and labeled, with the staff or automated machinery determining shipping fees and service, which may be influenced by the customer demand when placing that order.
There are numerous modes of transportation to bring your inventory to customers, depending on where the customers are, where your distribution center is, the shipment size, how quickly you need to get it there, and any delivery factors like temperature or other precautions. This is all tied into the shipping process. Along with inventory costs, transportation costs are an important cost center. Shipping costs continue to rise, and delivery drivers are in shorter supply than in the past. That, along with increasing gas prices, is leading to higher costs.
To meet customer demand, delivery should be timely and accurate. The customers should know when delivery is expected as well, and be able to track it.
This is not actually the last step, but one that should be weaved in throughout the process. The customer may have no problems, and the order goes through with smooth sailing, arriving at the destination with no issues. However, problems can arise at any step along the supply chain.
What Is The Importance Of Outbound Logistics?
Both inbound and outbound logistics are vital to an organization. With outbound logistics, the delivery aspect is more customer-facing, and the costs can impact the organization’s bottom line. It affects company profits as well as the brand’s reputation. Handling outbound logistics well can be a competitive advantage to help your company stand apart from its peers. If done poorly, outbound logistics can cost you money and harm your business.
Consider optimizing your outbound logistics to get the most value from it. Start with optimizing your inventory system to ensure you have what you think you have. Are you using an inventory management or warehouse management system? If not, it’s time to consider it. Do you have enough inventory when you need it, or do you have too little or too much? Dig in to understand that situation. Carrying too much inventory is costly, and it can expire or go stale and unsold. Carrying too little at one time means you can lose customers because you can’t fulfill orders in enough time. If the inventory is not stored in a way that makes sense, that can add extra time to the fulfillment process and harm customer service.
Investigate if your shipments are reaching your customers in a timely manner, without errors, and at a cost-effective rate. This is the time to look into your carrier options to see if you are getting the best service levels and prices. You may want to shop around to improve your options. We can help you do this. It might mean using a combination of regional carriers and major carriers, depending on the type of delivery and the timeframe needed, or just renegotiating contracts.
If you are performing deliveries yourself, you might want to look into a transportation management system to handle route planning. Transportation costs and time can have a significant impact on not only your business but also on supply chain management. This automated software can help you shave time for deliveries, which results in more deliveries and less gas. It also can improve customer relations. It can make for happier delivery drivers as well.
Lastly, if you are not using a third-party logistics (3PL) provider, it may be worth seeing if it would benefit you. There is no harm in looking at all options. Some companies find that having a 3PL perform inbound operations and outbound logistics operations improves their metrics and allows the company to spend its time on other strategic efforts. There is not always a right answer.
How Does A Business Benefit From Outbound Logistics?
There are countless ways that a company can benefit from outbound logistics services when done right. It can save you money through efficiencies. It can make your storage and fulfillment process smoother and more accurate. It can improve quality control. It can improve customer service and build brand loyalty. And it can free up your staff to work on more important issues if you have the right standard operating procedures in place.
If you’re thinking of using a 3PL, let us help you find the best one for your needs with our proprietary process. There are thousands of 3PLs in the market, and they don’t all offer the same thing. Our 3PL process will evaluate your needs and wish list and see where things currently stand with your operations. We can determine if you are overspending on these services and help identify what partners would be the best match for you. Once we do, we can negotiate directly with your current 3PL or evaluate those in the market who are a good fit. We look not only at pricing but also ensure your objectives and needs are met. Shipware’s experts continue working on your side once a 3PL is in place, to hold them accountable via the service level agreements.
Finding the right partners in outbound logistics can make your operations run better and can save you money. It can also lower your stress levels and let you focus on growing your business and addressing other challenges.
Contact us to learn more about how we can help you with your outbound logistics needs, whether selecting a 3PL or finding the best transportation options for your business.