As the adage goes, “you’d better learn how to manage your inventory before it manages you”. This couldn’t be more true when we talk about the case with ecommerce logistics companies.
Managing ecommerce logistics forms a fundamental part of your operations department. Depending on what phase of the business you’re in, it might be the right time to partner with third-parties to outsource inventory storage and management, so you can better focus on your business services.
Let’s first understand what ecommerce logistics is all about, and its significance to your business. After all, this is the component that defines how your customers will get your products.
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What is Ecommerce Logistics?
Ever since Amazon implemented its signature delivery within 48 hours policy, it forced competing for ecommerce stores such as Target and Walmart to play along similar lines. They too now have to deliver products quickly to keep a competitive edge or risk losing out on customers.
The introduction of machine learning, artificial intelligence, and data analytics pushes the boundaries of ecommerce logistics, helping business owners improve order fulfillment and accelerate effectiveness. Most ecommerce companies are improving the customer journey with the goal to sustain and scale order fulfillment. Simultaneously, they also aim to increase output with the least amount of inefficiencies through machine automation as opposed to increasing their human workforce.
Why is Ecommerce Logistics so Important for Your Business?
It’s the push in ecommerce logistics that has driven companies to develop a holistic ecosystem that includes maximum channels; i.e. in-store pick up, ecommerce, distributors, resellers, partners, and global manufacturers that drive net new customers. The goal of ecommerce giants is to drive more sales and increase customer loyalty.
Improved ecommerce logistics whether it’s in-house or a third-party logistics company greatly helps your business grow. You’ll be able to benefit from aspects of your business like order fulfillment, return orders, and inventory storage & management systems.
This helps if you’ve got high-volume stocks to sell as it provides an alternate way to manage your inventory, see order fulfillments, stock replenishment, without a lot of time investment.
However, your emphasis on ecommerce logistics is not the only thing. You also need fast ecommerce web hosting to attract customers and offer them a seamless shopping experience.
Let’s now elaborate on the logistics chain to understand its mechanism.
Understanding the Logistics Chain and How it Evolved From the 70s
The logistics chain consists of management of various business aspects such as warehousing, accounting, packaging, distribution, security, and handling. Some of the essential elements of logistics chain management are the inclusion of all team members and their understanding of their role in making materials into products and bringing these products to the customer.
The Evolution of Retail Logistics (1970 – 2000)
Over the past 50 years, the physical distribution network (now called a logistics chain) has greatly changed. The changes were driven by centralization, global sourcing, and the birth of the ecommerce business model.
Initially, suppliers and shops were directly connected, which meant shop keepers had to alert their suppliers when the stock supply was low. This changed as retail distribution was introduced to the logistics chain to play an integral role in centralizing suppliers and managing the stocks so that shop keepers didn’t have to connect with each supplier for restocking.
During the 1990s, global sourcing became common, as it increased the variety of products for customers to choose from. However, this created a need for two bodies; one that managed overseas suppliers and the other that handled the complete distribution.
These logistics chain greatly changed by the 2000s. E-fulfillment centers that handled most of the overseas suppliers were introduced. Goods would reach the parcel hub, and would then undergo sorting, and finally be delivered via the parcel delivery center.
Another major change during the 2000s is that these goods were now being delivered directly to the customers’ homes – or to a delivery/collection point if the goods couldn’t be delivered to the delivery address. Goods that needed to be returned were brought back by to the parcel delivery center.
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How Is the Ecommerce Logistics of the 2010s Different From Brick and Mortar Logistics?
Today’s ecommerce logistic chain is similar to what was pioneered in the 2000s with the addition of online payment gateways and external bodies that deliver goods from the parcel hub to the delivery address or a delivery point.
To put it simply, customers can use online payment mechanisms such as PayPal, Amazon Pay, Google Pay, American Express, Apple Pay, Stripe, and more. Once the payment is confirmed, the product is cleared for delivery and sent from the warehouse to the customer’s delivery address.
Now that you know how a logistics chain works, you’re probably wondering how to implement the right system for your company. Let’s have a look at in-house and third party solutions, and see which one suits your specific needs.
What InHouse Ecommerce Logistics Entails
Established companies that have sustained the test of time in the market often opt for an inhouse ecommerce logistics department. That’s because they have already established their brand and audience, and are now planning on scaling their operations.
An inhouse logistics company takes measures to provide logistical services for its own products. This includes services like networking, planning, management, and coordinated communication. You might use transportation management software to manage some aspects of your logistics.
In contrast, startups and most small-to-mid businesses opt for third-party logistics partners (3PL) as they’re more affordable. Handling substantial investment like extra equipment, labor costs, utility bills, and investing in more distribution center spaces are factors that can make in-house ecommerce logistics for startups and small companies.
I recommend reading this blog post about what is ecommerce 3PL and how it works for an ecommerce model. This topic greatly helps in orienting readers that are new to the concept of 3PL, some of the common ecommerce logistics challenges, and what type of ecommerce 3PL services to look for if you’re running an ecommerce business.
Third Party Logistics Partner (3PL) vs In-house Logistics
The choice to opt for an ecommerce 3PL or having an inhouse logistics team depends greatly on your business requirements.
With an inhouse logistics team, you have complete control over your distribution process. But that also means you’ll be incurring additional costs to manage these operations. On the other hand, outsourcing distribution to an ecommerce 3PL greatly cuts down costs but also takes away significant control.
While there are plenty of pros and cons for each, there are a number of questions you should ask yourself before deciding what works best for your business. Some of these questions are:
- Is my team or product fit to manage logistics internally?
- Do I have the tools I need to meet customer demands?
- Is the packaging process simple or complicated for my team?
As a startup owner, manual record-keeping for pick, pack, and ship may be a simple process to handle. However, when it comes to high volume shipping, you’d want to automate the process or adopt an advanced warehouse management technology in order to reduce human error. Most companies outsource this process to a 3PL that specializes in this field.
In case you haven’t already, you should also explore 2020’s best ecommerce shipping strategies and practices. This blog post elaborates on how shipping costs are calculated, the methods adopted by shipping companies, the kind of packaging you should opt for, and some of the best ecommerce shipping solutions available.
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To know which one is more suitable, consider conducting a cost-benefit analysis of using either option. This includes the fine prints in the contract, the flexibility of the 3PL to adapt to your business needs, credibility, and price of the service. After all, your brand is at stake here.
If you’re not too worried about efficiency or know that you’ll have low volume orders, you could opt for setting up your own team to manage these operations. It’s important to revisit what’s holding your business back before taking the leap of making such a significant investment.
Finding the Right Logistics Partner
You’ll find various types of logistics partners today – ranging from distribution, warehousing, transportation, shipping, and receiving. Logistic companies are now specializing in certain areas of the logistics chain.
The type of ecommerce logistics you require will depend significantly on the scale you wish to operate on, you can still create a uniform checklist to pick the right kind of partner. These are some of the factors that can help you identify the right logistics partner.
1. Area of Expertise
You should set apart most ecommerce logistics partners by their set of capabilities that meet your short-term and long-term business needs. Since logistics partners have their own areas of expertise, they should be able to answer your questions accordingly.
You can ask them general questions such as “What is the software compatibility of the software you use?”. You can even go deeper and ask a transportation logistics company about the dedicated trucking assets that they have. These kinds of questions can help you gauge your potential logistic partner’s level of expertise.
Your ecommerce logistics partner is likely going to work with you on a long-term basis. Hence, you would want them to have credibility. You wouldn’t want to risk your business’s reputation due to an unreliable logistics partner.
3. The Network of Locations
I’ve placed this up here because it defines the locations that you can expand your business to. You can look into this by revisiting your business’s ideal customer profile, as you would have researched on geographic locations where your ideal customers are.
Ideally, the right logistics partner would offer you strategic solutions that work in parallel with your business expansions. They would also have a business networking in the continents you plan to expand your business to.
The price of the ecommerce logistics provider you choose is a key metric to consider. In most cases, this is measured as a per-delivery unit which includes transportation cost, warehousing fees, receiving cost, picking and packing fee, shipping, and a fixed monthly fee.
Hence, you should consider the price along with the services the logistics partner offers when analyzing the price comparison with other potential logistics partners.
5. Customer Service
Whether you choose a logistics partner for your short-term or long-term business needs, the team’s responsiveness and communication skills are critical to the daily operations of your business. Hence, it’s important to know how soon customer queries are addressed by the logistics, and how quickly they are resolved.
You’ll find this information on social media and online discussion groups. So it’s important to consider going through that to see what their existing clientele has to say about the service and the scale of the negative reviews (if any).
This is an important aspect to consider when selecting your ecommerce logistics partner as their team will be handling your goods. Thus, the frequency of their safety training programs and safety checks play a significant role in helping you foresee how the logistics partner handles situations.
Logistics companies that have standardized safety and security checks along with international standards are likely to handle situations such as warehouse fires more professionally. This should help you pick a logistics partner that makes sure your products are delivered without damage during its operations.
Logistics companies commonly integrate technology in their work processes to automate their operations and provide transparent and efficient services to their clients. Hence, you should favor companies that integrate technologies such as cloud computing, warehouse automation, and online inventory management systems.
A logistics provider that enjoys great automation technology will reduce your shipping costs and increase efficiency. Furthermore, you’ll look forward to focusing on your business, as you would be able to see quick product delivery reports instead of getting this information on your own.
The efficiency of a logistics company can be gauged by how quickly they can process orders and get operational work from documentation to on-ground. Additionally, communication skills also impact efficiency; hence you could inquire about their communication channels.
This would help you get the right information at the right time and be able to decrease inefficiencies.
9. Freight Management
A reliable ecommerce logistics company usually alerts its clients when it has to increase or decrease costs according to economic circumstances or changes in the business. Furthermore, they’re also able to provide quick and custom services and tools for their clients by coordinating with their business connections.
Thus, when you choose a logistics company, you should consider their awareness of the current economic situation and their ability to solve problems related to this.
While on the topic of freight management, the packaging of your product also greatly impacts your business bottom line. The cost increases based on the quality of materials used, whether it’s an automated process versus labor-intensive, or if you’ve outsourced it to a logistics company.
For information on ePacking shipping, I personally recommend you read this blog post. It covers ePacket Shipping (where the e represents ecommerce), its pros and cons, tracking, eligibility, and a list of countries that supports ePacket shipping.
Bonus Tip: Avoid Logistic Partners with Subcontractors
Too many cooks spoil the broth. This applies to choose a logistics partner that works with subcontractors as well.
You’d want to be careful of logistic partners that outsource their services to local carriers or entities. That’s because the subcontractors would be more concerned with the logistics company as opposed to you.
You now have a checklist to help you select a credible and reliable logistics partner that can grow alongside you. Now let’s look at a few things that you should be on the lookout for when you’ve outsourced this part of your business operations.
4 Things Business Owners Need to Incorporate into their Ecommerce Logistics
Whether you have an in-house logistics team or you have outsourced it to a partner, there are a number of aspects you need to monitor to ensure your brand delivers on its promise.
1. Your Current Ordering Process
Consider revisiting the suppliers you have onboarded on your ecommerce business. Since you’re now focusing on improving efficiency, one of the overlooked aspects is the reliability of your supplier.
Scenarios, where your order returns are increasing, should raise an alarm; there’s a chance that your supplier hasn’t updated the prices of product information. The customer mistrust this could lead to can potentially cost your brand heavily.
2. Manage Your Inventory
A common ecommerce management mistake is stocking up in bulk, but monitoring and tracking by hand. Picking the right ecommerce logistics company can help you automate this process can save time, office space, and plenty of backaches.
Additionally, I’d like to recommend this blog post about effective inventory management that dives into the steps in inventory management and the techniques that you can adopt.
3. Order Fulfillment Process
One of the significant advantages when it comes to the order fulfillment process lies in 3PL partners. Instead of manually processing and fulfilling orders on your own, you can outsource this and benefit from an automated process.
This way, the entire order fulfillment process is hands-off for you and your team. You can pick the kind of packaging that works best for your products, monitor through online reports, and even customize the kind of labels you want.
Needless to say, this saves you valuable time to focus on other aspects of your ecommerce business,
4. Processing Returns
When choosing an ecommerce logistics partner, consider monitoring the number of return requests; this shows how satisfied your customers are with the products you sell. Furthermore, automating this process can help prevent a situation where you’ll have to conduct damage control or risk a negative brand image due to bad reviews via social media.
In a Nutshell
I hope you enjoyed reading this piece on ecommerce logistics as much as I did writing it! We‘ve covered the evolution of logistics and distribution, whether to opt for an in-house team or a 3PL partner, the aspects to consider when selecting a logistics partner, and a few things to incorporate in your current ecommerce logistics process,
If you think I may have missed out anything worth mentioning, feel free to comment in the section below and I’d be happy to get back to you.