Logistics are essential for ecommerce business owners. Keeping your own stock and packing orders yourself is one thing, but for delivery you usually depend on a carrier. You can even outsource the entire fulfillment process from storage to delivery. How do you streamline your ecommerce logistics?
Setting up your ecommerce logistics
Whether your online shop is big or small, efficient stock management and ecommerce logistics are always a point of concern.
At the start you might wonder how to finance the inventory. Soon you will be wondering how much inventory your business needs, or how to deal with excess inventory.
Brick and mortar stores often have their products and logistics within the retail locations, but many ecommerce businesses store their stock in warehouses. Following an influx of orders or inventory expansion, you may find your warehouse lacking space. Or you end up spending hours upon hours order picking. Therefore, regularly assessing your storage management and supply chain can save a lot of time and money.
Regularly assessing your storage management and supply chain can save time and money.
Managing your inventory resources
If you manage your storage in house, the first order of business is your racking system.
This needs to fit the size and weight of your products. Then there is the choice for pallet racks, wide span storage racks or shelf racks. Consider how people move through the warehouse when order picking too. A smaller aisle means more storage space, but can become impractical with multiple picking carts. Lastly, classifying your products by name, colour code or popularity can prevent unnecessary searching.
To further streamline your stock management, consider automating certain processes. Stock management software can be a godsend for keeping track of your stock in one central database. This software can also tell you which products are running out fast or are typically ordered together. With this information you can better arrange these products in the warehouse.
Order picking refers to the process of picking and preparing items for shipment. If you do not have any systems in place for order picking, you can end up endlessly walking down aisles looking for the right products. Or you arrange them in a way that takes too much time. When you are first starting out with your shop, this will not yet be an issue. But once your online shop grows, it can be a burden on your operation.
For starters, make sure your bestsellers are nearby and at eye level. This can already shave off significant walking time. And if products are often ordered together, make sure they are next to each other in the warehouse.
Using inventory management software will help you find out where you can best store certain products. Seasonal inventory, for instance, you can best store on a warehouse mezzanine – an extra platform between floor and ceiling.
Once your online shop grows, order picking can become a burden.
There are some tools for order pickers that can further optimise your warehouse. This is especially beneficial when you have large order volumes or multiple order pickers. Barcode scanners, for example, will show what items to pack. There is also voice picking, where items are communicated through headphones and you confirm by speaking. This can eliminate any mistakes and will speed up the packing process. Keep in mind that you will need warehouse management software to connect with the device.
Packing your orders is the next step in the logistics process. Most importantly, packaging should protect your products during transportation. It should be resistant to weather conditions and prevent slipping and sliding of items. Therefore, make sure the packaging fits properly or add some filler material inside. It should also be suitable for possible returns.
Furthermore, your packaging can be a form of marketing in itself. It is the first thing a customer physically sees of your shop, and so you want to make a good impression. More importantly, if your packaging is way too big or uses a lot of unnecessary plastic, it is damaging to the environment and your customer will not be pleased. Packaging material that fits your product and is not overly wasteful is also more cost-efficient.
Reduce shipping costs
After picking and packing an order, it is finally time to send it off to your customer. Of course, ecommerce retailers can go to the post office and they will take care of the shipment, including a track and trace code. However, this means you will pay the full price for shipping items to your customer.
Alternatively, you can get your own contract with a parcel carrier and get a small discount. But even then you are probably overpaying for your logistics.
You will need enough volume to get the best offers from postal carriers.
Instead, you will need enough volume to get the best offers from postal carriers like DHL, DPD and GLS. To do this, you can use shipping platforms. These companies usually have thousands of ecommerce shops under their wings, which is why they can offer better pricing. When choosing a platform, make sure they offer your carrier of choice.
Usually a shipping platform comes with its own shipping software. As you may already know, processing orders, printing address labels and managing returns can become a tiresome process. With shipping software, you do not have to manually process individual shipments anymore. The program can automatically create address labels, track and trace-emails and return forms. Do make sure the software fits your ecommerce software too.
Most online stores will start out keeping their own stock, picking their own orders as well as packing and shipping them. This process from order picking to shipping is also known as fulfillment.
Once your online business starts growing, you can choose to move to a bigger warehouse and hire some staff. But if fulfillment becomes a headache, a lot of retailers choose to outsource all or parts of the fulfillment process.
You can place out all of your warehouse management, including storage, order picking, packing and shipping. Some companies can take returns from customers and inventory management out of your hands too. Even processing payments, customer service and product photography can be outsourced if you want to, but fulfillment mostly refers to everything up to the customer’s doorstep.
Third party logistics providers: pros and cons
The biggest benefit of fulfillment centers is that they have fully optimised their warehouse processes and logistics to be as efficient as possible. Buying a packing machine may be too expensive for your store, but since fulfillment companies have lots of ecommerce customers, you can benefit from new technology for low costs. Their advanced warehouse management system can give you valuable insights. And their assembly lines are fully equipped for peak season, which can save you a lot of stress.
Additionally, a fulfilment center will have a higher parcel shipping volume, meaning their prices will be much lower. Outsourcing fulfillment can also open up more delivery options, which will propel your store’s conversion. If you add these options yourself, it will split up your parcel volume with carriers meaning you will probably pay more. With a fulfillment company you can easily realise next day delivery with cut-off times as late as midnight, for example.
Fulfillment centers have fully optimised their ecommerce logistics.
You may expect that third-party fulfilment is too expensive, but that is usually not the case. You will also earn the costs back easily by saving time and money on warehouse operations, management software and educating staff. The only thing to keep in mind is that you will lose some control over the fulfilment process. If a customer asks about a return parcel, you can not easily go grab it for them, for instance.
Another form of fulfillment outsourcing is dropshipping. Dropshipping means you outsource keeping your own stock.
You do not have to buy and store your own inventory, because the supplier will ship items right from their own warehouse. Customers order in your shop, but from there the dropshipper takes care of the shipping.
Dropshipping means your supplier takes care of all the logistics.
Dropshipping can be interesting. You do not have to manage stock and therefore will not end up with an empty shelf or dead stock, for example. And because you do not have to store items yourself, you can easily expand your product range. Dropshipping can also be beneficial for faster and cheaper delivery, as a dropshipper will have a high parcel shipping volume and more delivery options available.
Who uses dropshipping?
You might think dropshipping is best suited for brand new shops. On the contrary: items from dropshippers can have lower profit margins because of the storage and shipping services.
The products can also be sold by multiple shops and are not unique. Therefore, it is most popular with growing ecommerce companies that already have customers but want to expand their inventory with little effort.
Dropshipping is also good for trying out a new product and seeing if there is demand, without already stocking up on it. Furthermore, dropshipping can be an excellent strategy for niche products that are not ordered that much. After all, it will not take up space in your own business and you do not have to constantly keep it in stock. With dropshipping, you can still offer these items to customers.
Dropshipping is also good for trying out a new product and seeing if there is demand, without already stocking up on it.
Lastly, dropshipping can be a nice add-on to your existing stock. It does not have to be all or nothing. Dropshipping can be a way of spreading store inventory risks. For instance during peak season, you can use a dropshipper as an extra buffer for storage and shipment.