Nowadays, eCommerce merchants are displacing conventional retailers for a variety of reasons, since eCommerce has become the preferred form of buying for consumers. And, according to a recent web development statistic, around 1.9 billion people worldwide purchased a product online in 2019.
eCommerce use has accelerated in recent years, resulting in increased competition, difficulties, and constant change.
As this method of purchasing becomes more popular, it introduces a new set of eCommerce logistical issues, including faster delivery times, free and simple returns, real-time tracking, and mobile-optimized websites.
Effectively analysing these main challenges an online eCommerce business faces and devising strategies to overcome them is important for being competitive in the industry.
In this comprehensive guide, we’ll explore fundamentals of eCommerce logistics, the challenges it brings on the surface, and strategies to overcome them.
So without any further ado, let’s get started.
eCommerce logistics : An overview
eCommerce logistics is the process of manufacturing, labelling, storage, and shipping products. An integrated, sometimes automated procedure lets eCommerce firms distribute their items to online shoppers (and back again, if returned).
Online retailers spend 11% of their total revenue on logistics. 27% growth last year, with $650 billion projected to be reached by 2025. Deliveries and fulfilment logistics constitute a “significant” issue for over half (53%) of merchants.
A well-thought-out logistics procedure is a must. eCommerce firms benefit from effective and efficient logistics. Failure to satisfy consumer expectations might potentially endanger businesses’ long-term viability.
Coupang is one of South Korea’s major internet marketplaces. The fact is, this company has established 100 fulfilment centres across 25 million square feet.
Let’s take a look at how a typical process of eCommerce process looks like:
Logistics can be handled by the brick-and-mortar company.
A specialised workforce receives arriving products, warehouses them, and chooses them out for an online purchase after it’s placed. You will have to collaborate with a shipping company who gathers orders and delivers them to a client.
Approximately 50% of merchants treat their physical storefronts as owned distribution operations. But at a cost. When online sales reach a billion, merchants need 1.36 million square feet of storage space according to Knight Frank.
The approach for shops employing a dropshipping strategy is less difficult. They don’t touch the products they offer online. It’s routed to a third-party shipping and handling company, who selects, packs, and sends it.
You have the lowest barrier to entry in an online dropshipping business. However, merchants aren’t touching the items, which means difficulties might develop. You can’t control the warehouse, the goods, or when it’s transported.
3rd party logistics suppliers
3PL suppliers function as the intermediate between totally hands-on and hands-off approaches. Your eCommerce site is still in charge of the items you sell. Storing, labelling, and packing your items is the only difference.
Common challenges faced by eCommerce logistics
To overcome the problems of eCommerce logistics, it’s essential to first know what challenges you’ll face. Let’s take a short look at the common major challenges:
- Paucity of verification measures
- Products refunds & returns
- Lack of system integration
- Customer loyalty
- Unresponsive customer services
8 Strategies to overcome these eCommerce logistics challenges
Focusing on core competencies
If your business isn’t centred around logistics, you needn’t spend time and attention on that area.Focus on doing what you do well, and let someone else devote considerable time and effort to getting your products to your customers.
Are you mostly focused on logistics? Do you believe it is necessary to your overall action plan? If outsourcing is not used, it may imply a tonne. E-commerce logistics has gotten exponentially more difficult in the last several years.
These providers are now reaching new geographic regions, as well as new nations. Keeping up with all of this, as a store, is quite difficult. To be able to have an honest conversation about logistics getting in the way of the company, merchants must admit to interfering with the overall goal.
Maybe it is best to look into outsourcing when you are more concerned with difficulties at a warehouse than how you can satisfy your customers or sell more products. You may save a lot on your outsourcing costs by hiring developers from under-developing states.
Choosing eCommerce logistics partner at the beginning
Are you mostly focused on logistics? Do you believe it is critical to your company model? If this isn’t done, outsourcing can be a good idea.
Warehouses, being forced to dedicate a large percentage of inventory space to housing inventory, and the complications in selling into new nations all have to be factored in when thinking about your inventory storage. Managing this as a store is tough, to say the least. When is logistics actually getting in the way of your business’s success?
As your business expands, you will find yourself putting in more work to maintain your original clients and attract new ones.
Incorporating logistics into your company may provide several advantages, such as why the D2C outsourcing industry may exceed $156 billion by 2023.
The greatest advantage is the ability to utilise resources you don’t have. The reason you have the option to outsource work is because it provides you the ability to hire professionals who are able to handle it around the clock.
Additionally, there are cost advantages. When it comes to cost per unit, there are economies of scale for 3PLs to offer a better deal than what you can afford to do yourself. You will also get access to all of the necessary infrastructure, making it easier for you to deploy on your own.
Choosing a third-party logistics (3PL) business might be difficult, but it is important to choose the best possible 3PL option.
A recent study indicates that every $100 in e-commerce sales yields $12 to $20 for logistics businesses. The $3 to $5 price range for logistics is much larger for brick-and-mortar retailers.
But the economies of scale and access to specialist talents afforded by 3PLs do give your company a competitive edge.
Synchronizing inventory efficiently
On the surface, it’s easy: all you have to do is inventory and appraise your goods. It is a difficulty to replenish items and not have too many supplies.
When it comes to inventory management, it’s critical, yet it’s also a science. It fluctuates significantly based on the retailer’s situation, what they sell, and where they stand economically.
The abundance stock is, indeed, horrible, correct? It confines your cash, which might be put to better use in other areas of your company.
On the other hand, we’ve all experienced instances where we found what we wanted to buy online, but sadly, it was out of stock.
This is a horrible customer experience due to the lack of proper inventory controls. You should aim to buy a stock at the appropriate place, at the right amount, and of the correct type.
It is also difficult to do. For those who do research online, there is a considerable amount of material on how to analyse inventory quantities, identify stock turn rates, and comprehend inventory turnover.
Automating all the process
The majority of 3PLs may offer customised pricing for certain shipments, resulting in considerable savings. However, it takes technology, knowledge, and expertise to make the best shipping selections.
To leverage on these numerous carriers, specific characteristics are required. The most critical is rate service shopping; the technology used in your warehouse management system or transportation management system to make the best shipping option feasible.
What is the ZIP code of origin? What direction is it taking? What is the weight of the parcel? What are the dimensions of this object? Rate shopping among those providers will attempt to accomplish this in the most cost-effective manner possible.
While researching the technologies that a 3PL offers, evaluate whether you can automate any portion of the logistics process.
Finding an eCommerce fulfilment centre that utilises robots is one method to do this. According to McKinsey, automated pallet-handling technologies at some firms may half the average time required to handle a cargo.
Many logistical tasks currently handled by third-party service providers are expected to be automated by 2030. Product inventory management systems for forecasting and restocking, picking robots, and multishuttle systems are all examples.
Alibaba, China’s largest eCommerce business, announced last year the launch of its own logistics system. Its delivery robot is capable of delivering 500 items each day and traversing a distance of 100 kilometres on a single battery.
However, logistics automation does not have to be so difficult. GoudronBlanc, a fashion retailer, links its shipping partner with its Shopify shop. While their logistics software syncs all online orders, their staff manually certifies which orders should be collected, packaged, and delivered.
Ensuring order accuracy and quality
Take your time before you begin running. Avoid making preventable blunders. To begin with, just deliver the correct requests on time. It’s one of the most important things your business can do.
To get you started, we highly recommend you begin with the basics. The most essential skill you have to examine when speaking with potential merchants is the quality and order correctness and getting things out of a contentment location on time.
The customer finds nothing more frustrating than messing up the basics. As in the modern day, people are shaped to expect more precision and quality than ever before.
Fast and free shipping
Shamelessly offering free delivery might motivate customers to buy more. These strategies will assist get orders through the checkout regardless of whether there is a restricted promotional offer or a minimum purchase amount.
Delivery for free is really important. A lot of data indicates that the major reason shopping carts are abandoned is because free delivery is not offered.
Another option is to use a base request size to satisfy all requirements for it, giving it as a promotion, or utilising it with chosen items.Ensure you have an eCommerce logistics solution with a free transportation option.
Gone are the days when people used to wait for 10 business days to get their order delivered.. When consumers expect their items to be delivered on schedule, they become dissatisfied when that is not the case. In order to draw customers back, you must provide reliable delivery time.
Diversify the suppliers
Despite its lean production method, Toyota suffered greatly from the 2011 Tohoku earthquake followed by a tsunami. After a supply chain assessment, Toyata determined that core components were supplied by vendors situated in regions of heightened risk.
Toyota wanted the suppliers to improve their supply chain’s resilience by having components produced in several places and having components stored in different locations.
Because of this, companies should reassess their current supplier agreements, including knowing about the availability of contingency and disaster mitigation strategies.
When the government restricts exports, it becomes challenging for businesses and nations to function when they’re completely dependent on the supplier from different countries.
For the last 15 years, China has risen to become the world’s second-largest economy. However, a massive number of companies are considering relocating their offshore production away from China, or perhaps reducing their dependency on it, amid the coronavirus outbreak that started in Wuhan back in 2019.
Supply chains will only be future-proof if the same mistakes are not repeated; resilient supply chains are flexible supply chains.
Innovative firms understand this far before most others. A number of Apple-manufactured smartphones are now being produced in India.
Covid-19 has expanded Apple’s desire to diversify its production by causing them to be caught in the middle of the ongoing trade conflict between China and the US.
In June 2019, according to sources, Apple requested its suppliers to investigate the monetary costs of increasing manufacturing from China to Southeast Asia and Mexico by 15% and 30% respectively. About 30% of all AirPods production was just relocated to Vietnam.
Create a transparent supply chain
A significant contributing factor to supply chain management success is the belief that every product comes to a final destination because of the collaboration of multiple organizations, the ‘supply chain’, and also that only a few companies truly comprehend and manage the entire supply chain,hence creating confusion and inefficiency.
The current crisis has demonstrated this to be very true. Too little business had eyes on every stage of the supply chain process; from planning to procurement through to distribution and customers interface.
Many companies were caught off-guard because they realized that core components of their supply chain had been sourced or manufactured in China, even if they had been made aware, they did not have a full understanding of the impact their workers and factories were experiencing as a result of the virus ; therefore, offering no warning to notify their suppliers.
If you want to understand your supply chain from raw materials all the way down to your end-customers, we highly recommend you should use supply chain mapping.
According to Leonardo Bonanni and Alexis Bateman, “Transparency can be measured along two dimensions; supply chain scope and the milestones on the path to complete transparency.”
That is, supply chain scope measures stages across raw materials, internal operations, and direct and indirect suppliers.
Transparency milestones range from code of conduct , standards and certifications, traceability, performance-based metrics, and full disclosure. . Most companies are in the early stages of both dimensions. Innovators have gained full visibility of their entire supply chain and disclosed it to all stakeholders.
Transparency is a type of communication; it is shared visibility. Gaining transparency to multiple tiers of the supply chain means sharing visibility across organizations and departments; doing so will mitigate risk caused by future black swan events.
Data consolidation projects can also help different stakeholders speak the same language about the supply chain, including the status of product supplies and whereabouts.
Some companies are also experimenting with blockchain technology to solve transparency issues. By tagging a good or material using blockchain, businesses should be able to see the origin of the raw cotton used for its jeans or the lithium in its smartphone batteries.
London-based startup, Provenance, promises to use blockchain to share key information related to the journey of a product to improve the veracity of the entire supply chain—allowing business and consumers alike to make more informed purchase choices.
eCommerce companies face an increasing number of logistical complications as they develop.
There are three core elements to your logistics operation, regardless of whether you’re working with foreign clients or locating third-party providers to manage your inventory regionally: accuracy, cost, and speed.