Outbound logistics encompasses all the steps and roles involved in getting a finished product out the door (or warehouse) into the hands of its end user, whether it's a local, national, or global logistics operation. This includes everything from moving packages across country to moving packages across town, and when done correctly, it's nearly invisible to the consumer.
The other side of that coin, however, means that inefficient outbound logistics results in lost time and money for both you and your customers, impacting inventory levels, inventory costs, and customer expectation. Implementing a proper parcel audit system can help identify inefficiencies and help reduce shipping costs.
With that in mind, having an understanding of outbound logistics can help you grow your reputation, sales, and company. Let’s dig into all the logistics details, including distribution centers and logistics operations.
Outbound Logistics: A Brief Definition
One definition of outbound logistics is: A process that organizes both the warehousing and transportation of a business’s product line from the moment production ends until the product arrives in the customer’s hands. This process involves comparing different parcel rates and leveraging shipping procurement to obtain the most cost-effective solutions.
Thus, outbound logistics activities can include:
- Storage of manufactured inventory
- Transportation of goods to a point of sale or distribution center
- Shipping and handling of goods from a warehouse to the end user’s home or business
- Transport, storage, and sale via wholesalers, dealers, or retailers
- Establishing and meeting timelines across all steps and locations
- Balancing quantities to avoid the costs of both overstock and scarcity
Outbound logistics is half of the logistics function of supply chain management, which refers to the totality of resource acquisition, storage, and transport. Inbound logistics, which includes the logistics process of transporting raw materials, is the flip side—the incoming transport of all the parts and pieces, supplies, and inventory needed to create a company’s products.
The Role of Outbound Logistics in Supply Chain Management
Both inbound and outbound logistics are critical to meeting customer demand and building a business that efficiently delivers products to end users. They fall under the umbrella of supply chain management—the total process of converting raw materials to a finished and delivered product. Within the context of supply chain management, each of the following elements plays a vital role:
- Procurement
- Operations management
- Inbound and outbound logistics
- Marketing channels
- Distribution
By understanding the role and integration of these components, businesses can create a streamlined and effective supply chain, ensuring timely and cost-effective delivery of products to the end-users.
Steps and Processes in Outbound Logistics
Outbound logistics can deal with either a tangible or digital product, but it’s often illustrated in terms of manufactured goods. Outbound logistics begins once inbound logistics results in finished goods, and ends once the product is in a consumer’s hands.
Steps and processes include:
- Transportation
- Distribution center storage
- Inventory management (including warehouse management system usage)
- Order processing
- Order fulfillment
- Shipping
- Final mile delivery
Common Challenges in Outbound Logistics
The goal across outbound logistics is to achieve everything listed above most cost effectively, which can be interpreted and tackled in numerous ways throughout the end stage of supply chain management. Shipping optimization is crucial here, and tools like Lojistic that provide shipping reporting can provide insights for better decision-making.
Transportation
Moving inventory from point of manufacture to its storage location often requires over-the-road trucking. Balancing cost and efficiency means:
- Negotiating contracts with LTL/TL logistics providers
- Identifying providers with highly efficient fleet management
- Reducing shipping delays, errors, and product damage
- Understanding reverse logistics and how it can affect operations
Warehousing
Storage facilities aren’t just about cost and square footage. Key elements to securing the best facilities for your needs include:
- Proximity to a businesses customer base
- Location and building situation
- Receiving, exit, and climate features
- Services provided
- Usage limitations
- Integrating with the overall logistics network
Inventory Management
Inventory management is more than simply knowing how many products are stored where. Effective monitoring includes:
- Anticipating seasonal order fluctuations
- Understanding when warehoused products should be discarded and destroyed
- Coordinating across sales, marketing, and manufacturing to meet customer demand
- Assessing inventory levels and inventory costs
Order Processing and Fulfillment
Order processing and fulfillment are prime functions to target for improvement opportunities, whether you’re a dropshipper working through Amazon FBA, a boutique start-up using your garage and a label maker, or a multinational business with custom software and networks.
How can you:
- Optimize the incoming order processing time?
- Reduce your error rate related to receiving payment?
- Ensure packages include exactly what the customer ordered?
- Reduce product damage due to packaging materials and processes?
- Utilize an effective warehouse management system?
Shipping and Delivery
Getting goods into your customers’ hands is the final stage, and it can be just as critical to their satisfaction as how the product performs. You’ll need to:
- Negotiate discounted rates with providers like UPS, FedEx, DHL, and private carriers, ensuring the cheapest shipping rates possible
- Leverage the USPS when possible
- Minimize delivery time and delays
- Manage shipment errors
- Work closely with delivery drivers
- Utilize shipping analytics to monitor performance and make necessary improvements
Balancing Outbound Logistics Decisions
A major challenge to outbound logistics is interconnectivity—there are no steps or decisions that are isolated, and the effects of a change to one function can ripple across multiple areas of supply chain management. Utilizing detailed shipping reporting and conducting a shipping cost comparison can help in managing these interconnected parts effectively.
For instance, if you opt for a lower-cost transportation carrier from your manufacturing plant to warehouses from a company that has a wider window for delivery time, it could result in:
- Additional warehouse charges by arriving outside of set hours for unloading
- Negative reviews from long-time customers faced with unexpected shipping delay
- An increase in customer service calls
Getting the Best Results for Your Operations
So how do you meet your goals of increasing efficiency and reducing costs at the same time, without upsetting one of the many apples in the apple cart?
Many companies partner with logistics experts in a specific function (i.e. inventory management, transportation, etc). Like many specialty business functions, there is no way for a DIY approach to match the efficiency of skilled professionals with dedicated platforms and networks.
Making the right logistics decisions and changes requires:
- Historical and predictive data analysis
- Stackable platform functions that connect multiple steps in a cohesive system
- Reducing costs with major providers based on established relationships
Ready to Up Your Logistics Game?
When it comes to logistics, change that “g” to a “j” and you’ll open the door to faster, lower-cost outbound services.
Lojistic is a shipping business intelligence platform that scales to any size of operations. Your Lojistic account provides actionable insight and automation so you can streamline your process, reduce timelines, and cut shipping costs. From optimizing your UPS and FedEx contracts and rates to managing your invoices and recovery, Lojistic technology and services helps businesses improve operational excellence. Our comprehensive parcel audit process can further assist in reducing unnecessary expenses.
Best of all? The Lojistic platform costs you nothing. From dashboards that gather your shipping history to identifying money owed to you by your carrier(s), it’s THE cost savings automation and analytics platform that businesses rely on to control and reduce shipping costs.
Create a free Lojistic account now, or check out our demo to see how Lojistic can help your business.
Sources:
HLOG. Outbound Logistics: What Is It and What Are Some Examples? https://hlogcam.com/news/outbound-logistics-what-is-it-and-what-are-some-examples/
Investopedia. Logistics: What It Means and How Businesses Use It. https://www.investopedia.com/terms/l/logistics.asp
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.