In recent decades, we’ve seen a shift from brick-and-mortar stores to online shopping, with people now preferring to purchase goods from the comfort of their devices. Since the boom of the e-commerce industry, plenty of businesses have joined in and begun offering products completely online.
While e-commerce is something that sounds easy to do from home or a small office, it’s a whole different ball game when your company begins to scale. In 2023, e-commerce is expected to grow at a rate of 8.9%.
As more people demand your products, you need to find a way to store your growing inventory and fulfill the influx of orders fast. That’s where e-commerce logistics comes in.
What is E-Commerce Logistics?
E-commerce logistics refers to the whole process involved in your online store’s operations — from storing and managing inventory to shipping orders and delivering them to customers.
While the process seems straightforward, there are actually plenty of things involved that help ensure your logistics are efficient and meet your customers’ demands. This includes concepts like inventory management, picking and packing your order and last-mile delivery, among others.
Having a well-thought-out e-commerce logistics process in place is key to running your operations smoothly and boosting your profit.
The E-Commerce Logistics Process
The e-commerce logistics process involves four key components: warehousing, inventory management, order fulfillment and return and reverse logistics.
If you choose to outsource the e-commerce logistics process, an expert shipping logistics company should be proficient in all four categories.
Warehousing
Warehousing is primarily concerned with how and where you store your inventory, but it also tackles the processing of orders, such as picking and packing and inventory management. Your warehousing solution must be able to accommodate the needs of your e-commerce business, from having enough storage space for SKUs to streamlining order fulfillment.
Inventory Management
Inventory is the lifeblood of an e-commerce business. After all, there’s nothing to deliver to customers if stocks run out. As such, proper inventory management is crucial to keep your e-commerce business running.
Many businesses either make the mistake of stocking too much or too little inventory. Excess inventory negates a healthy cash flow — you’ll be spending more on supply that does not have adequate demand. On the other hand, inadequate inventory leads to stockouts and idle business.
You need to find a healthy balance between your inventory and the demand for your products. To do this, you must be able to identify which products are selling, which are underperforming, how much you’re spending on your inventory and how timely you can replenish stocks.
Order Fulfillment
Order fulfillment involves all the aspects of getting an order to a customer. It begins when an order is placed, moves on to processing and ends when the products are received by the end recipient.
This is arguably the most critical part of the e-commerce logistics process. Yet, it’s also the most challenging for businesses. Especially as the demand for fast shipping gets more aggressive, getting the orders processed and delivered quickly and efficiently should be a top priority.
No marketing tactic or sales gimmick can counteract the negative effects of a poor order fulfillment process. It directly affects the customer experience and can determine your potential for repeat business and higher profit.
Returns and Reverse Logistics
The e-commerce logistics process does not end when the products land on your customer’s doorstep. You must also be prepared for returns in case your customer isn’t satisfied with your product.
At least 30% of products ordered online are returned, which warrants the need for an effective system for receiving returned orders and putting them back in your inventory for reselling.
Having a well-implemented reverse logistics process is also tied to customer satisfaction. 92% of consumers say they would buy from an online store again if the return process is easy.
Key Players in the E-Commerce Logistics Chain
E-commerce logistics involves the contributions of five key players who facilitate the main components of the e-commerce logistics chain, starting with your suppliers all the way to the carriers who bring your products to your customer’s doorstep.
Suppliers
Your suppliers or manufacturers kickstart the e-commerce logistics process by creating your products and stocking your inventory. Depending on your agreement, your supplier may ship directly to your customers, such as in dropshipping arrangements, or send your orders to your warehouse.
Fulfillment Centers
A fulfillment center handles the bulk of your e-commerce logistics operations. It’s a warehouse where your inventory is stored, where picking and packing happens and is the first touchpoint for the carriers engaged to ship your products to customers.
Fulfillment centers are typically owned or leased by an e-commerce business. But recently, outsourcing fulfillment center operations to a third-party logistics service provider has seen an upward tick.
Distribution Centers
Larger e-commerce businesses that have a wide consumer base will have more than one warehouse. In addition to their fulfillment center, they may have several distribution hubs scattered in strategic locations close to their market.
Through this, they are able to store inventory in different locations and speed up the order fulfillment process. Because they have a distribution center near their customers, they can achieve faster and cheaper shipping.
Sorting Facilities
Sorting facilities are smaller installations in different localities where orders are sorted. This is also where route planning takes place, ensuring that bulks of goods are assigned to carriers that cover the recipient’s area.
Carriers
Carriers are the companies that take packages from the fulfillment center or sorting facility to deliver them to your customer’s doorstep. The most common popular shipping carriers in the U.S. are DHL, FedEx, UPS and USPS, which transport goods to end customers via plane or truck.
Types of E-Commerce Logistics Management
There’s no singular approach to e-commerce logistics. You can employ one of three different strategies, depending on what suits your business model, capacity, and needs.
In-House Logistics
Managing e-commerce logistics in-house means taking on the entire process on your own, from managing your supply chain and inventory to shipping to your various sorting facilities, distribution centers or end customers.
While you may be able to do everything in-house at first, it will prove to be a difficult prospect as your business scales and your operations grow. That’s why plenty of e-commerce businesses opt to outsource their logistics needs.
Third-Party Logistics Providers
A third-party logistics provider (3PL) is a company that you engage to manage your entire e-commerce logistics process. Depending on the 3PL’s offers, they may be able to help you with:
- Inventory tracking
- Supplier management
- Warehousing
- Product packaging
- Shipping
75% of companies that have engaged 3PLs for their e-commerce logistics have seen reduced operational costs, which increases their motivation to increase their use of 3PL services.
Dropshipping
Dropshipping is the cheapest e-commerce logistics management solution. In this setup, your supplier ships the products directly to your customer, which means you can eliminate a huge bulk of the process, along with their costs, from your list of responsibilities.
However, dropshipping does cause a strain on your delivery times. Depending on where your supplier is located, it might take several weeks or months for your customer’s order to arrive. It’s not ideal for businesses that prioritize customer satisfaction.
The Importance of E-Commerce Logistics
From cost savings to profit growth, an effective e-commerce logistics process is crucial to the growth and success of your company.
Cost Savings
An e-commerce logistics process, when done right, streamlines your operations and makes them more productive and efficient. This eliminates costly bottlenecks and issues in your supply chain, saving your business money and increasing your profit margin.
Customer Satisfaction
By streamlining your order fulfillment process, a proper e-commerce logistics system ensures the timely delivery of your products to your customers. Fast delivery increases customer satisfaction and loyalty, guaranteeing repeat business and giving your business a competitive edge.
Data Analytics
Employing the right tools for your e-commerce logistics process can provide you with valuable data you can use to make smart decisions for your business. These insights can inform your demand forecasting, route optimization and supply chain decisions.
Inventory Management
E-commerce logistics can improve your inventory management strategies, helping avoid stockouts and overstocking. It allows you to balance supply with demand and keeps your cash flow healthy.
Scalability
An effective system for e-commerce logistics grows with your business. As demand for your products increases, your logistics solutions will be able to accommodate your growing needs for storage, inventory, order processing and delivery.
Work with WWL for E-commerce Logistics
Every e-commerce business must invest in efficient logistics solutions to keep the business running and pave the road to growth. WWL helps support your e-commerce operations by making fulfillment and logistics easy — our experts can handle the entire process for you, from the moment you receive an order to shipping the items to your customer.
Our end-to-end e-commerce service, partnership with Amazon.com and vast experience in the industry allow us to provide top-level support for your logistical needs no matter the size of your operations or the demands of your customers. With WWL, you can delegate your e-commerce logistics process to experts and focus on growing your business.