Are you asking, what is the difference between inbound and outbound logistics? Then, you are on the right page because this article will help you compare and contrast these two types of logistics.
To understand how different these two types of logistics are, we will need first to define them and understand what they each entail.
Receiving inventory in a warehouse
Essentially, inbound logistics focuses on receiving supplies and materials for internal use or for or manufacturing purposes.
It could refer to receiving ready-made products for office use or warehouse and fulfillment. Inbound logistics could also mean receiving raw materials and supplies for the production unit.
Importance Of Outbound Logistics
Inbound logistics is crucial because it is the first stage in the value chain. If something goes wrong at this stage, it will hurt the entire process. It may even mean stopping production and other operations altogether.
On the other hand, a well-run inbound logistics program can result in higher-quality products. It may also result in more cost savings and increased sales for the business.
Additionally, efficient inbound logistics can improve the customer experience while reducing your operational costs.
Plus, if you carefully organize your inbound logistics operations, you can easily negotiate better rates with your truck freight and shipping partners. This will result in even more significant savings.
Step By Step Inbound Logistics Process
Although the activities involved in inbound logistics vary from one industry to another, the process typically entails the following:
- Procurement: this step focuses on the acquisition of supplies and materials. It simply requires a business to purchase the necessary materials at the lowest budget but without sacrificing quality.
Here is how it is done; firstly, the procurement team searches the market for vendors and selects suitable suppliers after a thorough due diligence process. If you’re sourcing suppliers from China, this article on how to choose the best Chinese suppliers might be insightful.
After choosing potential vendors, they then conduct a quality check to confirm the suitability of the supplies in question. The next step is to negotiate the prices and other terms and conditions. Lastly, payment follows, after which a delivery schedule is agreed upon.
- Receiving inventory: this stage involves unloading the supplies from the delivery vehicles and sorting through them to verify their quantity and quality.
It is a laborious and tedious process. It requires staunch manpower and proper unloading equipment such as a forklift. The warehouse receiving process also requires an efficient inventory management system to help keep track of delivered items.
- Reverse logistics: apart from procurement and inventory management, reverse logistics is also essential in the inbound logistics process. Here, businesses get back inventory from customers for repair, recycling, reselling, or remanufacturing.
Effective packaging for outbound logistics
Outbound logistics involves everything from delivery to the distribution of finished goods to the customers.
Importance Of Outbound Logistics
The focus of outbound logistics is to ensure the smooth flow of goods from origin to destination (end-user).
It involves multiple partners, i.e., the manufacturer, distributor, retailer, and delivery team.
Once the manufacturer finishes production, the goods are taken to the warehouses for packaging, labeling, and other finishing touches. Afterward, they are either moved to the distribution centers or transported straight to the consumer via chosen retailers.
Note that the outbound logistics process is centered on customer demands by ensuring timely delivery of the finished products.
Businesses can choose to send out their products directly to the customer on an order-by-order basis. Alternatively, they can contract large distributors or sign up for a fulfillment service like FBA to help make their final deliveries.
Whatever option you choose for your business, the objective is to get the finished products to customers on time. Keep in mind that the way you manage your outbound logistics process will ultimately directly impact costs, sales, profits, and customer satisfaction.
Step By Step Outbound Logistics Process
Like inbound logistics, the outbound logistics process comes in many forms, but it can include the following:
- Order processing: Outbound logistics begin when a customer places an order. When the order is confirmed, it is sent to the warehouse management for processing.
- Sorting: After order processing is complete, the warehouse staff takes out the purchased items from the inventory. They then sort, pack and label the products for shipping.
Note that once stock is taken out from inventory, the warehouse management system is updated. Here, the relevant staff adjusts the stock and storage units, so they are up to date.
- Shipping and delivery: once the order is ready, the carrier ships it to the retailer, fulfillment center, or distribution center.
- Final delivery: Drayage is the final step in the outbound logistics process.
Here, a designated truck and logistics agent will pick up and delivery the order from the distribution center and to the customer’s location. With outbound logistics, customers can range from supermarkets to small retail stores or individual end-users.
The Main Differences Between Inbound And Outbound Logistics
Notably, both inbound and outbound logistics deal with the movement of goods from the manufacturer to the end-user. They’re like a double-edged sword, and based on the descriptions above, we can conclude several critical differences between them, such as:
Inbound logistics focuses on purchasing, storing, and allocating resources for production. On the contrary, outbound logistics applies to the sale of finished products. It involves processing customers’ orders and then choosing, packing, labeling, and transporting the purchased products to customers.
When it comes to inbound logistics, the documents presented are often purchase orders, invoices, and receipts. On the other hand, outbound logistics mainly deals with sales orders and delivery order documents.
In inbound logistics, interaction takes place between the suppliers and the company/business. Meanwhile, outbound logistics primarily focuses on the business and final consumer.
Inbound and outbound logistics form a critical part of supply chain management. While it may be costly to implement, it notably presents opportunities for significant time and money savings. It is why businesses should take a closer look at their logistical operations and see if they are well-optimized.
If companies manage their logistics appropriately, they can be more economical in their operations, and as a result, gain a competitive advantage.
In addition, if all operations run smoothly, the business can be more customer-oriented and sustainable. Over time, it may even be able to lower prices due to increased efficiency.