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The choice of balance between the two should be the result of careful analysis in order to achieve cost optimization.
Because inbound logistics can become very complicated and interfere with optimal operations, some companies prefer to outsource their non-core functions to third-party logistics services providers. These providers then focus upon analyzing the supply and demand flows within the industry. Warehousing and lead times can then be optimized according to predictions resulting from these analysis.
IT systems are often used to help with this by analyzing information sets and yielding optimal inbound logistics programs. By using these systems, third party logistics suppliers then save time and money by consolidating and analyzing all the fragmented information available for inbound logistics. In this way, an optimal lead time is combined with optimal storage options. The main purpose of inbound logistics programs is then optimization in terms of costs and time. In terms of specific costs, frequency and lot size decisions are based upon a comparison of inventory vs. transaction costs. These are then added to basic unit costs, which yields a cost of a unit until its point of sale.
Q3. How does outbound logistics contribute to an organization's "bottom line"?
While inbound logistics have not enjoyed optimal focus within general business paradigms,...
The reason for this is perhaps that it relates much more directly to the bottom line than inbound logistics. Outbound logistics moves inventory towards the customer, who moves revenue directly to the supplier.
Outbound logistics also relate much more directly to customer needs than inbound logistics, although the latter is the basis for the effectiveness of the former. Effective outbound logistics is based upon the needs of customers, which need to be carefully investigated in order to ensure the effectiveness of both inbound and outbound logistics.
In order to therefore create an effective outbound logistics system, the company needs to take an integrated approach towards both inbound and outbound logistics, as the success of the former is a prerequisite for the success of the latter, and indeed the entire supply chain. In this way, outbound logistics is not the only determinant of the bottom line, but it is rather an integrated process of elements such as sufficient product visibility, optimal transportation and storage costs, meeting customer demand, and effective, market-related pricing. It is of vital importance that professionals in business give a balanced amount of attention to all aspects of logistics in order to maintain an optimal program for ultimate profitability.
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