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

• Sourcing and procurement: Identifying and evaluating potential suppliers, obtaining price quotes, negotiating with and managing suppliers.
• Ordering/purchasing: Buying the goods and materials the company needs so the right quantity arrives at the right time.
• Transportation: Deciding whether to use a truck, airplane, train or another method to move goods. This activity also involves selecting delivery speed for incoming supplies, contracting with third-party carriers and working with vendors on price and route.
• Receiving: Handling the arrival of new materials, unloading trucks and ensuring they match the order.
• Material handling: Moving the received goods short distances within the facility and staging them for later use.
• Putaway: Moving goods from the receiving dock to storage. Staff puts everything away in assigned locations.
• Storing and warehousing: Managing the materials before they go to manufacturing or customer fulfillment. This department is responsible for making sure items are placed in logical locations for fulfillment and the right storage conditions are met.
• Inventory management: Deciding the type and amount of raw materials/items you should store and where to locate them. Read the inventory management guide to learn more.
• Expediting: Managing the progress of and schedule for materials as they make their way to your facility.
• Distribution: Sending supplies to their destination inside the business.
• Tracking: Checking on details about incoming orders, such as their location and documents like receipts.
• Reverse logistics: Bringing goods back from customers for reasons such as returns, defects, delivery problems, repair and refurbishment. Also, recycling and salvage firms that work with used materials obtain their supply through reverse logistics.

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 Logistics

The 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:

• Inbound shipping inefficiencies: Some companies spend too much of their budget on shipping. To cut costs, you need to negotiate preferred rates with fewer carriers and consolidate inbound shipments to make full truckloads. You can also set vendor inbound compliance standards (VICS) on price and service. Analytics can help you identify any waste of time or money.

• Information vacuum: One frequent challenge is not knowing the exact location of a shipment, when it will arrive and how much it will cost. This lack of knowledge causes some companies to carry extra inventory, make purchases too early and suffer delays in production and customer deliveries. Real-time information systems allow a company to track and trace shipments and communicate with suppliers to make sure accurate data is captured when entering materials.

• Surges in deliveries and receiving: Without proper planning, businesses can end up juggling too many deliveries simultaneously. As a result, their yards become clogged with trucks, causing confusion among drivers about which dock to use. Peaks and lulls in deliveries makes it hard to effectively staff receiving personnel, as well. A weak receiving process leads to errors and a backup of materials. Solutions include scheduling arrivals, routing deliveries to specific docks and maintaining a consistent pace throughout the day. Warehouse management software (WMS) can help with logistics. Another technique is cross-docking, where the receiving department matches incoming inventory to open orders. When workers unload products, they move them directly to another dock to load onto an outbound truck, without ever storing them.

• Processing returns: Returns processing is an afterthought for some companies, leading to lost sales when stock is not put back into inventory quickly. Inaccurate inventory counts and reduced customer satisfaction are additional problems. Create clear, efficient processes for returns and communicate the importance of returns management to staff to combat this issue.

• Supplier reliability: A company needs dependable suppliers that offer competitive pricing and quality. However, reliable suppliers can be difficult to find and keep. To make this easier, try steps such as:

  • Build long-term relationships
  • Pay suppliers on time
  • Negotiate as necessary to make sure contracts align with your business goals
  • Check supplier quality certifications
  • Evaluate supplier risks such as political climate, weather and labor relations
  • Forecast your growth patterns and pick suppliers that can scale
  • Check supplier lead time and on-time delivery rate
  • Assess their customer service
  • Consistently evaluate alternative suppliers

• Balancing supply and demand: Ensuring there are enough incoming supplies to meet customer demand can be difficult due to seasonality, competitive influences, economic conditions, pricing volatility in raw materials, fluctuations in selling cycles and more. The best way to balance supply and demand is through data. Software can compare incoming inventory to your order pipeline. It can also monitor the status and location of inbound deliveries, predict demand based on historical patterns, find opportunities to consolidate purchases and more.