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Inbound and outbound logistics are two ends of the same rope. However, their purposes are different. Having said this, no one can deny that both of them are critical functions of the same supply chain. This article elaborates on what inbound and outbound logistics are, key differences between them and tips for improvement.
What is inbound logistics?
Through inbound logistics, a manufacturing company procures and other supplies needed for the business. In simple words, inbound logistics is managing goods that come in the company/factory/business such as raw material. For example, if you are a food processing unit making jam then, then fruits, sugar and other required ingredients sourced by your factory come via inbound logistics. On the other hand, if you are a distributor of garments, then all kinds of garments that you may have ordered from various garment making units come in through inbound logistics. It involves various steps such as purchasing, checking for shipping damages, quality checks, inventory management, and so on.
However, inbound logistics function is not limited to inward transportation of goods. It also involves a list of activities mentioned below:
- Purchase: The purchase department places an order of the required quantity and quality of the raw material for the business.
- Receiving of goods: After placing an order, the raw material or goods are received, the unloading of the truck takes place and goods are stored in the inventory. The receiving employees usually roughly check the raw material ensuring the right products are received. Also, they need to ensure that there is no considerable shipping damage, which may degrade materials.
- Quality check: In some cases, an additional step of quality checks is carried out. For example, sensitive industries such as pharmaceutical, food & beverage, etc., are required to undertake quality check of raw materials. This ensures that the raw material is up to the standards required and there is no.
- Inventory: then, the goods are stored in the inventory of the company.
Taking an example of a toy manufacturing company, inbound logistics involves the following activities:
- Selecting a vendor and placing an order for the required raw materials such as wood for wooden toys, different grades of polymers for plastic toys, fabric for fabric toys, and other raw materials such as colours, dyes, and so on.
- Upon receiving the order of raw material, the procurement team ensures that the quantity and standards of the procured raw material are right.
- Unloading of the raw material takes place and then it is sent to inventory for storing until it comes into production.
- The procurement team will reorder the required quantity of raw material as per the need. Usually, there is a set formula for reordering, so that the purchase department follows.
- Meanwhile, the Quality check (QC) team ensures the quality of polymer resins is right for the production of toys.
What is outbound logistics?
Outbound logistics is exactly the opposite to inbound logistics. When you are dispatching goods out of your factory or company, it is called outbound logistics. For instance, if you are an ice cream manufacturer, and you are dispatching ready ice creams through ,to distributors, then it is outbound supply chain. Similarly, a distributor or wholesaler is shipping goods to retailers, it is outbound logistics for them.
Outbound logistics involves activities such as order-management, delivery, packaging, distribution, warehousing, transportation, and so on. A business has to have a good logistics solution provider for the success of the outbound logistics function.
Outbound logistics function of a toy making company will involve the following activities:
- Once the finished toys are ready, the outbound logistics team will be responsible for its distribution.
- The team will work to ensure that products are reached to the distributors at the optimum transport cost. For this, the team needs to find the right logistics partner and transport partner. For example, if this toy making company is based out of Bengaluru, the team will look for a list of transport services in Karnataka for distribution.
- At times products are stored in a warehouse near the customer base for quick distribution. For example, Bangalore based toy maker will find a warehousing facility on the vicinity of Delhi for smoother distribution in the Northern market.
- Similarly, fulfilling e-Commerce orders, last mile delivery, next-day delivery, etc., are inseparable elements of outbound logistics.
- Depending on the needs the outbound logistics team can choose to work with a trucking company, freight forwarders or, 3PL or 4PL logistics company.
Inbound logistics vs. outbound logistics
Inbound and outbound logistics are equally important functions for any business. They are not opposite to each other but are essential functions of the same supply chain.
Inbound logistics aims at procuring raw materials. Therefore, involves activities such as purchase, receiving of goods, quality check of raw material if required, inventory management and so on. So
On the other hand, the aim of outbound logistics is to ensure the supply of finished products to the supplier. Therefore, it involves activities such as distribution, warehousing, packaging, and so on.
|Inbound logistics||Outbound logistics|
|Definition||It is used for bringing goods such as raw materials in the company.||It is used for sending good out of the company. An example would be dispatching ready goods to the market.|
|Flow of goods||It involves inward flow of goods.||It involves outward flow of goods.|
|Activities involved||Purchase, procurement, material handling, inventory management, etc.||Inventory management, material handling, packaging, dispatch, etc.|
|Business relationship involved||You need to have a strong relationship with suppliers.||You need to have good relationship with distributors, logistics partner, and so on|
Tips to improve inbound and outbound logistics
Here are some tips to improve inbound and outbound logistics.
- Avail of new age logistics services: New age logistics services such as partial trucks loads (PTL) can help you overcome many challenges. Tata nexarc offers PTL logistics service at the best price in the industry. You can quickly post your requirements, select your logistics partner and ship your cargo at the lowest price.
- Maintaining business relationships is key: Whether it is your supplier for inbound logistics or logistics partner and distributors for outbound logistics, maintaining relationships with them is key to success.
- Order accuracy is important: Many manufacturing companies follow just in time manufacturing approach where inbound and outbound logistics play a critical role. As such companies order raw material just in time for production. Therefore, the accuracy of order and reorder is critical.
- Automation can bring efficiency: Inbound and outbound logistics can be well managed with the help of automation solutions such as warehouse management system (WMS), transportation management system, inventory management system and so on. These automation systems offer greater visibility over the supply chain and enable the logistics team to make right decisions.
Both functions – inbound and outbound logistics functions are extremely important for smooth conduct of the business. Therefore, ensure that you have a good logistics partner that works in tandem with your business needs.