When you make a product for sale—whether it’s software or drill sets—it requires materials and components that go into constructing its final form. This could include raw ore, processed metal or lumber, semi-finished electronics, or even completed items that you’re adding to a larger unit or set to prepare for sale under your business.
Inbound logistics refers to all of the steps involved in getting those raw materials and products from their original source to their place of finished state.
Defining Inbound Logistics
As a whole, inbound logistics covers the totality of securing the raw materials, components, goods, or information needed to create the products your business sells. Discussions of inbound logistics usually center on upstream or B2B companies where product creation is more common than B2C which often centers on resale of finished products.
At a practical level, the inbound logistics definition is a bit of a Venn diagram, with two overlapping circles:
- Business concept and goals
- Specific activities
One-time purchases or builds related to structures and permanent equipment, as well as labor management related to product creation, don’t typically fall under inbound logistics. Rather, it encompasses the ongoing stream of materials that make up your saleable products.
As such, logistics (both inbound and outbound) are a critical part of overall supply chain management.
Difference Between Inbound and Outbound Logistics
Logistics is a business concept and set of activities that falls under the process of supply chain management, and answering what is inbound logistics vs outbound logistics is pretty straightforward: it’s all in the name.
If logistics encompasses every step and arrangement related to the creation and distribution of your products, then:
- Inbound logistics covers materials coming to your business in connection with product creation.
- Outbound logistics refers to all the steps involved in moving your finished products out to the customer.
The Importance of Inbound Logistics in Supply Chain
No one part of supply chain management can be discarded without consequence—it’s all part of the process of getting your product to a point of sale in order to keep the lights on for your business.
With that being said, however, inbound logistics is where it all starts.
You can’t build a better machine (or any machine) without the raw materials that go into it. While there are some business decisions that will allow you to balance later stages of the supply chain, like a flash sale to push out excess inventory, you’re stuck in the water if your inbound logistics fail.
Key Components of Inbound Logistics
Logistics managers and firms are responsible for countless details, from reviewing major contracts to figuring out a workaround for a truck breakdown. The activities that give inbound logistics meaning include:
- Sourcing, procurement, and ordering
- Transportation to warehouses or production facilities and within the company
- Tracking
- Receiving and inspecting
- Storage and warehouse management
- Reverse logistics (i.e., returning damaged materials)
Thinking more in terms of how rather than what—with the constant goal of increasing efficiency or quality while reducing or maintaining costs—the business concepts that comprise inbound logistical planning include:
- Inventory management
- Quality control and waste reduction
- Material handling and preservation
- Cost efficiency including price negotiation and shipping liability assumption
- Scheduling and coordination
- Vendor relationship development and maintenance
- Delivery optimization through real-time data, analytics, and audits
Additionally, inbound logistics can be connected to specific company values such as:
- Ethical sourcing in terms of labor and human rights
- Environmental sustainability such as green initiatives related to specific materials
- Focus on sustainable energy related to transportation or warehousing
Challenges in Managing Inbound Logistics
Logistics is all about meeting and overcoming challenges. Even if everything is going smoothly to plan, the optimization aspect of logistics means that looking for improvement opportunities is continuous.
Among the biggest thorns on the inbound logistics bouquet are:
- Materials availability – Is what you need to create your products available? Whether it’s raw materials or semi-finished components, factors such as competition and innate scarcity can make it difficult to consistently source what you need when you need it.
- Materials quality – Poor quality materials can lead to their return, to changes in the rate of testing, production, or packaging, and to customer dissatisfaction based on availability or quality. You don’t just need to get the materials when, where, and in the volume needed—you need to ensure their quality is acceptable and consistent.
- Transportation issues – Since the midpoint of the pandemic, most consumers have heard the phrase “supply chain delay.” Ships locked out of ports, driver shortages, delays in air travel—while 2021 and 2022 piled on every example of transportation interruptions all at once, transportation glitches, from traffic congestion to port closures, can delay inbound materials at any time.
- Variable pricing – Inflation, sourcing, and changes in the competitive landscape can all affect the price of the materials needed to manufacture your products. Balancing pricing of raw materials and their transport, particularly from differing origins, against timing and product consistency can be tricky math to figure out.
- Supply and demand management – Particularly if your business experiences shifts in customer demand such as seasonality, ensuring that you have the right quantity and type of materials on hand to meet those needs can be difficult.
- Capacity balance – If upcoming demand coincides with materials availability, can you increase your orders? Do you have the storage space to handle a larger influx, the production capacity to increase manufacturing volume, or the budget to fund an increase in either at the same time as a larger materials order?
- Poor communication – Clear and immediate information is critical to optimizing inbound logistics. If a business has no way of knowing whether a package delay is due to a missing signature or a highway accident, they can’t fix the problem or adjust timelines to accommodate a delay. Any lack of information between the company, suppliers, carriers, or other service providers can be problematic.
- Sequentiality – Like a set of dominoes toppling after the first is tipped over, one interruption can cause a ripple effect throughout your inbound logistics. Efficient inbound logistics means precisely timing each step of order, receipt, labor scheduling, machinery availability, and so on. When one domino falls, it can be a major challenge to rearrange every related step to avoid product delays and cost overruns.
Inbound Logistics Best Practices
So how do you overcome these challenges? Luckily, inbound logistics isn’t a rare field, even if your business has unique needs or processes. Best practices include:
- Utilize technology – If there’s any aspect of your inbound logistics that depends on a pencil and a calculator, you’re losing time and opportunities. With so many moving parts, logistics platforms are a must to help you identify the best option while balancing countless variables.
- Partner with experts – Dedicated logistics professionals can provide cutting-edge solutions and new perspectives to optimize your inbound logistics. Even with the best in in-house talent, bringing in outside help provides a chance to audit and tighten existing processes and provide new solutions.
- Develop backups – Borders close, mines cease production, factories experience labor shortages. As reliable as any source or service provider has been in the past, don’t expect a basket to carry your eggs forever. Develop and test alternatives, and consider splitting business needs across multiple providers to help ensure continuity.
- Strengthen your vendor relationships – Looking for backups doesn’t mean ignoring your current suppliers. Work on mutually beneficial, positive relationships that include personal connection and appreciation where reasonable. Collaborate, communicate, and ask for their guidance in helping meet goals.
- Review, revisit, realign – It’s simple to say “start with planning” but logistics is a 24/7 planning game. Add planning as part of your annual and quarterly cycles so that the basics of your inbound logistics game plan—what, when, where, and how—are always available for adjustment in relation to seasonal sales cycles, product launches, and market shifts.
The Role of Technology in Inbound Logistics
Logistics platforms are rarely one-and-done. Depending on how much of your logistics processes you outsource, you may need to invest in systems for:
- Warehouse management
- Transportation and fleet management
- Shipping optimization
- Inventory control
The right technology blend can help you cut costs and boost your efficiency and customer experience.
Maximizing Efficiency with Inbound Logistics
Transportation of materials is a critical component of inbound logistics, and the Lojistic platform can help your business reduce shipping costs and improve performance.
Regardless of your company’s size, we can provide you with critical shipping business intelligence. Our shipping analytics platform audits your shipping invoices, and pursues refunds the carriers owe you.
Plus, your Lojistic account allows you to review your shipping history, offers actionable insights and automation, and provides ongoing reporting and result tracking.
When you’re ready to check us out, take a look at our success stories, view our virtual demo, or learn more about how Lojistic can help reduce transport costs and boost the efficiency of your business’s inbound and outbound logistics.
If you have questions for us or want to walk through account setup with a human, schedule a time to have one of our experts call at your convenience.
Sources:
Inbound Logistics. Inbound Logistics: Definition, Examples, and Process. https://www.inboundlogistics.com/articles/what-is-inbound-logistics/
CFI Education Inc. Logistics. https://corporatefinanceinstitute.com/resources/valuation/logistics/
CHRON. What Is Inbound Logistics & Manufacturing? https://smallbusiness.chron.com/inbound-logistics-manufacturing-14398.html
Trade Finance Global. What are Inbound Logistics? https://www.tradefinanceglobal.com/freight-forwarding/inbound-logistics-definition/
Oracle Netsuite. Guide to Inbound and Outbound Logistics: Processes, Differences and How to Optimize. https://www.netsuite.com/portal/resource/articles/inventory-management/inbound-outbound-logistics.shtml
Author
Bryan Van Suchtelen
Bryan Van Suchtelen
Corporate Director of Parcel Rate Services
Prior to joining Lojistic in 2015, Bryan enjoyed a 26-year career with UPS where his roles included Pricing, Field Sales and Director-level Sales Management of some of UPS’s largest customers.
At Lojistic, Bryan leverages his wealth of experience/expertise to identify and execute supply chain cost management solutions for parcel shippers of all sizes. Bryan has helped his customers reduce their shipping spend by tens of millions of dollars.