E-commerce Logistics: Why, What and How
Everything you need to know about eCommerce logistics. Optimize your eCommerce order fulfillment logistics and warehouse using the best 3PL (eShop Logistics 😊) to improve customer experience and increase sales.
“The boundary between disorder and order lies in logistics.”
Imagine this: You’ve launched a bunch of marketing campaigns and gotten a lot more sales this month. Your numbers keep going up. You’re working with a top-tier vendor and will soon need to order more products.
Your next challenges are: how do you continue to fulfill every order on time? How do you handle all the new orders that come in while maintaining your high standards?
What you need to do is get a good handle on your logistics operations and set up processes in a timely manner, so you can continue to grow your business.
In this post, we take a detailed look at every aspect of e-commerce logistics: what works, what doesn’t, and what tools to use.
Let’s get started.
What is eCommerce Logistics?
E-commerce logistics refers to the processes involved in storing and shipping inventory for an online store or marketplace. This includes inventory management, pricing, packaging, and shipping online orders.
As an e-commerce business grows, it is essential to have a system that allows you to track all your orders and ensure that each order is delivered to the right place and on time.
ecommerce logistics is a process that begins with the acquisition of inventory from the manufacturer or supplier and ends directly at the customer’s door.
Let’s take a look at the various aspects of order fulfillment and the stages of the supply chain.
The 5 Parts of the eCommerce Supply Chain
- Suppliers
Suppliers or manufacturers are companies that create the product and ship it to distribution centers. If the brand is dropshipping , the supplier ships the product directly to the customer. Otherwise, the brand places a bulk order and stores it in a warehouse, then ships it to customers as orders come in.
- Order Fulfillment Centers
A fulfillment center is a large warehouse that holds inventory close to the end consumer’s location. They pack and ship each product as soon as a customer places an order. This facility can be owned or leased by the eCommerce business (dedicated fulfillment center) or managed entirely by a third-party logistics provider (3PL). For example, Amazon has its own fulfillment centers for brands that it uses to fulfill orders in a program called Fulfilled by Amazon (FBA).
- Distribution Centers
If an eCommerce business is large enough, it can use fulfillment hubs to split inventory across multiple warehouses or modes of transportation. It may choose to use separate warehouses for its B2B and DTC orders because they require different packaging or shipping destinations.
- Sorting plants
These are facilities that sort products for large-scale e-commerce operations that move large quantities of products.
- Vectors
Couriers are companies that transport the product to the final destination. In Italy, they are BRT, GLS, Poste Italiane, DHL and others. They pick up the package from the distribution center or warehouse and transport it to the customer by truck or plane. In some cases, a brand may use its own private couriers for faster delivery.
Types of eCommerce Logistics
There are several ways to manage the logistics of your e-commerce.
Internal logistics
Managing your eCommerce logistics in-house means managing your supply chain yourself. This means tracking shipments from the supplier to the warehouse and to the various distribution centers or sorting facilities you may have. It also means using your eCommerce platform analytics and significant investment costs.
Dropshipping
This is where the supplier or manufacturer sends the product directly to the consumer. This is a much cheaper option because it eliminates warehousing costs, but it significantly increases delivery times in some cases, especially when it comes to international shipping. Think: buying iPhone cases from China from a brand and waiting 2 months for them to arrive to your customer.
3PL
Third-party logistics providers handle every part of the logistics process so you don’t have to. They offer inventory tracking, vendor management, warehousing, and packaging. Some 3PLs even have nationwide networks of warehouses that guarantee they can offer 1- or 2-day shipping.
3 Vital Parts to Improve Logistics Management
You might be thinking: there are so many moving parts! What do I focus on first?
Let’s keep things simple.
Here are the three aspects of the logistics process that every e-commerce company should focus on:
Inventory Management
Managing your inventory means keeping track of all your products and knowing where they are and what quantities they are in. Which warehouse(s) contain which SKUs and tracking shipments between different locations. It’s also about knowing which SKUs you’re running low on and when you should reorder them.
Storage and warehousing
This is the most expensive part of the logistics process. There are many things to consider when looking for the right storage solution for your products. This includes things like:
- Where to strategically store various items close to end consumers
- Find a solution for bulky or large items
- Find the best warehouses to use for each of the markets you sell in
Order fulfillment
Since Amazon launched 2-day shipping, customer expectations have changed. Now, major brands are offering faster shipping options and fulfilling orders much faster. The entire process involves processing orders, shipping the order, calculating the shipping cost, and using major carriers for last-mile delivery.
Improving your order fulfillment process often requires distributing your warehouses so they are strategically located closer to your customers. The modern consumer expects a seamless delivery process with 3-5 days or less of delivery time.
The most popular method for managing orders for a modern eCommerce is to rely on a 3PL. Here’s why.
Benefits of Using Third Party Logistics (3PL)
E-commerce business owners prefer to use third-party logistics companies. In fact, the global 3PL market was valued at $2,027.71 billion in 2023.
Studies show that merchants are increasingly relying on 3PLs and deriving value from them:
- 86% of retailers said using 3PLs improved customer service.
- 75% said 3PLs resulted in overall cost savings.
- 3PLs are most often used for domestic transportation (86%), warehousing (66%), and freight forwarding (44%).
- Here are some of the reasons why online retailers prefer to use 3PLs for their eCommerce order fulfillment.
- Next day and 2 day shipping
- Customer expectations changed dramatically when Amazon started offering same-day, next-day, and 2-day shipping (an unprecedented move in the history of eCommerce). Many other online stores and marketplaces joined the bandwagon to offer a customer experience that could rival Amazon’s.
- The era of 10-day shipping is over as places like Walmart and HomeDepot have started offering 2-day express shipping and lower shipping costs.
- In the past, this was only possible if you used FBA, which is Amazon’s giant network of warehouses. Now there are 3PLs that have a distributed network of their own facilities, and b2c, d2c and b2b logistics operators such as eShop Logistic .
- Shorter shipping times and on-time deliveries require a distribution network of warehouses across the country. It is too expensive to build your own, which is why online stores prefer to use a 3PL that has its own logistics network.
- More data and valuable information for business growth
- One of the main benefits of using a third-party logistics company is the automation of the software they provide. 3PLs use software that streamlines the logistics process and provides a wealth of real-time data and insights into every aspect of eCommerce order fulfillment. They can help brands turn valuable information into actionable insights.
- For example, logistics software could help a retailer realize that it needs to open more stores in strategic areas or specific zip codes. It could help reduce excess inventory, improve warehouse management, and help companies go green by streamlining recycling and returns processes.
- Best resolution processes
The best resolution processes
3PLs simplify returns management for medium to large eCommerce businesses. This is where online retailers and brick-and-mortar stores differ. Studies show that eCommerce stores have a return rate of at least 48%, compared to 8.89% for brick-and-mortar stores.
This is not due to dissatisfied customers, but more to the fact that you can’t wear or try on products online before you buy them. So many customers buy large quantities of products with the expectation of returning one if it doesn’t fit or they don’t really like the style.
This creates a serious logistical nightmare for online retailers. 3PLs can help brands improve the return process and ensure it runs smoothly.
Scalability
Third-party fulfillment services have established relationships with suppliers, regional carriers, and manufacturers. They can help at every point in the eCommerce supply chain by connecting brands to the right supplier, carrier, or fulfillment partner.
You can also get shipping discounts, reduce delivery costs, and improve last-mile delivery. All of this translates into higher profits, better customer experience, and greater potential for rapid growth.
Conclusion
Logistics management is a crucial part of any e-commerce business. It requires a network of fulfillment partners along the entire supply chain. It also requires an experienced e-commerce logistics partner, a third-party fulfillment service, and software that automates much of the process for you.
A truly great fulfillment strategy doesn’t happen overnight. Look at your business needs and start optimizing your supply chain step by step. If you assemble the right team of partners and focus on meeting consumer expectations, then you will win, every time.
Using Amazon FBA? Need help improving your processes and increasing sales? Talk to one of our expert eShop Logistic specialists .
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