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Inbound Logistics 101: Definition, Functions, Process Optimization

Inbound logistics is an essential component of procurement logistics and an intersection between transport and warehouse logistics. When the goods ordered by a company arrive at the warehouse, the smooth flow of inbound logistics, incoming goods inspection, and goods posting will support the efficiency of warehouse management. Read here what inbound logistics is all about and how it can be optimized.

What Is Inbound Logistics: Meaning

Inbound logistics is a logistical process on the one hand and important for accounting on the other. The logistical part of inbound logistics includes all activities necessary to receive, inspect, and store incoming goods. The incoming goods inspection also serves the purpose of quality management. When the delivered goods are put into stock, the inbound logistics process is complete in logistical terms.

From an accounting perspective, the inbound logistics is associated with an increase in inventory. This ties up capital in the form of stock and causes a financial obligation to the consignor of the goods.

Inbound Logistics: Process Flow

The aim of inbound logistics s to make the goods delivered by a logistics service provider such as DHL Freight available for further company processes as quickly as possible. High efficiency in the warehouse means keeping lead times, space requirements, and employee capacities as low as possible without jeopardizing the quality of the operational process. Fast lead times minimize the amount of capital tied up in the warehouse so that the capital can be reinvested in value creation.

These are the individual work steps during inbound logistics:

Order

Inbound logistics is usually preceded by a purchase order prompted by a specific resource requirement. The receipt of ordered goods can be planned. In contrast, there are also unplanned incoming goods: for example, returned goods or promotional items.

Receipt Planning

Here, the interaction between warehouse and transport logistics is crucial. The more reliably transport logistics service providers can forecast the arrival of goods, the better the demand planning will run for warehouse logistics. Proper time and resource management shortens waiting times and makes efficient use of capacities.

Acceptance of Goods

When incoming goods arrive at the company by delivery, an initial inspection step takes place:

  • Are consignor and consignee correct?
  • Does the quantity delivered correspond to the order?
  • Has the delivery date been met?

Accompanying documents such as the consignment note help with verification.

If there are no apparent mistakes, the goods can be unloaded. After that, a superficial visual inspection is carried out to clarify whether there is any transport damage. The delivery quantity should also be checked again by visual control.

Incoming Goods Inspection

The incoming inspection verifies whether the delivery corresponds in quantity and quality to the order. First, the actual compliance of the delivery with the information on the delivery note is ascertained or found fault with. Depending on the type of goods, thorough inspections are carried out or only random samples are taken for quality control. In the case of refrigerated goods, the correct temperature should be checked for quality assurance.

The incoming inspection is logged. Acceptance of the delivery may only be confirmed after inspection. Defective deliveries should be rejected. It is important that any transport damage and deviations in quantity or quality are also fully documented on the acceptance confirmation – stating the date, time, and the employee carrying out the inspection.

This is necessary for legal reasons, as otherwise the confirmation states that the delivery has arrived complete, undamaged, and on time. Complaints are then usually only possible under certain conditions: for instance, in the case of hidden defects and those concealed by the carrier, or in the case of defects that could not be detected during the incoming inspection even with the greatest care.

Inventory Hold and Clearance (under certain conditions)

If the delivered goods come from abroad and need to be cleared by customs before they can be used in the EU, they must first be kept temporarily in quarantine storage. Customs carries out additional checks during the quarantine storage and then approves the goods for storage in the main warehouse.

Quarantine storage may also be considered if a company has established a separate procedure for the quality assurance of products. In this case, too, the goods in question are first held in quarantine storage, where they are checked by quality assurance staff and then approved.

Recording of the Inventory in the Warehouse and Accounting

To account for the goods received, the goods are usually recorded via warehouse management software and transferred as inventory to the company’s own system. This increases the recorded inventory. Any differences between the delivery bill and the actual delivery quantity or the purchase order that have already been reported to the transport service provider must be included in the entry as an adjustment posting. After the incoming goods has been accounted for, the goods received are part of the stock.

Warehousing

To ensure that required goods are available quickly, they must be stored according to demand. This means that, for example, material that is primarily needed for certain company processes is immediately available for the goods issue. The same also applies to goods that are in demand from customers. For such stocks the lead time in the warehouse should be as short as possible, which must be considered during warehousing.

However, according to demand also means that the storage location must be physically appropriate in terms of dimensions, weight, or the perishable nature of a good. Hazardous goods must be stored in compliance with legal requirements. Within the framework of these specifications, attention must be paid to short transport routes and the best possible utilization of spatial and personnel capacities when storing and selecting the storage location.

Inbound Logistics Checklist
Inbound Logistics Checklist

Optimizing Inbound Logistics with these Key Figures

The relevant key figures on inbound logistics and its efficiency are obtained via the following processes:

  • Number of goods accepted
  • Time needed for the receipt of goods
  • Error rate during inspection
  • Resource utilization in the warehouse
  • Lead time of demanded stock

With a few tips, these key figures can be positively influenced and the inbound logistics can be made more efficient:

  • Goods-specific examination reduces the inspection time: With robust goods, transport damage is unlikely. Random samples are sufficient here. Goods that are susceptible to defects or that have a high relevance for the quality of a company product or customer satisfaction should be inspected with priority.
  • Planning of inbound logistics mitigates peak times: To ensure that incoming goods pass through acceptance and inspection as quickly as possible, deliveries should be distributed evenly throughout the day. Individual deliveries can be consolidated. Experienced logistics service providers such as DHL Freight are happy to collaborate and help you.
  • Smart warehouse software simplifies and speeds up inbound logistics: Advanced cloud-based IT solutions create transparency about current and scheduled incoming goods. At best, such systems integrate warehouse and transport logistics, with artificial intelligence (AI) playing an increasingly important role. When logistics service providers and warehouse management are integrated, capacities can be better calculated: from ramp allocation to staff requirements. Mobile scanners that forward barcode information directly to the system when goods are received are another help.

Conclusion

Inbound logistics has a direct impact on the performance of a warehouse. Process optimization in inbound logistics can improve a company’s overall performance. Above all, high-quality IT solutions and careful planning of processes make corporate intralogistics more efficient. As a transport logistics service provider, DHL Freight aims to contribute to your business success with the highest level of cooperation and the greatest possible delivery accuracy and quality.

Frequently Asked Questions

What does inbound logistics mean?

Inbound logistics comprises all activities necessary to receive, inspect, and store incoming goods. The incoming goods inspection also serves the purpose of quality assurance. 

Which procedures are part of inbound logistics?

Inbound logistics involves: the planning of pending incoming goods; goods acceptance with an initial goods inspection; incoming goods inspection to check whether the delivery corresponds to the order; if necessary, quarantine storage and clearance if the goods have to be approved by customs or the company’s internal quality inspection; accounting, after which the goods are available in stock; finally, the storage of the goods in the warehouse according to demand.

How can inbound logistics be optimized? 

Options for optimizing inbound logistics include proper process planning, incoming goods inspections that prioritize goods susceptible to defects, or IT solutions that network warehouse and transport logistics.

How can transport logistics service providers positively influence inbound logistics?

Excellent service quality from transport logistics providers with high delivery accuracy is directly reflected in the plannability and thus the efficiency of inbound logistics. Likewise, close cooperation between transport and warehouse logistics providers is a great help in optimizing incoming goods processes.

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