Before we delve deep into the technicalities of inbound logistics management and everything that it entails, let's have a quick run-through of how the significance of logistics and supply chain grew into our daily lives over the years.
The finished goods we use in our everyday lives are built through various raw materials, mostly all of which were once part of a container. Some of those containers traveled overseas and crossed borders, while others traveled to many supermarkets to reach your household, to be precise.
Now, you must be wondering what's so new about this. Hasn't this been happening for many decades? What's new is how growing customer satisfaction, intense and increasing online delivery volumes, and major cross-border trade operations pose various challenges for the logistics industry.
In today's fast-paced logistics environment, there's an immense need to deliver faster, smartly, and reach high levels of customer satisfaction. Ensuring that the right products reach the customer at the right time is not a piece of cake. And a major fundamental mistake behind this practice can be weighed down inbound logistics in a supply chain.
For instance, if the required raw materials do not reach a production unit on time, it generates inefficiencies that directly trigger customer satisfaction. This is where the smooth and effective working of inbound logistics becomes very crucial.
In this article, we’ll take you through the technicalities and major compliances of inbound logistics for a better and clear understanding. Stay tuned and keep reading.
2) What is Inbound logistics?
Bringing supplies and raw materials from the suppliers and delivering the same in production units for further processes, this practice falls under the umbrella of inbound logistics. It maneuvers and takes care of the procurement and delivery of the materials or parts required to build a final product.
Effective management of inbound logistics makes sure that a firm can undertake a smooth supply of its best-selling or most-demanded items. On the other hand, outbound logistics are responsible for packaging, warehousing, transportation, and delivery of products from the manufacturing facility to the final customer.
3) What are Inbound logistics activities?
3.1) Sourcing and procurement
The first step of inbound logistics is undoubtedly sourcing and procuring raw materials or finished goods from suppliers. But how do you determine which distributors to choose for this operation? Most ecommerce companies have a list of potential suppliers they can reach out to at any time. Zoning down on one from the list of many means carefully considering price quotations and earliest availability.
Ordering the raw material company requires that the right quantity arrives at the right time. Once you have shared the list of items you want to buy with your suppliers, it’s time to finalize rates and purchase them.
This is a crucial step of inbound logistics because the decisions made here can affect your business’s overall logistics and supply chain costs. Here, sellers must select the mode of transportation, via road, sea, or air, depending on the type of goods and how soon they need to be delivered. They also need to hire third-party carriers or logistics and check whether they provide pickup from vendor warehouses.
Taking care of and managing the new materials, unloading the goods, and making sure they match the order. When the goods arrive at your store you will receive a Bill of Lading (Bill of Lading) from the courier company with a list of everything that’s in that shipment. Your next step is to sign the Goods Receipt Note (GRN) to acknowledge that you have received everything you ordered and that the goods are in perfect condition.
3.5) Material Handling
Whether you store the items in your physical store, warehouse or storage unit, the next step involves moving the received order to a nearby safe facility and staging it for future use.
Moving the raw materials from the receiving dock to a secure storage area. The staff is instructed to put everything away in assigned locations. They will also mark the items and attach RFID tags for easy identification later.
3.7) Storing and warehousing
Managing all the procured goods before they go under manufacturing or customer fulfillment. This department is responsible for ensuring that all the raw materials are placed properly under logical circumstances so that the right storage conditions are met.
3.8) Inventory management
Putting the right goods under valid storage conditions and keeping track of them. If you use an Inventory Management system (IMS), it will input all the item details and update your inventory with the latest stock.
Sending the required supplies to their authorized destinations inside the business.
3.10) Tracking orders
Gathering and collecting details about incoming orders, including locations and required documentation. Your shippers will share a tracking link or tracking id with you to easily track the movement of your shipment.
3.11) Reverse logistics
Reverse logistics refers to the reverse shipping of returned, defective, repaired, and refurbished goods from customers. If you have to return your consignment, you must speak to the supplier and arrange the process of pickup from your location. Your shipping carrier will share the tracking details with you to track the order in real time.
4) Critical differences between Inbound logistics and Outbound logistics
4.1) Inbound logistics
- It includes procuring raw materials and supplies through a supplier to an inbound warehouse.
- Majorly focuses on the supply.
- The raw materials flow from suppliers, manufacturers, 3PL providers, brands, or distributors to a retailer.
- Activities under this category involve material sourcing, material management, and research along with warehouse receiving
- Involves interaction between the service provider or supplier and the company.
4.2) Outbound logistics
- Includes shipment of the final goods to the end customer.
- The main focus is on the demand for a product.
- The flow of goods is from a company, retailer, or brand to the final customer.
- Processes under this category are shipping, delivery, and customer service support.
- Includes communication between the company and the final customers.
5) Challenges of Inbound logistics
The primary challenges faced under inbound logistics are high costs, unpredictable lead times, and uncertain delivery dates. Such problems make it hard for businesses to maintain an ideal inventory level and improve the effective productivity of warehousing.
Here is a more detailed understanding of its challenges:
5.1) Inbound shipping inefficiencies
Some companies tend to spend too much of their monetary funds on shipping. One must negotiate preferred price ranges with a few carriers and consolidate inbound orders to make full truckloads to cut costs.
Many ecommerce companies set up strict supplier-business rules to manage costs and avoid extra spending.
5.2) Information vacuum
Another common and frequent challenge is not knowing valid shipment information. Where will the shipment arrive, when will it arrive, and how much will it cost? This lack of information forces companies to carry out extra inventories before the time of need or suffer delays in production and customer needs.
Real-time inventory information systems allow a company to make records, trace shipments, and actively communicate with suppliers to ensure correct data is recorded when entering the raw material.
5.3) Balancing supply and demand
Keeping track of enough incoming supplies to meet customer demand can be difficult due to economic conditions, seasonality, price fluctuation of raw materials, and much more.
Therefore, the best and most effective way to balance supply and demand is via data. Dedicated software can easily keep track of incoming inventory in your order pipeline. It can also monitor deliverables’ status and location, predict demand patterns per historical data patterns, look for opportunities to consolidate purchases, and more.
5.4) Communication gaps
Logistics is a total of multiple moving portions and the amalgamation of numerous stakeholders. This practice triggers various yet significant issues regarding keeping all the stakeholders aligned with the delivery process, status, delays, and much more.
5.5) Shipping inefficiencies
Shipping inefficacies can consist of various factors and things. Route diversions, natural climatic delays, vehicle breakdowns, lack of manpower, and drivers, to name a few.
6) How to optimize Inbound logistics?
Optimizing your inbound logistics means ensuring that operations occur faster and more efficiently. Assess every process, identify the strengths and weaknesses, and then make the following improvements.
6.1) Model your current process and track performance
Look out for inefficiencies related to waste, quality loss, information gaps, costs, and delays. The presence of intangible or invisible costs in inbound logistics can directly impact poor customer service and complicate matters. Therefore, always compare your operations to the best in the industry and competitors.
6.2) Analyze your choices
Weighing your choices goes a long way in ensuring streamlined inbound logistics. The price of sourcing raw or finished goods, hiring a storage unit, warehouse shipping costs, and online profit margins should inform your decisions. If you find yourself spending too much on one aspect, try to offset the cost in another sphere.
6.3) Develop strategies to address the loopholes system-wide
Inbound and outbound logistics risk falling prey to systemic and manual errors. To avoid problems in the supply chain and save costs, we strongly recommend using an automated logistics platform that makes the process faster and eliminates room for mistakes. Such logistics software can help right from inventory management and warehousing to shipping and delivery reports.
6.4) Use a transport management system (TMS)
This tool helps in automating, managing, and optimizing freight operations. A TMS will compare shipping quotes and service levels among different carriers, schedules the shipment, and tracks it entirely through delivery.
6.5) Build strong relationships with suppliers
All successful ecommerce businesses are built on great partnerships. It’s important to build trust and understanding between the parties, vendor, and business, early on. Not only does that help with the smooth running of business operations but it can help with reduced lead times, lowered costs, and urgent deliveries.
7) What are the steps involved in Inbound logistics?
Step 1 - Sourcing and purchasing
The company looks out for vendors and service providers who can provide the required raw materials at the best prices possible. Later they fix a definite price range and quantity and purchase raw materials.
Step 2 - Recording and tracking
Once the company records the required purchase order, they receive a receipt from the supplier once the advance payment is made.
Step 3 - Notification
Once the shipment is made by the supplier, it electronically notifies the firm and provides them with the tracking information regarding the shipment.
Step 4 - Receiving
Workers unload the supplies and scan barcodes to count and identify the product. The quantity and quality are verified, and then the material is accepted. Later the goods are sent to manufacturing units or put away at a warehouse.
Step 5 - Reverse Logistics
The receiving team takes care of all the returned, reimbursed and damaged goods sent back by the consumers.
8) What are the benefits of Inbound logistics?
Effective and efficient inbound logistics management can provide a plethora of benefits to your firm. Here are some of its advantages:
- Improved and high product quality.
- Low-cost shipping and receiving.
- The cost of raw materials is predictable.
- Steady and on-track production rates.
- Allows better inventory management.
- The ability to spot supply chain problems is very high.
- A strong foundation for sales success
- Stronger supplier and vendor relationships.
Inbound logistics is the key to a successful business, after all, it's the process that allows you to get raw material in and start with things. Whether service providers, B2B or B2C companies need to focus on inbound logistics to make things run smoothly. These initial activities come under the umbrella of inbound logistics and are essential to get things moving in the business world. We hope this article was of great help and solved most of your queries regarding the same.
10.1) How can you calculate inbound logistics?
There are various metrics to measure the performance of inbound logistics. Here are some calculations to consider:-
- Time and expense to receive incoming inventories
- Freight cost for a pound of raw material
- Freight cost as a share of total production cost
- Number of times staff handled raw material
10.2) What is inbound logistics in a value chain?
The value chain comprises operations, sales, marketing, and other services. Inbound logistics affects the initial part of the value chain by bringing raw materials into the business. Later, the company adds value to the chain by turning those raw materials into useful goods.
10.3) What is inbound logistics in manufacturing?
In the manufacturing or production process, inbound logistics is how raw materials come into the factory. The production needs to be on point to meet the output, costs, and other targets.