What is the term for the management of the flow of goods in the manufacturing industry?
Strong inbound and outbound logistics are crucial to the success of a business. These processes affect production, profits and customer service. There are many challenges in getting logistics right, and the costs of not perfecting these processes can be enormous. But putting the right controls in place can help your business achieve success. Show
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What Is Logistics?Logistics coordinates the movement and storage of resources such as goods, equipment and inventory. For manufacturers, logistics starts with the incoming supply of raw materials and carries through to the delivery of finished products to customers. For example, a logistics department would receive supplies, give components to a production line, move finished goods to a distribution center, manage inventory and ship products to a customer. Logistics teams are responsible for making sure each of these steps run smoothly, including purchasing, accepting inbound delivery, storage, packaging, inventory management, shipping, outbound transportation and delivery. Choreographing these processes gets complicated when volume grows and there are multiple products to manage. Companies that use several distribution channels and operate facilities in different locations face another layer of complexity. In 2019, U.S. businesses spent $1.63 trillion on logistics, equal to about 7.6% of GDP. To generate the best returns, a company needs to have the right supplies at the right place at the right time. Its manufacturing line cannot run unless it has all the necessary materials to build its product or items to distribute in the requested amounts. If the company does not have enough stock to fill an order, it may lose a sale or make a customer unhappy by forcing them to wait for the item. Role of LogisticsLogistics is the foundation of the supply chain and is vital to a company’s success. Well-organized logistics can reduce expenses, save time, help meet customer demands and enhance a brand’s reputation. Effective logistics is key to managing the supply chain, the complex network of organizations, individuals, activities and resources required to supply a service or product. In 2019, the average company spent 11% of revenue on logistics, with transportation and inventory accounting for about 72% of that spending. What Is the Difference Between Inbound and Outbound Logistics?Inbound logistics brings supplies or materials into a business, while outbound logistics deals with moving goods and products out to customers. Both focus heavily on the transporting of goods. But inbound is all about receiving, while outbound focuses on delivery. Inbound vs. Outbound Logistics
What Is Inbound Logistics?Inbound logistics is the way materials and other goods are brought into a company. This process includes the steps to order, receive, store, transport and manage incoming supplies. Inbound logistics focuses on the supply part of the supply-demand equation. Inbound Logistics Activities
How a company approaches inbound logistics varies depending on incoming goods, the industry and the buyer-seller relationship. The company may handle its own inbound logistics or outsource it. Challenges of Inbound LogisticsThe primary challenges of inbound logistics are high costs, uncertain delivery dates and unpredictable lead times. These make it hard for businesses to maintain ideal inventory levels and improve warehouse efficiency and productivity. Here are some specific inbound logistics challenges in more detail:
How to Optimize Your Inbound LogisticsOptimizing inbound logistics means making the operation faster, leaner, more cost-efficient and more agile. Assess every process, identify strengths and weaknesses, and then make improvements.
Some of the most widely recommended actions to optimize inbound logistics include:
Video: What Is Inbound Logistics & How to Optimize It
What Is Outbound Logistics?Outbound logistics focuses on the demand side of the supply-demand equation. The process involves storing and moving goods to the customer or end user. The steps include order fulfillment, packing, shipping, delivery and customer service related to delivery. Outbound Logistics Activities
Challenges of Outbound Logistics and How to Overcome ThemOutbound logistics challenges can hurt profits and customer satisfaction. Inventory and shipping costs can rise quickly, while incorrect or late orders will drive customers away. These are some specific outbound logistics challenges:
How to Optimize Your Outbound LogisticsTo optimize outbound logistics, put effort into relationships and negotiations. Use technology to figure out delivery networks, plan routes, organize schedules and, ultimately, keep costs down.
Inbound and Outbound Logistics as Part of Supply Chain Management (SCM)Logistics is just one piece of supply chain management. Supply chain management manages all the links among suppliers, producers, distributors and customers. Other elements of supply chain management include manufacturing and delivery-related customer service. Logistics helps synchronize the supply chain by controlling the flow of goods from the point of origin to the point of consumption. Participants in the supply chain, like suppliers and buyers, find partnerships helpful. Two firms work together for their mutual benefit. These partnerships are often open-ended, unlike strategic alliances or project partnerships. Supply chain partnerships require:
The most important partnerships include suppliers and vendors on the supply side. On the demand side, the critical ties are among logistics providers, retailers, wholesalers, distributors and end customers. Suppliers may collaborate closely with important customers on product formulation, product size, product mix, SKUs, inventory levels, supply forecasts, risk management, cost control, waste reduction and ordering systems. The customer may want to work together with logistics providers on pacing, packaging, scheduling and route efficiency. Damage Liability in LogisticsDamage liability for goods lost and damaged while in transit or storage is one area of disputes in logistics. Inventory represents a big cost for businesses, and buyers want protection against losses while goods are in the supplier’s control. Suppliers also want to limit liability. As a result, the contracts often state how to store and transport materials. Details cover temperature, length of storage, shipping labels and other conditions. Contracts spell out needs for special handling, such as protective packaging or having a particular end standing up. They also address if it is acceptable to stack boxes or store goods underneath heavy items. To prevent losses, the customer will ask the supplier to track the location of the goods and confirm the correct quantity. If it’s feasible, the customer may want to double-check by visiting the supplier’s warehouse and perform inbound quality inspection if it hasn’t been inspected before it leaves the vendor. Some materials may not need to be inspected, such as low-cost and maintenance, repair & operation supplies (MRO), but the quality department should provide the warehouse with instructions for sampling, inspecting and rejecting failed materials. The two sides use formulas for damage compensation based on actual value or a set amount per pound. The supplier or customer may get insurance to cover this risk, and both parties may both agree to share the risk by each obtaining partial insurance coverage. Supply Chain Management vs. LogisticsSupply chain management looks collectively at multiple business activities to achieve a competitive advantage. Logistics focuses on the flow of goods to meet customer needs. Role of Logistics in Purchasing and ReceivingPurchasing/Selling Receiving/Shipping
Step-by-Step Inbound and Outbound Logistics ProcessesInbound and outbound logistics break down into many specific steps. Together, the steps help ensure the smooth movement of goods and materials into and out of a business. Steps in Inbound Logistics (Receiving)
Steps in Outbound Logistics (Shipping)
Examples of Inbound and Outbound LogisticsEvery business that makes a product or provides a service has to figure out how to manage logistics. For example, a company that turns silicon into computer chips or a farmer who grows wheat from seeds both use logistics to get goods to their customers. Inbound Logistics ExampleA company’s inbound and outbound logistics depend on what it is selling and its business model. An example can show how these processes work. Here is how logistics work for an apparel manufacturer called Sorina Designs.
Outbound Logistics Example
Importance of Inbound and Outbound LogisticsInbound and outbound logistics are important because they help a business run smoothly. They also have a direct and substantial impact on sales, costs, profits and customer satisfaction. Below are some of the ways that logistics play a crucial role for companies:
Benefits of Inbound LogisticsCompanies can take advantage of many benefits from inbound logistics, including more reliable sources of supplies and lower costs for raw materials. The following are more benefits of efficient inbound logistics:
Benefits of Outbound LogisticsOutbound logistics help companies please customers. The process confirms nothing is missing, broken or defective. Among the specific benefits of well-run outbound logistics are:
Managing Inbound and Outbound Logistics With SoftwareInbound and outbound logistics help you meet customer needs by delivering quality, service and timeliness. Software systems put you in control with manufacturing, inventory and warehouse management solutions. With both inbound and outbound logistics management software running on the ERP platform managing core financial processes, product-based businesses have visibility into all aspects of operations and can quickly and easily run reports that demonstrate the impact of different scenarios on profits, customer satisfaction and more. Both inbound and outbound logistics can be a major cost center, but that also means they represent an opportunity for major time and cost savings. That’s why companies should take a close look at these aspects of their operations and see if there are more efficient, cost-effective ways to complete these steps. It’s a key part of optimizing supply chain management as a whole and providing the exceptional customer experience that will help your business excel. Keep expanding your knowledge of inbound and outbound logistics as the field continuously evolves. Here are some of the most common questions. What is inbound logistics and manufacturing?In manufacturing, inbound logistics is how raw materials come into the factory. Production needs to be steady to meet output, cost and quality targets. If there are supply problems, a company might have to stop production. Factories cannot easily change machines to work with various raw materials, so security and certainty of supplies are critical. What is inbound logistics in a value chain?The value chain includes activities such as operations, marketing, sales and service. Inbound logistics affect the early part of the value chain by bringing raw materials into the business—the company adds value by turning the raw material into a useful product. How to calculate inbound logistics?There are many metrics to measure the performance of inbound logistics, including error, defect and on-time delivery rates for shipments. Some calculations to consider are:
What is outbound logistics in a value chain and value chain analysis?In the value chain model, outbound logistics occur after production. Logistics gets the product to the customer. Value chain analysis looks at a company’s activities. The analysis sees where the firm can achieve competitive advantages, such as lower costs or a more appealing product. The goal is to create more value without raising costs. What are outbound logistics services?Outbound logistics services handle a company’s deliveries to its customers. Doing this well can be costly and complex. Some companies use outside providers, known as 3PLs. Logistics services typically handle warehousing tasks, such as:
What is the management of the flow of goods?Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.
What is manufacturing flow management process?Manufacturing flow management is the supply chain management process that includes all activities necessary to move products through the plants and to obtain, implement, and manage manufacturing flexibility in the supply chain.
What is the flow of supply chain management?There are three main flows of supply chain management: the product flow, the information flow, and the finances flow. The Product Flow – The product flow involves the movement of goods from a supplier to a customer. This supply chain management flow also concerns customer returns and service needs.
What is the term used to describe the materials flow between the supplier and the company?A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product. A supply chain encompasses everything from the delivery of source materials from the supplier to the manufacturer through to its eventual delivery to the end user.
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