What is e-commerce logistics?
E-commerce logistics describes the process of shipping, delivering, and managing products bought online. With the increasing popularity of e-commerce, successful execution across the logistics network is essential for businesses that sell products online.
E-commerce logistics covers every part of the supply chain, including:
- Inbound shipping.
Staging products in geographies that enable faster delivery.
Picking, packing and shipping products.
Tracking orders and handling returns.
Once a customer places an order online, it immediately goes into the e-commerce platform the business uses. The order is then passed to the warehouse or fulfillment center where the product is stored. In some cases, the products may be shipped directly from the manufacturer or supplier to the customer.
Once the order is received, the fulfillment center staff will pick and pack the product. This process involves finding the item in the warehouse, packaging it securely, and attaching any labels or shipping information needed. Once the product is packed, it is then shipped to the customer via a small package or LTL carrier.
The 5 must-have elements of e-commerce logistics
Inventory management is crucial to maintaining solid order fulfillment in real time. Most e-commerce platforms have built-in inventory management tools that allow businesses to track stock levels, monitor sales trends, and set reorder points. Identifying product and demand cycles enables e-commerce retailers to balance new-product ordering or manufacturing with customer needs. Accurate inventory data allows retailers to avoid stockouts and continue meeting customer expectations.
1. Package management
The most significant and often most complex aspect of any e-commerce business is managing the large number of packages being shipped, tracked and delivered on time. This is where the rubber hits the road (forgive the obvious pun) because choosing the right shipping partner and delivery method is the difference between losing business or building high levels of customer satisfaction.
Businesses must consider the cost, speed and reliability when deciding which carrier and which service to use.
2. Returns management
Efficient handling of returns is one of the most challenging areas of any e-commerce business. With online shopping, customers can’t physically touch or inspect products before buying, heightening the risk of product returns. The customers are also all in different places. There is no central location for pickups. Thus, e-commerce retailers must rely on carriers with a network of drop points that make returns easier for customers.
There must also be a sophisticated tracking system that can handle millions of data points to ensure the returns are received and credited to the correct account.
3. Software and automation
Technology plays a significant role in e-commerce logistics as many businesses use software and automation tools to manage their logistics operations. This goes well beyond robots pulling products or automated conveyor systems in warehouses. For many e-commerce businesses, products must be staged throughout their network to lower delivery times, increase efficiency and reduce labor costs.
Companies use multiple carriers or third-party logistics providers to manage freight moves between facilities and in the final mile as a product gets to the customer’s door. Coordinating all efforts requires a cohesive platform that takes data from a wide variety of inputs and distributes that information to a large team of stakeholders.
4. Freedom of choice
True customer satisfaction comes from having choices. In the e-commerce world, this means customers must have multiple delivery options, including same-day and next-day services. This requires businesses to have a well-organized logistics network to process and deliver orders quickly. It also means the shipping leaders must have access to a large number of providers because it’s not enough to simply have capacity. In today’s e-commerce world, it must also be the right kind of capacity.
5. Supply-chain management
Rock solid supply-chain management practices are the heart and soul of e-commerce logistics. Businesses must work with suppliers to ensure products are available when needed and delivered as promised. For many e-commerce businesses, their supply chain is an international one. Companies are bringing products or materials in from Asia or Central America, with outbound shipping needs that span the globe. The number of handoffs in the shipping cycle requires a high level of expertise and, often, a variety of specialized logistics professionals.
How does e-commerce shipping differ from brick-and-mortar logistics?
At 30,000 feet, e-commerce logistics looks much like brick-and-mortar logistics. Both cover the front and back end of the supply chain, moving inbound products to staging areas, managing inventories, filling trucks and delivering products to customers. However, e-commerce logistics is its own animal, bringing unique requirements that need unique solutions.
E-commerce businesses typically receive a much higher volume of individual orders than brick-and-mortar stores. This means that e-commerce platforms handle a much larger number of individual shipments. This requires e-commerce retailers to manage a complex network of carriers and logistics professionals to manage the large volume of small deliveries.
E-commerce businesses often use a centralized warehouse or network of warehouses to process and ship orders. In contrast, brick-and-mortar stores generally rely on a local inventory that is replenished regularly. This increases the complexity of the e-commerce inventory management and order fulfillment systems.
There are two ways to look at this one. The first is e-commerce businesses often offer multiple shipping options to customers, including express and same-day delivery, which require specialized shipping services that most brick-and-mortar stores don’t have to manage.
The second is the number and types of carriers an e-commerce business needs to operate. Depending on the products sold or the quantity in the shipment, businesses often need solutions for everything from small package to full-truckload. They also need a variety of last-mile delivery services that could be anything from a simple drop-off to white-glove delivery and assembly of products.
E-commerce businesses have a higher rate of returns than brick-and-mortar stores and no centralized drop point. E-commerce logistics must make room for a streamlined return process that makes returning a product as simple as possible for the customer.
E-commerce logistics plays a key role in serving customers to their satisfaction. Businesses must have a robust and well-defined network and process to ensure delivery times products are available when ordered and delivery times meet or exceed customer expectations.
The 3 types of e-commerce companies and their specific logistics challenges
E-commerce companies have transformed businesses’ operations, allowing them to reach a wider audience and sell products online. However, as e-commerce continues to grow and evolve, so will the challenges each type of company must face.
1. Business-to-Consumer (B2C) E-commerce Companies
B2C e-commerce companies sell products directly to individual consumers. These companies often have high volumes of small, individual orders, making inventory management a primary focus for the logistics team. With many products to choose from and a high volume of orders, inventory levels fluctuate rapidly. This can be a particular challenge during seasonal spikes in sales or the occasional lull in sales. Successful e-commerce businesses track stock levels closely, ensure popular products are restocked promptly, and track and estimate demand cycles to avoid overstocks or stockouts.
Returns and exchanges are significant challenges for B2C e-commerce companies. Customers expect a simple and hassle-free process for returning or exchanging products, which can be difficult to achieve. Companies must ensure they have an efficient and effective returns management system in place, allowing them to handle returns quickly and accurately.
2. Business-to-Business (B2B) E-commerce Companies
B2B e-commerce companies sell products to other businesses. Unlike B2C companies, B2B companies often deal with larger orders and more complex transactions. This can make it challenging to manage inventory and ensure accurate delivery.
Like B2C businesses, B2B e-commerce companies still manage large volumes of orders and deliveries. However, these orders often include multiple items and unique customer requirements. For example, a B2B e-commerce logistics team may need to deliver products to multiple locations or schedule deliveries at specific times to avoid disrupting a customer’s operations.
Another significant challenge for B2B e-commerce companies is handling complex orders. These orders may include multiple products with different quantities and delivery dates. Companies must have a robust inventory management system, allowing them to track stock levels, monitor demand, and ensure sufficient stock to fulfill all orders.
3. Consumer-to-Consumer (C2C) E-commerce Companies
C2C e-commerce is still the wild west of logistics operations because so much of the shipping flows from one customer to another. However, some organizations like Amazon handle the fulfillment of the items sold on their platform. These companies often deal with a large number of small transactions and must ensure products are delivered accurately and on time.
Overall, C2C e-commerce companies must navigate a complex logistics landscape to provide a seamless customer experience. The biggest challenges for C2C organizations are maintaining good product quality, fraud prevention and ensuring customer service meets or exceeds expectations. By addressing these challenges, companies can ensure their platform remains reliable and attractive to buyers and sellers alike.
Enhance customer satisfaction with effective e-commerce logistics
By leveraging the power of e-commerce logistics, businesses can speed up their delivery process, optimize their inventory turns, reduce shipping costs, and enhance their overall customer experience. These benefits can translate into significant cost savings and improved operational efficiency, helping e-commerce companies stay competitive in a crowded marketplace. The rate of e-commerce growth shows no signs of slowing down. Businesses that invest in cutting-edge e-commerce technology and process will be better positioned to drive their business forward and continue delivering profitable returns for their stakeholders.
Logistics, resilience key to the post-COVID-19 economy
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