Inbound vs Outbound Logistics: What’s the Difference?

Inbound logistics and outbound logistics are the lifeblood of a company that sells physical products to customers. These processes bring in all the supplies, raw materials, and inventory the company needs (inbound logistics) and put products into customers’ hands (outbound logistics).

Understanding these processes inside and out—and using that knowledge to optimize the way they operate—holds significant benefits for any business. In this article, we’ll offer an overview of both inbound and outbound logistics. We’ll also cover the differences between these two sets of processes, so you get a solid, start-to-finish foundation in logistics.

The Basics: What Is Inbound Logistics? What Is Outbound Logistics?

Let’s begin with a few basic definitions, starting with the word logistics itself. Below, you’ll see how Investopedia defines it:

So, What’s the Difference Between Inbound & Outbound Logistics?

The main difference between inbound and outbound logistics lies in the direction the items are moving:

• If they’re headed for the company, the actions to move them are considered inbound logistics.
• If they’re headed for the customer, the actions are considered outbound logistics.

What About Reverse Logistics?

Given the above definitions, where does reverse logistics fit in? Because reverse logistics move goods back to a company, they’re considered inbound logistics. But while all reverse logistics processes are considered inbound logistics, not all inbound logistics processes are reverse logistics processes.

To explain, let’s take a closer look at inbound logistics vs. outbound logistics processes so we can understand the differences between them.

Inbound and Outbound Logistics Processes

To further illustrate the above definitions for inbound and outbound logistics, let’s take a closer look at the processes that fall in each category:

Inbound Logistics Processes

• Procurement – Locating suppliers of raw materials, supplies, and finished goods, as well as purchasing items from those suppliers by negotiating contracts and placing an order.
• Transportation – Moving those raw materials, supplies, and goods where they need to go. This might involve hiring a trucking company, for example, to pick up the goods from the supplier and deliver them to a warehouse.
• Receiving – Evaluating shipments for accuracy, inspecting shipments for damage, and adding the contents of the shipment to an inventory or warehouse management system.
• Storage – Moving items to their location in a warehouse or a distribution center, one that will protect them from damage and ensure they’re easy to access as needed.
• Inventory Management – Monitoring and ordering stock/supplies as needed to ensure consistent supply according to projected forecasts.

Outbound Logistics Processes

• Order Receipt, Processing, and Fulfillment – Validating, picking, and packing orders as they come in and managing warehouse activity as it relates to filling customer orders. Also may include managing any partners, like 3PLs, who assist with order fulfillment processes.
• Shipping – Transporting items to customers, including transportation management, carrier management, and last-mile delivery.
• Customer Service – Ensuring customer satisfaction through order tracking and troubleshooting services.

Reverse/Inbound Logistics Processes

• Customer Service – Communicating with customers sending items back and troubleshooting any challenges.
• Shipping – Moving items from the customer back to the company so the item can be evaluated and moved to the next step.
• Receiving & Evaluating – Logging arrivals and moving them to the right station for further evaluation, as needed (i.e., for repairs or disposal).
• Restocking & Storage – Placing items back in the supply chain that can be sold again and storing them in a location where they can be pulled when an order comes in.

Inbound vs. Outbound Logistics: Real-World Examples

To give you an even more concrete understanding of these concepts in action, let’s take a look at real-world examples of both inbound and outbound logistics.

Inbound Logistics: KitchenAid Stand Mixers

KitchenAid’s iconic stand mixers are assembled in their Greenville, Ohio plant. All of the processes that bring parts and materials to the plant constitute inbound logistics. That would include things like sourcing and procuring parts and/or raw materials; receiving those parts; logging them in an inventory/warehouse management system to ensure enough materials on hand to fulfill orders; and storing the parts until they’re needed for the assembly process.

Outbound Logistics: KitchenAid Stand Mixers

When a customer places an order at kitchenaid.com, the outbound logistics process starts up. The order is validated and processed, and then sent for picking and packing. At that point, the product is removed from the shelf, packaged for shipping, and labeled for the right carrier, with tracking data. The carrier picks up the shipment, and then delivers it to the customer, effectively ending the outbound logistics process.

Optimizing Inbound & Outbound Logistics

While they might focus specifically on inbound or outbound logistics at certain times, supply chain managers ultimately aim to optimize both. To get a sense of the benefits that supply chain managers can generate by examining inbound and outbound logistics activities, let’s take a closer look.

Optimizing Inbound Logistics

By setting key performance indicators (KPIs)—like freight bill accuracy, transportation costs, lead times, and receiving times—supply chain managers can get a better handle on their inbound logistics and uncover new efficiencies. Overall, this process has the potential to:

• Shorten time to revenue by eliminating inefficiencies that increase lead time.
• Maintain stock and inventory at ideal levels, balancing inventory carrying costs with product availability.
• Increase customer satisfaction by keeping inventory in stock, which reduces order delays.
• Decrease freight costs by minimizing or eliminating emergency restocks.

To learn more about the benefits of optimizing inbound logistics (and the accompanying challenges!), check out our article: “What Is Inbound Logistics? How Does It Work?”

Optimizing Outbound Logistics

On the other side of the operation, there are also plenty of benefits for optimizing a company’s outbound logistics. By looking at KPIs like order fill rate, order accuracy, order processing time, delivery time, and customer service complaints, supply chain managers can tweak their processes to reduce waste and increase efficiencies, resulting in benefits like:

• Cost savings, often in last-mile delivery, which can be notoriously expensive.
• Faster delivery of goods, which can mean receiving revenue more quickly for companies who collect on or after delivery.
• Creating greater levels of customer satisfaction with faster, error-free deliveries.

For more on the benefits and challenges of outbound logistics, take a look at our other article: “What Is Outbound Logistics? How Does It Work?”

Keeping Your Supply Chain Running Smoothly

A strong understanding of your supply chain can only be a benefit. Whether you’re taking a closer look at your inbound logistics, outbound logistics, or reverse logistics, the more you know, the better equipped you are to make improvements. Whether they’re incremental or significant, these optimizations will lead you toward lower costs, reduced waste, and happier customers.

Looking for ways to optimize your logistics? Our freight experts would be happy to help you analyze your transportation usage and budget to uncover new efficiencies. Reach out for a complimentary consultation to get started.