Inbound and Outbound Logistics: Impact on Operations
Warehouse Location Impact on Logistics
The warehouse location decision directly affects the entire logistics system.
- The number of warehouses influences the overall level of safety stock.
- The allocation of markets to warehouses affects inventory sizes at various locations.
- The number and locations of warehouses affect distances between plants and warehouses.
Inbound Logistics Impact on the Final Customer
With inbound logistics activities, decisions are made regarding purchasing and obtaining raw materials. These decisions affect the finished goods and can directly impact the final consumer.
The objective of logistics management on the inbound side of the production line is virtually the same as on the outbound side: to provide a given level of customer service at the lowest total cost.
Inbound vs. Outbound Transportation
- Inbound logistics refers to the buying, storage, and dissemination of incoming goods to the production unit. Outbound logistics implies the transmission, selection, packaging, and transportation of final goods to consumers.
- Inbound logistics is about sourcing, receiving, and managing materials within the organization. Outbound logistics is mainly concerned with customer service and distribution channels.
- Inbound logistics is oriented towards the utilization of resources and raw materials within the manufacturing or assembly plant. Outbound logistics stresses the outflow of finished goods or products from the firm to the final consumer.
- In inbound logistics, interaction takes place between the supplier and the company. In outbound logistics, the interaction is between the company and the ultimate consumer.
Maintenance: An Inbound Logistics Function
Maintenance refers to all activities associated with servicing and repairing equipment. It may comprise a large part of a service firm’s inbound logistics system. For some companies, maintenance is what production is to others. For example, an airline cannot move people unless airplanes are maintained. Even in a manufacturing firm, assembly lines must be serviced and maintained, although maintenance tends to be a smaller part of the organization’s overall logistics.
Unified Management of Inbound and Outbound Logistics
Having a single manager overseeing both inbound and outbound logistics activities offers significant opportunities for service improvement and cost savings:
- A single manager can keep the entire logistics effort focused on delivering value to the final customer. When viewed as two distinct functions, materials management and physical distribution activities may conflict without a common leader to maintain the customer’s perspective.
- Economies of scale may be obtained. It may be possible to use vehicles transporting component parts into the production process to move finished goods to the marketplace. Warehousing space may be used to store both raw materials and finished goods.
In reality, the different nature and handling characteristics of raw materials versus finished goods often make such sharing impossible.