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How to drive efficient inbound and outbound processes that meet business objectives and customer expectations
Table of contents
- Inbound logistics
- Outbound logistics
- Distribution center requirements
- Closing thoughts
Your logistics network is the backbone of how you turn materials into products and how you deliver products to your customers. Many people understand that their logistics networks are critical to the success of their operations, but don’t see a full picture of their logistics network as a whole. In fact, the processes of bringing materials to your company and then delivering finished products to your customers are distinct. These are known as “inbound logistics” and “outbound logistics”. Understanding the difference between the two is essential for gaining a full-field view of your entire logistics network.
Inbound and outbound logistics serve different purposes, and their designs reflect this. Both the inbound and outbound logistics processes are distinct and are optimized to fulfill the role required of each network. In this article, we’ll dive into what “inbound logistics” and “outbound logistics” refer to, the differences between them, and how to optimize both networks. It’s important to understand from the outset that both logistics networks are necessary for success. However, what works for your supply chain doesn’t necessarily translate to your delivery network. The opposite is also true. Efficiencies developed in getting your products to your customers don’t necessarily work for optimizing your supply chain. Let’s examine the purposes of and differences between inbound and outbound logistics.
“Inbound logistics” refers to the network that brings goods or materials to your business. Your inbound logistics network includes everything you need to transport, store, and deliver goods to your business from other suppliers. The actual products that you bring into your business depend on what you do. Inbound logistics can cover things like raw materials if you are a manufacturer, or finished products if you deal with assembly. Essentially, inbound logistics includes everything your business operations need to create the finished product that you eventually sell.
Inbound logistics is both incredibly complex and important. There are some key factors that help inbound logistics processes run smoothly. If your business demands raw materials to produce certain goods, you need a steady supply of those materials to match your production output. At the same time, you don’t want too much of a raw material delivered if you don’t have the warehousing to accommodate it. In most cases, you want to receive your raw material shortly before you actually use it. This means that you must tailor your inbound logistics network to your specific production cycle and warehousing capacity to ensure that there isn’t a surplus of unneeded materials or goods.
Optimizing your inbound logistics network streamlines business operations. To understand how to optimize your inbound logistics network, you must have a full picture of every moving part in the network and understand how the network functions. For your inbound logistics network to operate as efficiently as possible, you must understand and optimize everything from receiving products from suppliers to transporting those products to your facilities and distributing them. One of the ways businesses do this is by working with a third-party logistics (3PL) provider. 3PLs are subject-matter experts in crafting and optimizing inbound logistics networks to ensure that the flow of goods and materials into your business meets your operational objectives.
Consider a situation where you need to ramp up production. How do you go about it? You may need to hire more labor for assembly, manufacturing, receiving, and distribution. You might need more robust warehousing, which may require additional facilities, off-site storage, or equipment that can handle greater quantities of goods. To acquire the materials or goods you need to meet demand, you might need to work closely with suppliers to establish regular deliveries. You might also need a robust transportation management system to track resources and goods through your network as needed, and to view in real-time the health of your inbound logistics network.
Doing all of this in house is possible, but it can be extremely expensive. Devoting internal resources to inbound logistics is also more appropriate if you need permanent efforts in place. For businesses that only need to increase their production temporarily, such as companies that experience higher sales volume during the holidays, you only need a temporary solution. One way that businesses scale up their inbound logistics network in the short term is by working with a 3PL. 3PLs are often capable of scaling a company’s inbound logistics network to accommodate its current needs without costly investment in labor, equipment, and infrastructure.
“Outbound logistics” refers to the transportation, storage, and delivery systems that bring your products to your customers. Outbound logistics is the way you bring your finished products to their destinations. Your outbound logistics networks generally work with different partners than your inbound logistics network. While some entities in the transportation industry specialize in inbound logistics, others specialize in product distribution and delivery. The process for outbound logistics reflects these differences. While inbound logistics brings raw materials into your business, outbound logistics moves your finished products to their destinations. Often, routing products to your customers requires moving the goods to a distribution center first. A distribution center is a warehouse that stores goods for a short amount of time. Once goods arrive at a distribution center, it’s not long before the retailer ships them to other destinations, usually to replenish inventory levels.
Outbound logistics networks can be quite a bit different than inbound logistics networks. Because of these differences, it is usually helpful to separate them both. Consider the fact that your inbound logistics network brings in a steady supply of materials that roughly match your operational needs. On the other hand, your outbound logistics network is designed to bring your products to your customers. This may mean distributing your products when they are ordered. If you deliver directly to consumers, this might mean moving your products through a distribution network and eventually to a carrier that will handle final-mile delivery.
Optimizing your outbound logistics network can present unique challenges that aren’t present in your inbound logistics network. Remember that an inbound logistics network brings goods or materials into your business. From there, you assemble these goods or materials into the finished products and distribute them. There are a number of competing considerations to weigh when you bring your products to market. Your finished products may be more fragile than the components you originally brought in, which could require special packaging to protect them during transit. Additionally, your distribution network will likely be much wider than your supplier network. Instead of a network bringing in supplies from a limited number of manufacturers, you’ll be delivering your products to a potentially wider range of destinations. If you deliver directly to consumers, this means your outbound logistics network must be capable of delivering to a potentially huge number of destinations.
You should optimize your outbound logistics network to ensure that it runs as efficiently as possible. This entails having the labor, equipment, and resources required to efficiently transport your goods to customers. Optimizing your outbound logistics network can result in substantial cost savings, while allowing you to more accurately determine delivery windows. Unlike an inbound network where problems with delivery can result in slowed production cycles, problems with an outbound delivery network can directly impact your relationship with your customers. Because of this, many companies are placing increased emphasis on optimizing their outbound delivery networks. One way they are doing this is by working with an experienced 3PL.
One of the primary challenges many businesses are facing in regards to their outbound logistics network is keeping up with consumer expectations. Consumer expectations are changing, particularly when it comes to how they order their products and when they receive them.
In the past, most companies had similar outbound and inbound logistics processes. Most shipments were large in size and were sent at regular intervals to retailers who stored some freight in warehouses and some freight on shelves. Once stock ran out, the retailer would order more. This is no longer the case. E-commerce has resulted in many more online purchases. Fulfillment centers carry out the purchases by storing enough of a product to rapidly fulfill orders and replenishing goods at frequent intervals. (Modern fulfillment centers generally don’t have the storage space to stash huge amounts of products on shelves.) As a result, delivery windows are tighter than they used to be.
Today’s consumers also have an expectation that they will receive their products fast. If your customers expect two-day shipping, you have to get your product to their door within that window or risk losing their business. Meeting this expectation requires working with delivery networks that specialize in rapid delivery and offer cost-effective final-mile delivery services. At the same time, to meet the expectation of rapid delivery, you’ll most likely have to stage your products at distribution centers that are located near key urban markets.
Clearly, optimizing your outbound logistics network can be a daunting task. Working with a 3PL is one of the ways that modern businesses accomplish this. 3PLs have access to the resources you need to get your products from the assembly line to your customers as efficiently as possible. Many businesses choose to work with a 3PL for outbound logistics because 3PLs optimize their networks for efficiency and are ultimately more cost-effective. This is particularly true for small and medium-sized businesses, which don’t have the resources or desire to create their own distribution and fulfillment networks internally. For most businesses, doing all of this internally simply isn’t practical. Rather, it makes sense both financially and operationally to outsource some or all of your outbound logistics to providers that specialize in it.
Distribution center requirements
If your outbound logistics operations involve moving product to distribution centers, you’ll want to keep in mind that some distribution centers require specialized services that increase transit time and cost, including:
- Sort and segregate, which confirms your shipment arrived in full. With this service, the driver and dock workers account for the entire shipment upon arrival, rather than unloading it and discovering at a later time that part of the load is missing. Note that some carriers don’t offer sorting and segregating. In addition, this service takes time, especially for truckload (TL) shipments, which could lead to detention fees.
- Notify the consignee, which prompts the carrier to inform the distribution center that the shipment is out for delivery. This service is helpful for delivery appointments. While the distribution center handles scheduling for less-than truckload (LTL) loads, shippers must make appointments with the distribution center for TL freight. If the distribution center has preferred carriers or systems, be sure to work within those constraints.
- Lumping, which means a third party trans-loads shipments. Lumper services vary by distribution center location. Figuring out whether or not the distribution center will use a lumper service to handle your freight can help you prepare for the possibility of added costs. If the distribution center plans to use a lumper service for your freight, there’s no way around it; you must pay the associated fee, otherwise your shipment won’t unload.
A few other considerations regarding distribution centers:
- Double-check that your packaging meets pre-established guidelines.
- See if you can make any required freight reconfigurations at the distribution center.
- Expand your distribution center network to expedite transit.
When you’re shipping to a distribution center, you must keep track of many moving parts and stick to a strict schedule. The consequences of missing delivery deadlines include setbacks with retailers, added costs, and more headaches.
When your distribution center shipments go smoothly, you keep your hard-earned reputation intact, waste less time, and save money. Achieve these favorable outcomes with shared truckload shipping. When you book Flock Freight’s shared truckload service, you control the pickup and delivery windows, ensuring shipments arrive on time. With shared truckload, your freight moves directly from your business to the distribution center via TL service, helping you dodge late fees. Order shared truckload for your next distribution center shipment and see the Flock Freight difference for yourself.
Understanding the differences between your inbound and outbound logistics processes is essential to gaining a full picture of your entire logistics infrastructure. Both inbound and outbound logistics are necessary for modern businesses. Inbound logistics involves bringing goods and raw materials to your business. With these goods and raw materials, you create the products that you sell to your consumers. Outbound logistics processes move your finished products to their final destinations. Both of these systems require specialized networks and tools, and usually require working with different partners.
It’s important to recognize that, ideally, you want to optimize both your inbound and outbound logistics networks to ensure that you are maximizing efficiencies. Optimize your inbound and outbound logistics by working with a 3PL provider. 3PLs have a wealth of industry expertise to draw on and have spent years developing relationships with carriers. They understand the intricacies of optimizing both inbound and outbound logistics and often guide businesses toward process improvements that generate increased efficiencies. Working with a 3PL can also result in substantial cost savings, particularly for small and medium-sized businesses that lack the negotiating power of larger entities. By working with a 3PL, you’ll gain access to the extended distribution networks, warehousing, labor, and equipment needed to get materials to your business and products to your consumers, without the costly investment that it would take to do so in house.