Inbound Logistics

Materials Management and Procurement

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 Inbound Logistics along the supply Chain
• A supply chain can be viewed as a combination of Inbound logistics (materials
management and procurement) and outbound logistics (customer service and
channels of distribution).

• It is important to note that inbound and outbound logistics systems share the same
type of activities or processes, since both deal with decision related to transportation,
warehousing, materials handling, inventory management and control, packaging as
well as some other activities.

• However, the differences that exist among the inbound systems of different
companies have important implications for the design and management of logistics
supply chain.

• What is inbound for one company is frequently outbound for another company which
is shown below: 2
 Inbound Logistics along the supply Chain
• Inbound logistics is essentially a part of the extractive or production process
• The supply of coal to the steel company for transforming the coal to coking coal in its coke plant.
• Coal Mine (Coking coal is an essential ingredient in steel production)
•
• Warehousing and transportation
• Steel Company The steel company utilizes several raw materials from variety of vendor sources in addition to coking coal to produce
• the steel. The finished steel is the outbound logistics from steel company, may be a part of several supply chains
• Warehousing, transportation, inventory control, materials handling and so on
•
Container PlantThe container company that produces cans of various sizes to be used for storing food

• warehousing, Transportation
• The food manufacturing plant, where processed food is poured into cans of various sizes and labelled
Food Processor
•
• Warehousing, transportation, material handling
•
Reverse
• Super Store Transportation, material handling CustomersRecycling of cans logistics

• The starting stage and the end user have inbound supply channel only whereas the intermediaries have both way
(inbound and outbound) supply
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 Integration of logistics system management
• Frequently, inbound system of logistics is referred to as materials management and
the outbound system of logistics as physical distribution.

• Integration of the inbound and the outbound systems is extremely important to the
efficient and effective management of the logistics supply chain.

• Information flow is often the key ingredient to the coordination of inbound and
outbound logistics system.

• When there is a lack of integration, inefficiencies occurs, especially with respect to

inventory accumulation and/or lack of appropriate customer service levels.

• Quick flow of information in both directions is needed for effective coordination of

the complex environment today.
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 Materials management
• It includes the planning and control of the flow of materials that are parts of the
inbound logistics system. It usually includes the following activities:
• 1) procurement
• 2) warehousing
• 3) production planning
• 4) in-bound transportation
• 5) receiving
• 6) materials quality control
• 7) inventory management and control
• 8) salvage and scrap disposal
• Procurement can be defined, in a narrow sense, as the act of buying goods and
services for a firm, or in a broader sense, as the process of obtaining goods and
services for a firm. An overview of the procurement process is shown below:
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 Procurement
Procurement Process

Needs Analysis
• Identify Needs
• User requirement

Make or buy decision Make

Purchase type
• Straight rebuy Buy some
Buy
• Modified rebuy components
• New buy

Select vendor
• Market Analysis
Post-purchase
• Potential vendors Product or service delivery
performance Analysis
• Prescreen potential sources
• Evaluate remaining sources
• Choose vendor 6
 Item Procurement Importance Matrix- a quadrant technique
• The quadrant technique utilizes a two-by-two matrix to determine the importance of a procured item
on the basis of value and risk, which is shown below.
• MRO refers to any maintenance, repair or overhaul activity to keep a manufacturing plant or facility
running.
Critical
• Distinctive
High risk, high value
High risk, low value
• R Engineered items
Unique items
Items critical to final product
• I
• S
• K Generics
Commodities
Low risk, low value
• Office supplies
Low risk, high value
Basic production items
• MRO items
Logistics services
• Value or Profit potential
• Value or profit potential
• To manage the procurement process, a four steps procedure as follows can be employed.
• 1) Determination of the type of purchase 2) Determination of the necessary level of investment
• 3) Performance of the procurement process 4) Evaluation of the effectiveness of the procurement process 7
 Other materials-Management Activities
• 1) Warehousing of raw materials and finished goods
• 2) Production Planning and Control by forecasting customers’ demand
• 3) Transportation function manages the inbound transportation of materials
• 4) Receiving – It involves the actual physical receipt of the purchased material as indicated in
the purchase order. If discrepancies exists, the receiving department notifies the purchasing
department, the user of the materials, and the accounts payable department. For any damage,
the inbound traffic (movement) and the receiving departments usually coordinate freight
claims handling activities.
• 5) Quality Control function attempts to ensure that the items a firm receives are those the
firm ordered. However, the quality control function is directly concerned with defining the
quality of the product in terms of dimensions, design specifications, chemical or physical
properties, reliability, ease of maintenance, ease of use, brand, market grade, and industry
standard.
• 6) Salvage and Scrap disposal – The final activity in the material-management function
involves disposing of salvage, scrap, excess, and obsolete materials.
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