The ‘Logistics’ Pillar of ecommerce

Completing our journey in understanding the five crucial ‘Pillars of eCommerce’, we dive into the myriad world of Logistics – the final Fifth Pillar of eCommerce

Digital Marketing Expert & Ecommerce Strategist

Logistics is a science on its own. A well-oiled logistics setup is a prime necessity for any eCommerce or retail business. The inventory that you have at any point in time on a shelf or rack represents your investment in the business. Managing the spends incurred on logistics and shipping products the way customers expect can be a decisive milestone to help increase the success and stability of your business.

Logistics, simply, is the management of the planning, execution, control of movement, and storage of goods or services which are obtained, stored, and shipped to their end destinations achieving specific objectives, varying from industry to industry.

HISTORY OF LOGISTICS

  • During the 70s’, suppliers or wholesalers directly replenished retail stores by direct deliveries.
  • The 80s’ saw logistics evolve into centralized deliveries controlled by major retailers themselves.
  • Global sourcing in the 90s’, took off with containerized imports by many retailers having their own import centers.
  • The advent of eCommerce in around 2000 saw a rapid expansion of pure-play retailers establishing e-fulfillment distribution networks.

CLASSIFICATION OF LOGISTIC PROCESSES

Inbound logistics

Inbound logistics processes include movement of raw materials and finished goods from the manufacturers through distribution channels to any of the below locations depending on the business model.

  • Fulfillment center
  • Warehouse
  • Retail store

Well-planned and controlled inbound logistics processes help businesses to restock fast-moving goods in time to ensure availability and increase production or sales efficiency.

Outbound logistics

Outbound logistics processes involve the movement of end products to the end-user. These are dispatched from fulfillment centers, warehouses, or retail stores, and this last leg completes the delivery to its final destination, which is the customer. This is a very important phase and has a vital role in increasing customer service levels.

Inbound and Outbound Logistics Processes consists of

  • Inventory management
  • Warehousing and storage
  • Order fulfillment
  • Return Management

THE ROLE OF ERP SYSTEMS IN INVENTORY MANAGEMENT

The complexities of eCommerce bring with it the unique challenge of managing containerized inventory arriving in bulk, which needs to be carefully inbound to warehouses, inventorying them by labeling and storing for easy retrieval.

The process of Pick, Pack, and Ship, as per individual SKUs in real-time, requires processes that provide real-time access and insights to inventory movement. Procurement from a multitude of suppliers, into multiple warehouses, along with an extensive number of ever-increasing sales channels, heightens the possibilities of misplaced orders.

An organization’s supply chain strategy can be streamlined by implementing appropriate ERP (Enterprise Resource Planning) software that aids in inventory sensing aligned supply chain and warehouse management capabilities that can systemically trigger alerts to place the right orders with vendors as and when inventory levels drop below a certain level.

These systems also help keep track of damaged and return goods, provide real-time inventory management, understand cost awareness, provide the organization with the data insights required to understand purchasing trends and customer preferences, and maintain the right inventory hand utilizing only the required shelf space while optimizing costs.

Procurement from a multitude of suppliers, into multiple warehouses, along with an extensive number of ever-increasing sales channels, heightens the possibilities of misplaced orders

OUTSOURCING TO 3PL (THIRD PARTY LOGISTICS)

The latest trend in eCommerce is to decrease the time taken from order-to-delivery to the customer. With the two-day shipping model becoming a standard part of their platform, eCommerce organizations will have to lease more warehouses, hire labor, negotiate shipping discounts, and so much more which takes time and requires significant investment. Companies will have to reduce the cost associated with shipment and fulfillment of orders to remain profitable, and hence they partner with 3PLs.

3PL companies tend to specialize in providing support that an eCommerce business would need. These companies can provide services through the following segments of logistics

  • Inbound and outbound freight
  • Customs
  • Freight consolidation
  • Warehousing
  • Distribution
  • Order fulfillment
  • Cross-docking
  • Inventory management
  • Return Management

While considering a 3PL service provider, ensure that they have systems in place to provide real-time data on sales and inventory management. This will go a long way to help in strategic decision-making. The 3PL organizations would need to have relationships with specialized service providers and niche logistic carriers for regional and local parcel services for same-day deliveries. Reducing shipping distances brings down costs and helps improve service and, in turn, customer satisfaction.

4PL COMPANIES

A 4PL service provider is a fourth-party logistics provider who essentially takes third-party logistics a step further. They manage resources, technology, infrastructure and also handles external 3PLs. They help to design, build and provide supply chain solutions for businesses interested in highly scalable eCommerce operations.

4PL services encompass all 3PL services as well as the following:

  • Logistics strategy
  • Analytical data providing insights into transportation spends, warehouse capacity utilization, and last-mile delivery performance
  • Freight sourcing strategies
  • Network analysis and design
  • Consultancy
  • Business planning
  • Change management
  • Project management
  • Control and co-ordinate wide supplier base across geographies
  • Inventory planning and management
  • Inbound, outbound, and reverse logistics management

As more and more organizations optimize their processes to manage and control warehouses and streamline the fulfillment and distribution process, it will become mission-critical for establishments to stay abreast of the latest advancements in the technology and services that involve the logistics and supply chain industries so that they remain relevant and competitive in the rapidly expanding eCommerce market.

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