STUDENTS' CORNER - 114

Outbound logistics

Having seen some basics of Inbound logistics, let us move on to Outbound logistics.

As opposed to Inbound logistics which deals with goods moving into the company, the Outbound logistics refers to the activities that take goods to the customers outside.

The entire process begins with the customer sales order and passing through warehouse packing ends with product delivery. Of course, for an efficient outbound logistics which in essence has to be cost effective, right distributions channels must be chosen preceded by sensible and sensitive inventory. Finally, as any business deal must close, the business bills the client for its order and gets the cash for the order. Cost effectiveness is the key concern for every step in the business deal.

Since both Inbound and Outbound logistics are essentially logistics, they have to follow the common practices for efficient performance. For example, they have to take care of the products when delivered to the customers or delivered internally in the sense that the products must not be damaged in transit. And the transportation must be cost effective. Efficient logistics reduces logistics cost thereby increasing the profitability of the company. To achieve this sustained profitability, the supply-chain partners must be carefully chosen.

While entering into transport agreements with suppliers and customers, it is always advisable to be specific as to who should bear the cost in case of any damage to the product. There are some general practices such as Free on Board (FOB) and ‘Delivered Duty Paid’. This is only to underscore the point that there must be clear sense of who is to pay for damage of the product, if any. This kind of definite decision helps avoid ambiguity and maintains relationship between the parties unstrained. After all smooth relationship with a party promises better prospects for continued business.

Experts have talked of Vertical Integration. It means that a company acquires or merges with its own suppliers or customers. This practice as can be expected increases the efficiency of the supply-chain management and additionally, it fetches competitive cost benefits. The customer who has become integrated with a business will sell a product rather competitively to the company but not to an external buyer for the same price. Other advantages of the vertical integration are automatic ordering, readiness to share vehicles, quick responses in terms of effective cooperation among managers, etc.

We have seen some of the basic points of Outbound and Inbound logistics.  And we will be spending sometime on Role of Logistics in Supply Chain Management.