Inbound and Outbound Logistics: Everything You Need to Know
A Complete Guide to Inbound and Outbound Logistics
Effective inbound and outbound logistics management are essential for reducing costs, improving efficiency and ensuring that customers' needs are met promptly.
As an eCommerce business, you probably frequently hear the terms ‘inbound logistics’ and ‘outbound logistics’. But what exactly do they mean? And what are the differences between them?
In this article, we will take a detailed look at what are inbound and outbound logistics, giving you more clarity on how the transportation of goods from one point to another in the retail supply chain works.
- Inbound and outbound logistics refer to the activities involved in transporting materials and finished products throughout the retail supply chain.
- Inbound logistics allows businesses to receive materials or supplies. Its processes include sourcing materials, placing orders, transporting goods, receiving products and reverse logistics.
- Outbound logistics deals with delivering goods to customers. Its processes include managing orders, packing products, shipping packages and solving problems.
- Efficient management of inbound and outbound logistics is essential for businesses to reduce their operating costs, improve the efficiency of their activities and enhance customer experience.
What are inbound and outbound logistics?
The terms inbound and outbound logistics refer to activities associated with moving products from where they are manufactured to where an end consumer receives them. Inbound and outbound logistics make up the retail supply chain and enable taking a product from one point to another and delivering it from the seller to the buyer.
Although both inbound and outbound logistics involve the transportation of products, their aims and the types of goods they move vary. First, let's explore the meaning of inbound logistics.
The inbound logistics process is concerned with moving raw materials into a supply chain. The goal of inbound logistics is for businesses to obtain finished products or components that they will use to make those goods, with the ultimate goal of selling them.
So, the movement of goods or parts from a supplier to a company's warehouse, store or distribution centre falls under the term inbound logistics.
The term outbound logistics refers to moving finished products out of a supply chain. This involves moving inventory out of the warehouse, confirming orders, packing products and delivering goods to buyers.
Customer service related to shipment is also considered part of outbound logistics.
What is the difference between inbound and outbound logistics?
After reading the definitions above, you might already have a sense of the difference between inbound and outbound logistics, but we will make it even clearer!
While inbound logistics focuses on moving materials and goods into a supply chain, the purpose of outbound logistics is to move finished products out of a supply chain. Inbound logistics is necessary for companies to secure things they can sell later, and processes that compose outbound logistics enable the delivery of orders to end customers.
In inbound logistics, goods are transported from suppliers, manufacturers and distributors to retailers, warehouses or third-party logistics companies. Once goods reach these destinations, outbound logistics begins, and products continue their journey to buyers.
Additional differences between inbound and outbound logistics lay in processes that fall under the respective terms.
What processes belong to inbound logistics?
The most common inbound logistics processes are:
- Sourcing materials
The first step of the supply chain is when a company decides what materials it needs and which manufacturer or supplier can provide them. Here, businesses obtain price quotes and can negotiate prices.
- Placing orders
Once a business identifies what materials and inventory it needs, it can purchase them from the supplier. As an eCommerce business, you most likely do frequent transactions, so make sure to keep a record of all the orders.
- Transporting goods
After a business places an order, suppliers transport it to the company's warehouses or distribution centres. Depending on the destination, goods can be moved using cars, planes or ships.
- Receiving products
After the ordered goods or materials reach the destination, a receiving team unloads trucks and verifies whether the shipment matches the order. If the team confirms that the products match what the company ordered, they move the products within the warehouse into storage. They will remain there until outbound logistic processes begin.
- Reverse logistics
Reverse logistics describes the processing of customers' returns. If a product does not meet the buyer's expectations, they might decide to send it back to the seller. When that happens, the product goes back to the warehouse. For this reason, reverse logistics also qualifies as one of the processes that belong to inbound logistics.
What processes belong to outbound logistics?
Now let's delve into what processes outbound logistics entails:
- Managing orders
After a customer purchases a product from a business, their order goes through the company's order management system; this is the first step of outbound logistics. Then, the order goes to a warehouse where it waits for fulfilment.
- Packing products
Before an order can be shipped, a team working in the warehouse must move products from their inventory locations and pack them. Once they put the items in boxes, they also have to label them so that the carrier knows the necessary shipping details.
- Shipping packages
After the products are packed, the carrier picks them up and transports them to the destination chosen by the buyers.
- Solving problems
Customer service also falls under outbound logistics. If there are any problems with the order or shipping, businesses must communicate with customers and try to solve the issue.
What are the challenges of inbound and outbound logistics?
Understanding how inbound and outbound logistics work is crucial for eCommerce businesses to offer the highest quality services and improve the efficiency of their operations. However, businesses must be aware of the potential challenges of inbound and outbound logistics. Here are a few things you should be aware of to maximise the value inbound and outbound logistics add to your supply chain:
- Supplier costs and errors
When sourcing components, businesses should negotiate rates and get quotes from a few suppliers before choosing the one that will provide them. If companies do not do enough research, they can end up spending a lot of money on raw materials. Similarly, if they fail to choose a reliable supplier, there is a risk of procurement errors. This could also lead to additional expenses or delays.
- Lack of transparency
When working with certain manufacturers, businesses might have limited access to information about when exactly the shipment will arrive or how to track the inventory.
- Long waiting times and delays
The period between when the company places an order and when the manufacturer delivers it can be lengthy, especially when the demand for certain materials surges. In turn, you might frequently experience delays affecting the rest of your business activities.
- Problems managing numerous deliveries
Businesses that receive many orders must handle multiple deliveries simultaneously, which can sometimes get confusing and lead to errors.
- Inventory mistakes
Inbound and outbound logistics can be complex, so mistakes in entering order information, providing delivery details or packing products can happen. Unfortunately, such issues can lead to businesses losing profit and witnessing customer frustration.
- Inefficient return process
Giving customers a chance to return products that do not meet their expectations is necessary to improve their satisfaction. But if a company lacks a clear and efficient return process, this aspect of logistics processes might be challenging.
How to optimise inbound and outbound logistics?
To make your supply chain more effective and cost-efficient, you should optimise the processes of inbound and outbound logistics. Here we give some useful tips to help you do that.
Identify gaps and inefficiencies
Before you start implementing changes, you should take some time to review your current processes and identify any inefficiencies related to costs, quality of products, delivery efficiencies or information tracking. This way, you can identify things that need improvement.
Keep storage costs low
As your business grows and expands, you will see your storage costs increase rapidly. To keep them down without reducing the number of customers, you should regularly perform inventory audits and invest in products with high turnover rates.
Develop strong partnerships with suppliers
Throughout the supply chain, businesses must work closely with suppliers. By developing strong relationships with them, you can take advantage of better service and prices and increase security and trust.
Warehouse management system
A warehouse management system can help you manage operations at your warehouse. Business owners can use the system to track inventory and shipments, pick products that need to be packed and monitor data, among other functions.
Use the services of a third-party logistics company
Third-party logistics, also known as 3PLs, are companies that can handle inbound and outbound logistics processes on behalf of businesses. They act as intermediaries between eCommerce businesses and their customers. They offer services that include warehousing, managing shipments or processing returns.
An example of a leading logistics solutions provider is Bezos, an experienced fulfilment company that handles all elements of storage, picking, packing, dispatch and delivery for its clients.
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Inbound and outbound logistics are crucial processes that focus on moving goods throughout the supply chain. Although both are similar, there are some differences between inbound and outbound logistics. While inbound logistics refers to bringing raw materials and supplies into the supply chain, outbound logistics involves transporting finished products out of the supply chain and delivering them to customers.
Understanding what inbound and outbound logistics are and what processes fall under them is essential to improve the efficiency of business operations, cut costs and ensure that customer needs are met.
One of the best ways to optimise the processes of inbound and outbound logistics and overcome any challenges that might arise is to use the services of an experienced logistics solutions provider such as Bezos.
We can help you manage all the processes of inbound and outbound logistics, saving you up to five hours daily on logistics tasks! Additionally, you will be able to cut up to 80% of losses on each international delivery. Speak to an expert and start saving money!
Frequently Asked Questions
What are examples of inbound and outbound logistics?
Examples of inbound logistics include:
- Obtaining raw materials and components from suppliers and manufacturers
- Transporting products to a warehouse or a production facility
- Storing materials and goods
- Inspecting the correctness of the order fulfilled by the supplier
- Managing inventory.
As for outbound logistics, examples include:
- Preparing products for delivery
- Moving finished products to distribution centres or directly to customers
- Tracking shipments
- Processing returns.
What are the main types of logistics?
The two main types of logistics are inbound logistics and outbound logistics. Inbound logistics focuses on moving raw materials and other goods the company plans to sell. On the other hand, outbound logistics focuses on the delivery of products to buyers. Both inbound and outbound logistics are important for businesses to operate efficiently because they ensure that products move smoothly from one place to another.
What is 3PL in logistics?
3PL stands for third-party logistics, which is a company that offers outsourced logistics services. This means that it handles processes of inbound and outbound logistics for businesses. 3PLs focus on order fulfilment, which covers warehousing, packing and shipping processes.