Logistics is the effective management of the flow of goods. Inbound logistics focuses on the purchase and movement of parts and materials to the finished inventory, and outbound logistics is centered on the storage and transportation of the final product. The Council of Supply Chain Management Professionals defines outbound logistics as “the process related to the movement and storage of products from the end of the production line to the end-user.” To ensure that the logistics process runs correctly, inventory levels must be maintained, the correct distribution channels must be chosen, and delivery must be optimized.
The Outbound Process
There are several parts to the outbound logistics process. When an order is placed, inventory is checked to make sure the order can be filled. Companies often use data about past purchases and information from distributors to decide how much inventory to carry. The order is then sent to the warehouse for picking and packing. Once the order is ready to be sent, the carrier picks up the items and the delivery process begins. The shipper bills the client for the process. While this is a very simplified, broad explanation, outbound logistics is actually a very complex endeavor that involves optimization and technology.
Many businesses use distribution to get a product to the final user. For instance, a company that makes snack packs most likely has many supermarkets and possibly several distribution centers in its network. The distribution channel stores the product, promotes the item, and sells it.
An Example of Outbound Logistics
You have probably placed an online order sometime in the last few months. Let’s say you placed an order online on Amazon for a book. When Amazon receives the order, provided they have the book in stock, they will alert the warehouse to get the book and box it up. If you have Amazon Prime, the book will most likely be at your doorstep in two days. Behind the scenes, the book has been handled many times, possibly been on several trucks or an airplane, and then to the final carrier (usually the USPS or UPS) who will deliver it to your residence.
The Importance of Outbound Logistics
A very important factor in the process is the optimization of shipping and delivery. Retailers demand very strict product delivery standards. Failure to comply can result in financial penalties and even the elimination of a certain product from the retailer’s shelves. Outbound logistics becomes a major component in getting the product to a retailer and whether or not that retailer will continue that relationship with the supplier. The same is true if the end-user is a private customer. The customer simply will not purchase from the manufacturer again. In today’s market where fast shipping is king, this is even more of the case.
The ‘last mile’ of shipping has become more expensive…and yet so important in the overall outbound logistics process. Not only do end-users demand low cost (or free!) shipping, but they expect that the item will be delivered correctly and on-time. Real-time tracking has become vital in keeping end-users abreast of the shipping process. This becomes even more complicated with international shipping services, which need to take duties and customs into account.
The transportation segment of the outbound logistics process is the most complex piece. With so many variables in the equation, shipping has become a very complicated process for many companies. With so many options to be able to get products either from another retailer or online, on-time delivery is imperative to keep the end-user satisfied. A logistics service provider can guide you through the outbound logistics process.