Flow of goods from the company to the customer
Inbound and outbound logistics cover the entire supply chain. They include all the processes from procurement of the raw materials to delivery to the end customer. Inbound logistics includes procurement and production logistics. As soon as the raw materials arrive at the assembly line, the supplier hands them over to the outbound logistics team.
Raw materials may be unfinished materials, components or finished products, depending on the industry. In all cases, the goal is to assemble the raw materials in such a way that they form a final product. Logistics professionals have the vital task of arranging the procurement of raw materials with production in such a way that the materials neither run out – which would cause a delay – nor accumulate in excessive quantities – which would tie up capital and storage capacity.
Procurement strategies and inbound logistics
The purpose of procurement logistics is to optimise transport, handling and storage processes. A guaranteed supply of materials is important, especially for production operations with fast throughput times. To survive in the competitive global marketplace, companies have to keep costs as low as possible, starting with procurement. They also have to dial in their timing and quality. Excessive inventories also incur costs by tying up staff and storage capacity. This problem can be avoided with just-in-time (JIT) and just-in-sequence (JIS) delivery strategies. Production steps are coordinated with procurement in such a way that inventories are kept as low as possible while still supplying the right parts in the right place at the right time – and, in the case of JIS, in the right order.
Production logistics and inbound logistics
Production logistics optimises the production process in terms of the flow of information, material and value. It is affected by various factors that increase with production process complexity. Production logistics professionals have to plan tasks such as transporting materials from the receiving warehouse to the production site as well as transporting goods to the next production step or to the outbound warehouse. The processes have to integrate so smoothly that the company can operate efficiently and thus compete successfully. The actual manufacturing process uses different strategies depending on the product:
- Continuous-flow manufacturing: Manufacturing the product on an assembly line, without interruption.
- Construction-site manufacturing: Workers and raw materials are brought to one location (the construction site).
- Manufacturing island: Complete manufacturing in groups or islands. An island contains all the materials required for a particular step in production or all the way to the final product.
Once the logistics experts have picked an ideal production method, the individual production steps have to be carefully coordinated with the flow of goods in order to save time and cut costs.