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Logistics is a key process for every business. Goods require movement from one place to another, and optimising logistics drives value to the entire supply chain. Building a comprehensive inbound and outbound logistics system can enable businesses to streamline transportation, last mile delivery, and enhance customer satisfaction. Better customer experiences translate into higher revenues impacting the overall business profits and growth.
On that note, let us look at outbound logistics meaning, importance, examples and process flow. We’ll also understand the main differences between outbound and inbound logistics.
What is outbound logistics with example?
There are two primary logistics processes every business has – inbound and outbound.
While inbound logistics refer to the internal movement of goods, the meaning of outbound logistics refers to the process of storing, transporting, and delivering the final product to the end user.
As can be understood, there are several other functions and activities involved in outbound logistics, such as:
- Warehousing and inventory management
- Order picking and management, and packaging
- Distribution channel and last mile delivery
Let us understand this better with some outbound logistics examples.
Example of outbound logistics
- A customer orders for a handbag on an eCommerce platform. The payment is processed and order is confirmed. An order ID is assigned to it: E.g., ORD00123007622
- Inventory is checked, the product identified, and picked from the shelf
- Handbag is checked for quality, and if ‘OK’ then sent for packaging and labelling
- Handbag is packed using bubble wraps and other recommended packaging material, and labelled with the order details (E.g., Customer name, shipping address, QR code, sender details etc.)
- Invoice is generated with the required QR code
- Parcel is sealed and ready for shipping
Now, in most cases, if this is a single order, a courier company can deliver the parcel. However, if this is one among many orders, then the orders are usually moved from the warehouses to the distribution centres. 3PLs or 4PLs can be used for this.
Once the parcels arrive at the distribution centre, they are sorted, and based on pincodes or special delivery instructions (e.g., expedited shipping), delivery partners are assigned.
The delivery partner will pick up the parcel and deliver it to the customer. Relevant updates and notifications will be sent to the customer to keep them informed. In most cases, an online feedback form is shared to the customer to collect feedback on the overall delivery experience.
Outbound logistics process flow: How does it work?
Let us understand how an outbound logistics process flow works with the example of an eCommerce company. In general, this is how a typical customer order processing works:
- Customer selects a product (e.g., handbag), adds it to cart, updates delivery details (e.g., contact details, shipping and billing address), pays for the product, gets payment confirmation message, gets ‘Order Confirmation’ message (order placed)
- Order number is generated, order is confirmed and communications are sent (note – customer receives email/sms confirmation, while fulfilment centres/warehouses get intimidated for order processing)
- Inventory is checked, product identified, checked for quality and any special message/instruction, packed, and delivery agent is assigned
- Order picked up, tracking status communication is sent to customers, order is delivered to customer
- Delivery confirmation status is updated and customer sent email/notification for feedback
What are the various outbound logistics activities?
Now that we understand what outbound logistics mean, let us take a look at the different outbound logistics activities. It must be noted that not all steps are followed by all organisations and is usually determined by the nature of business, service type, and other details.
Listed below are the key activities involved in outbound logistics management:
Inventory management and storage
These functions go hand-in-hand. It’s not enough to have the right inventory in place, but also to store it properly e.g., temperature controlled, hazardous material storage etc. This is especially true for small businesses with limited storage space (learn about economic order quantity and reorder quantity formula to calculate when and how much inventory to reorder).
Order processing and fulfilment
This step involves all the activities from the point the order is processed to the actual shipment (we will look at packaging and shipping as a separate component). For instance, as a customer, if your order is awaiting fulfilment, it means that the seller has processed your order but hasn’t shipped it yet.
In general, once the order is received and inventory checked, the order is processed. Product quality is tested for defect, inventory software is updated in real-time, and any special requirements or instructions are adhered to. It is next sent for packaging and shipping.
Packaging and shipment
Packaging and labelling comprise of different activities. Whether it’s a small or large corporation dealing with domestic or international shipments, this is critical. How you pack and label your parcel can impact overall customer experience. Poor packing means risk of shipping damages, incorrect labelling means delivery delays or incorrect messaging. Moreover, loading also has to be attended to before shipping, to ensure that the goods are loaded into the trucks/vehicles properly.
Moreover, incorrect labelling also impacts the reverse logistics process and adds to additional logistics and transportation costs for the business. Also, when it comes to international shipping, where taxes, customs, and other duties are involved, incorrect labelling, e.g., wrong consignor and consignee details can add to delays, costs, and storage challenges. This stage as such also includes proper documentation work.
Delivery and confirmation
The next key step in the outbound logistics process flow is the actual delivery of goods and confirmation of delivery. Now, in case you are a small business, this can be done via your own trucks or through a courier service or trucking company. However, if you are shipping via a 3PL or 4PL, the order will first have to be shipped to designated distribution centres.
Last mile delivery is the actual transportation of goods to the end customer. This is usually done via road transport. Take note that there are several steps involved in the backend especially route optimisation, real-time tracking, dispatch management etc.
Once the delivery process starts, relevant communication is sent to the customer. For example, ‘Out for delivery’, ‘Reaching you by x p.m.’, ‘Your product has been delivered’ etc.
In most cases, a survey/feedback link is shared at this point to collect feedback on the delivery partner and experience.
Challenges in outbound logistics systems
While outbound logistics efficiency can impact the entire supply chain operations, there are some challenges it continuously faces. For instance,
- Increasing cost of transportation – India’s logistics costs is among the highest worldwide. The cost of logistics per unit and logistics cost analysis has been rising over the years, making it necessary for businesses to identify affordable solutions for the movement of goods.
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- Lack of supply chain visibility – Lack of thorough visibility across supply chain operations lead to reduced efficiency and revenue. There are several processes involved in outbound logistics and visibility across the multiple processes can lead to delays, inefficiencies, customer complaints, expenditures. This is more when businesses work with 3PL, 4PL or any external transporter with limited control over the movement of their fleet.
- Inefficient delivery systems – In many cases poor delivery systems can also impact overall logistics operations. From mapping optimised routes to finalising delivery vehicles, getting the right invoices, permits and documents, there are several processes that work collectively to ensure timely and optimal delivery.
- Meeting customer expectations – Logistics is a competitive field, and meeting customer expectations is one of the key strategies to gain competitive edge. From packaging to timely delivery and damages, the last-mile delivery (both for B2C and B2B delivery) is crucial.
Key differences between inbound and outbound logistics
When it comes to inbound and outbound logistics, there are some key differences between them. Inbound logistics means to manage the movement of incoming goods for a business. For a manufacturing company, that could be the procurement of raw materials for production. This can include: receiving raw materials, checking for quality, unloading, inventory storage, movement of goods to production, etc.
On that note, let us understand the key differences between the two:
|Inbound logistics||Outbound logistics|
|Refers to the incoming of goods into the business||Refers to the outgoing of finished products from the business|
|Involves one-way flow of goods and raw material for production from suppliers||Involves shipping the final products to the end customer|
|Core functions are procurement, material handling, inventory storage, and transportation within departments for production||Core functions are inventory sorting, order picking, order fulfilment, packaging, labelling, transportation, delivery|
|Built around having strong vendor-supplier relationship (read about vendor managed inventory)||Built around having a strong distribution channel, warehouse management, and customer relationship|
How to improve outbound logistics value chain
By now we understand the role and importance of outbound services to the overall supply chain systems. As such, it’s vital to keep the processes and systems functioning properly to optimise the outbound logistics value chain.
Let us look at some simple steps that businesses can take for the same:
- Build customer trust by prioritising shipment schedules, and deliveries on time and in proper condition
- Find the best routes and delivery partners to limit complaints caused by inefficiencies and/or poor performance
- Use tools (e.g., EDI) for order management, inventory management, customer feedback etc. to streamline processes and get the right insights
- Provide value-added services and features (e.g., the option to schedule delivery slots based on customer availability, order status tracking etc.) to enhance the customer experience
- Keep communications regular and transparent
- Improve warehousing and storage facilities, e.g., work with micro-fulfilment centres, adopt tools for real-time updates, etc.
As a logistics business owner or one wanting to start a logistics business (take tips from these compelling logistics business name ides), understand that efficiency can be planned by noticing bottlenecks and finding solutions proactively.