Inbound Logistics from A to Z: Building a More Efficient Supply Chain

October 14, 2022
8 min read

Learn how to streamline inbounding logistics with demand forecasting and strategic partnerships.

Inbound logistics has been top of mind for merchants hoping to stay ahead of supply chain challenges. The revolving door of delays and cost drivers in the supply chain – from port congestion to rising freight costs – has merchants taking a hard look at every link in their supply chain to create more resilience and improve their margins.

In fact, according to recent merchant survey data, 68% of merchants are changing their inventory procurement and inbound logistics strategies this year.

  • 33% are changing the types of inventory they purchase
  • 23% are ordering more inventory than previous years
  • 21% are inbounding earlier than previous years

The supply chain in general, and inbound logistics specifically, has also been a cost center for many merchants, driving up operating costs. A full 59% of merchants report that their margins have shrunk this year, largely due to supply chain costs, with 42% citing elevated freight costs as the main driver.

According to McKinsey, merchants can realize significant cost savings in the supply chain by negotiating and streamlining their inbound logistics. While many brands look first to negotiating prices on raw materials and manufacturing, McKinsey found that putting more structure around how those materials are transported is actually more effective for optimizing supply chain costs.

What Is Inbound Logistics?

Inbound logistics is the process of moving raw materials of finished goods into the supply chain.  Inbound shipments occur when moving raw materials to a manufacturer and when moving inventory into a distribution center or warehouse. Inbound orders are typically shipped via freight – either LTL or FTL, depending on the quantity, product type, and scheduling needs of the shipper.

Wondering if you should inbound via LTL or FTL? Learn the differences between LTL vs FTL here.

Outbound logistics, on the other hand, is the process of moving goods out of the supply chain –  fulfilling and shipping products to the end customer. Outbound orders can be shipped via freight or small parcel, depending on the size of the shipment and the end destination. 

Demand Forecasting and Inbound Logistics

Inbound logistics is a key element of proper inventory management. It’s important to get the timing, order quantity, and inventory distribution right in order to improve margins and meet customer expectations for fulfillment and delivery. In order to get all three of those things right, it’s essential to have a demand forecasting model in place.

Inbound Logistics Timing

A proper demand forecast should include accurate lead times from the manufacturer so you can set automatic reorder points. Your warehousing partner should also perform regular inventory cycle counts to ensure that real-world inventory counts match units available to sell. 

Ordering and inbounding inventory at the right time ensures that you have product on-hand in time for holidays and promotions and also helps reduce stockouts, which result in missed sales opportunities and added costs that can drag down the profitability of your business.

Order Quantity

Ordering and inbounding inventory in the right quantities helps balance the risk of stockouts against the risk of carrying too much inventory. It’s also important to have a deep understanding of your sales velocity at the SKU level to make sure you’re prioritizing your best sellers.

This year, many retailers have felt the effects of over-stocking on the wrong types of inventory, forcing them to offer deep discounts or even liquidate dead stock.

Inventory Distribution

Inbounding the right amount of inventory at the right time will only serve your business if you have it in the right place. And the “right place” is as close as possible to your end customers. Inventory distribution helps lower time in transit (TNT) to deliver to all of your customers using 2-day Ground Shipping.

To really optimize your inventory distribution strategy, you could also use a Distribution Center/Fulfillment Center model, also known as a hub and spoke.

In the video below, Ware2Go’s Senior Manager of Supply Chain Strategy, Gabby Avery, explains how a hub & spoke model allows merchants to inbound more frequently to respond more quickly to changes in demand.

Warehousing Protocols for Inbound Logistics

When inbounding finished goods, the last stop is usually a warehouse, fulfillment center, or distribution center. It’s important to understand the inbound logistics process at the warehouse to know what to look for in a qualified warehousing and fulfillment partner.

When warehouse procedures slow down the inbound logistics process, it slows down time to revenue. The more quickly inventory is on the shelves, the more quickly you can start selling your products. The last thing you want is to have your inventory sitting on a warehouse dock waiting to be checked in.

Inbound logistics at the warehouse level begins with an Advance Shipment Notice (ASN). The ASN tells the warehouse exactly which SKUs and quantities are in an incoming shipment. Best practice is to send ASN as an electronic data interchange (EDI) through the warehouse’s warehouse management system (WMS) when the inventory ships. 

The ASN tells the warehouse how much space and labor they need to have available to receive and put away the incoming inventory. When they receive the shipment, they reconcile the ASN with the shipment to ensure accuracy and then stock the items according to product requirements.

A warehouse partner that prioritizes dock to stock time, or the time it takes to receive and put away inventory so it’s ready to sell, helps you get inventory turning faster. Ideally, dock to stock time should be 48 hours or less.

Streamlining Through a Single Partner

Often, the links of the supply chain are siloed, making it difficult to have full visibility to find efficiencies and create resilience. Partnering with an end-to-end supply chain partner can simplify and speed up the inbound logistics process. A full-service supply chain partner will offer freight shipping as well as warehousing, fulfillment, and shipping. 

Ware2Go, through a partnership with Coyote Logistics, offers end-to-end supply chain capabilities. Merchants who partner with Ware2Go have a single access point to manage their supply chain from inbound logistics to the final mile.

When fifth-generation family farm, Palouse Brand, outsourced their supply chain to Ware2Go, they lowered their time in transit (TNT) across their network by 40%. In fact, according to CEO, Sara Mader, she can have products picked up from her warehouse in Washington state, shipped across the country, inbounded, and checked into a warehouse on the East Coast in only 5 days.

To learn more about how Ware2Go is simplifying the end-to-end supply chain to help merchants of all sizes compete and grow, take a look at our solution.

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