E-Commerce

What is important in e-commerce logistics

Fatih-Kağan Taşkoparan

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E-commerce logistics: what you need to consider when setting up and maintaining your supply chains

In e-commerce in particular, logistics is the be-all and end-all alongside sales. After all, sales success is only achieved when the ordered goods find their way to the customer. Since you are certainly interested in growing your store, the question inevitably arises as to how you set up your supply chains from A to Z from a certain size so that they always function sensibly, efficiently and cost-effectively.

So what is important in e-commerce logistics?

What is e-commerce logistics and what does it involve?

In general, logistics is the entire process of procurement, storage and transportation of resources to their final destination. Put simply, logistics in e-commerce is managed with the aim of having the required quantity of a product available at the right time and delivering it to the right customers on time.

The individual steps in e-commerce logistics relating to inventory management and fulfillment ("picking, packing, shipping") are:

  • Goods receipt including entry into the merchandise management system
  • Warehousing
  • Picking according to incoming orders
  • Packaging (Pack) and shipping (Ship) including tracking
  • Returns management

The costs of logistics in e-commerce can be considerable. For online stores, you sometimes have to assume 20 to 40 percent of the total turnover. This naturally causes profit margins to melt away. This is why e-commerce logistics is a particular challenge for many retailers.

What makes good e-commerce logistics?

However, logistics in e-commerce is not only an issue from the store operator's perspective. Shipping costs that are perceived as too expensive are one of the most common reasons for high abandonment rates on the part of potential buyers. Some consumers are even unwilling to pay shipping costs at all. And they are even less willing to wait.

That's why it's important to maximize efficiency and speed. All components of your e-commerce logistics solution must be optimally coordinated. The focus is primarily on the following components:

Warehouse

The warehouse is a central cogwheel in traditional online retail, which does not rely on Dropshipping is set. Many processes such as goods receipt, storage and packaging take place there. It is therefore important that your warehouse is in order and that all administrative tasks interlock like finely tuned clockwork. This includes aspects such as:

  • Optimized use of space
  • Methods for detecting and preventing problems with infrastructures and processes
  • a scanning system with which you can sort, monitor and classify the stock

Incoming goods

A well-timed goods receipt is a determining factor for the response time to orders. The synchronization of internal processes with purchasing is of fundamental importance. This requires various ongoing measures:

  • Label goods on arrival
  • Carry out quality checks on products and packaging
  • check that the goods match the items ordered

Stock

The Stock must be transparent at all times. To be able to monitor stock levels, you should track all items from receipt to issue. A Merchandise management system with the corresponding interfaces makes this task much easier.

Shipping

The Shipping is by far the most delicate process phase in e-commerce logistics after picking and packing. If you outsource your shipping, the challenge is to synchronize the preparation of the parcel with the arrival of the service provider. This requires:

  • Picking and packing lists organized,
  • Shipping labels and invoices printed,
  • weighed and measured the packages and
  • customers are kept up to date on the shipping status.

Tracking

Shipment tracking is one of the features that customers ask for the most. However, the problem often arises that tracking takes place via the courier service's website. This quickly leads to an unsatisfactory shopping experience, especially if customers want to track several orders at the same time.

Returns management

Returns management is an area of e-commerce logistics that can cost a store a lot of time and even potentially revenue. In fact, returns are one of the key points that customers pay attention to before they buy. A transparently communicated returns policy not only gives retailers a competitive advantage, but is also necessary to minimize logistics costs.

What e-commerce logistics solutions are available?

The decision as to how you handle logistics in your e-commerce practice is always a consideration of efficiency, customer experience and costs. There are various options between the two poles of either handling logistics completely yourself or outsourcing it entirely to a third party (so-called 3PL - Third-Party Logistics). The most important are

  • Completely independent processing is generally only an option for small stores or start-ups. In these scenarios, it may make the most sense to handle everything in-house.
  • External shipping service providers come into play as soon as the product range and order volume increase.
  • E-fulfillment service providerCustomers expect fast and affordable shipping and a positive last-mile delivery experience. E-commerce fulfillment can use digital technology to optimize logistics operations and automate processes to reduce human error and promote greater order accuracy. However, given the financial and human resources required, it is advisable to work with a specialized service provider.
  • Dropshippingalso known as drop shipping, works like this: As a retailer, you take orders in your store, which are then shipped directly from the manufacturer or supplier to the end customer. As the store operator, you have nothing to do with the "route", the actual e-commerce logistics. Overall, dropshipping saves storage and transportation costs, but also makes you dependent on the speed and quality of external partners.
  • Automated logistics processes: These are cloud-based platforms that connect all players involved in e-commerce logistics in real time and automate processes such as commissioning transport services, printing shipping and returns labels or displaying the shipment status as far as possible. Depending on the individual situation, it may be worthwhile for retailers to take a look at these platforms.

The advantages and disadvantages of the settlement options at a glance:

 AdvantagesDisadvantages
In-house processingFull logistics controlHigh personnel and time expenditure
External shippingMakes scaling the business model possible in the first placePossibly lower profit margin due to higher costs
E-fulfilment service providerComprehensive outsourcing solutionMargin effective, little control over customer experience
DropshippingLower financial riskNo influence on the shipping process
Automation via platformTime savingDependence on software solution in the cloud

5 tips for successful e-commerce logistics

So how do you set up your e-commerce logistics successfully? And how can you ensure that it works efficiently in the long term? The following tips may be helpful:

1. do not neglect demand planning

Retailers who have been in business for a long time usually base their inventory forecasts on historical data and personal experience. As a newcomer, you can help yourself by monitoring the traffic on your website or the activity on your social media channels.

You will often find indications that demand is about to increase. Don't forget to stock up in good time so that you can react quickly to seasonal trends (e.g. the start of winter or summer), holidays and upcoming special offers such as Black Friday deals.

2. use compatible tools and structures

The more extensive the requirements for e-commerce logistics become, the more difficult it is to keep an eye on the big picture. If your business is growing rapidly, you may need to build up (at least temporarily) ad hoc logistics capacities such as additional storage space, dropshipping structures or multiple shipping options.

However, if these parts do not communicate well with each other, it can be difficult to maintain an overview.

3. offer free shipping

Customers expect fast delivery times, but don't want to pay for them. Marketing techniques such as minimum order quantities or promotional items can help to increase the number of orders and take advantage of the economies of scale. Discipline is then required at all points in the supply chain to ensure that free shipping becomes a competitive advantage and not a financial burden.

4. prioritize the last mile

Most consumers judge the entire interaction with your company based on the delivery experience. A sustainable last mile strategy must therefore meet their expectations while balancing costs and resource requirements.

5. ensure good returns management

Managing returns is often a major challenge in e-commerce logistics. The average return rate in a retail store is less than 10 percent; in online retail, it can be over 30 percent. In some cases (such as in the clothing sector), you can expect a permanent return rate of 50 percent.

To handle returns properly, you should treat them as "reverse logistics" and treat them with the same care as the actual purchase. With some clever return policies, you create incentives for buyers who can be confident that they won't be stuck with products that don't meet their needs. Of course, cost control is important here.

As you can see, organizing effective e-commerce logistics is not easy. But it's not possible without it. At least one thing is certain: online shoppers are becoming increasingly demanding, but they also appreciate good service more and more. And logistics is a powerful lever in your service experience. Efforts in this area will more than pay off.


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