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As your company enters a high-growth phase, it’s vital to focus on what it is you’re delivering to your customers … metaphorically and literally
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How to overcome the challenges of ecommerce logistics at scale
As your company enters a high-growth phase, it’s vital to focus on what it is you’re delivering to your customers … metaphorically and literally. • Unless you have the bandwidth to focus on logistics, this essential but complicated element can be a painful drain on your team’s resources • Here are nine lessons, along with a hand-chosen resource for each, on overcoming the challenges of ecommerce logistics:
Find an Ecommerce Logistics Partner Early The right 3PL partner can save you time and stress. By all means, listen to your gut, but you don’t want to have to make the call when you’re flooded with backorders: There are definitely advantages to insourcing your logistics and doing everything yourself. The most obvious advantage is control, but there's a whole ton of advantages to outsourcing. • The most obvious ones are access to capabilities that you don't have. So whether that's technology, whether it's resources, expertise, new geographies, by outsourcing you can basically buy that from a specialist who does it 24/7, which is a huge advantage.
There are also advantages from a cost perspective. Typically, 3PLs have economies of scale to give you a better cost per unit on what you're able to achieve yourself. • Other things are like scalability, the ability to grow your business and access infrastructure that you would not be able to deploy by yourself because maybe you don't have the capital or the ability to deploy that by yourself. • The economies of scale and access to expert capabilities offered by 3PLs create a competitive advantage and support that you might not be able to provide on your own, at the scope and speed you need.
Focus on Your Core Competencies • I would probably say that one of the most important advantages to outsourcing your logistics is the ability to focus on your core competencies • What is it that truly makes your business tick? Is logistics your core competency? Is it fundamental to your business model? If not, outsourcing can make a lot of sense. • Recently logistics, particularity e-commerce logistics, has gotten much, much more complicated. So more fulfillment locations, more carriers to manage, changing technology, and so on. • New geographies, new countries. And keeping on top of this as a retailer can be extremely difficult. So retailers have to have an honest dialogue about when logistics is really interfering with the success of their business. • If you’re worrying more about issues in a warehouse, than how you could be potentially delighting your customer or selling more product, it might be the time to outsource.”
Ensure Quality and Order Accuracy • My words of advice would be to start with the basics. Quality and order accuracy and getting orders out of a fulfillmentcenter in a timely fashion is the single most important capability that you need to look at when you're talking to potential vendors. • Nothing disappoints the consumer more than screwing up the basics. No amount of wow factor, no amount of marketing buzz will ever overcome this and it should be the most important discussion point with the vendor. • People are conditioned now to expect a high level of accuracy and quality. Anything less is disappointing.
Synchronize Your Inventory • Inventory management is exceptionally important and it's also, frankly, a science. How much buffer to have, and how much you want to have in stock, really varies based on the retailer situation, what they sell and where they find themselves financially. • Excess inventory is bad, right? It ties up cash that you could use more productively in other areas of your business. But on the flip side, we’ve all been in situations where we've been shopping online, you find the thing that you wanna buy, but unfortunately, there are no units on hand. • That’s a bad customer experience that’s a result of maybe not having the appropriate controls on your inventory. As we said before, the goal is the right inventory, in the right time, at the right place, in the right amount. And doing that effectively is a lot harder than it sounds. • If you go online, there’s a lot of information about how to evaluate how much inventory to hold, to calculate and analyze your inventory turn rates, your turnover days and so forth. But it boils down to a few variables:
How much does your inventory cost? • How much do you typically have on hand at any one time? • How predictable is your demand? • How do you replenish your inventory? • This looks very different if inventory is coming from China, as you can imagine. You have a one month or two month lead time, versus a vendor that sits up the road. • The simpler those variables are, the more feasible it is for you to manage your inventory. The more complicated they are, the more difficult it will be — which means it might make sense to consult with experts.
Connect Your Warehouses • Depending on where you store different parts of your inventory, keeping track of what products are where is vital to ensuring timely delivery: • The need for affordable speed is driving this regionalization trend in fulfillment. It’s very difficult and expensive to service customers across the United States from a single site, while at the same time, meeting their expectations in terms of what a consumer today wants in terms of the delivery time. • It’s even more difficult to service international customers from a single site and delight them at the same time. • Retailers have to cover multiple warehouses, drop-shippers, potentially stores, and doing so across potentially across multiple countries in an attempt to find a most efficient fulfillment location. Managing that fragmentation is difficult.
The hardest part is really knowing how many nodes do I need and defining how much inventory to hold where in that network, when and in what amount. That's what we typically call demand planning. • That’s a capability that a lot of retailers lack, or don’t really have the tools to be able to analyze effectively. • Also, if you are in multiple nodes, you need tools to be able to see that inventory, light it up, so to speak, and execute orders across that inventory. That’s called order sourcing, or distributed order management. Those are areas DHL's invested in significantly to try and overcome these challenges.
Balance Value Added Logistics, Costs, and Focus • Making sure that your products are perfectly packaged can increase customer satisfaction, but it’s important to know when these value-added services cause more trouble than they’re worth: • It’s always a good idea to ask about what value-added service capabilities does that fulfillment provider have: • What kind of experience and capabilities to they have with kitting? • Are they able to handle custom packaging? • Can they do gift bags? • Can they do custom messages? • Can they work with fancy tissue paper? • Can they work with samples? • Can they personalize the package and so forth?
These are all becoming increasingly important and having a provider that can manage these and understanding how much it costs to manage these are very, very important questions to ask. But as a reminder, it can also go too far. Some of these value-added services add tremendous operational complexity to the fulfillment process and, as a result, they drive cost into the fulfillment process and retailers really need to make sure that they have the appropriate return on that investment. You always need to balance the operational implications with the marketing wow factor.
Free Shipping, Fast Shipping Offering a no-cost delivery can encourage people move forward with their shopping. Whether there’s a limited promotional offer or a minimum order size, these techniques will help get orders through the checkout: Free shipping is absolutely very important. Plenty of evidence tells us that not offering some sort of free shipping is one of the leading reasons why shopping carts get abandoned. And there are ways to manage the cost of free shipping, such as having a minimum order size to qualify for it, offering it only with promotions, or with select items, and so forth. With the free shipping option, make sure you have an ecommerce logistic solution that is affordable.
Regionalize Inventory to Reduce Cost big shipping companies that span the country offer one-size-fits-all solutions to delivery, but they aren’t always the easiest … and are rarely the cheapest: We know a lot of, particularly some of the bigger brands, the bigger retailers are now experimenting with same day [delivery]. The answers to that paradox really exist in the supply chain. We talked about regionalizing inventory to remove distance from the equation. Distance equals time and money and cutting distance down can save a lot of dollars while maintaining or even improving service levels. If you’re shipping LA to LA, you can use the USPS workshare products and get two days and that sure beats two day express product from Kentucky or somewhere in the middle of the country. Localization opens up many options to leverage different types of carriers. You’re not dependent on national incumbents anymore. You can start to work with regional carriers, metro couriers, and so forth, that can bring tremendous savings to the table, versus their national counterparts.”
Leverage Technology for Logistics Rates • Different rates for different shipments can offer significant savings, but it requires the technology, information, and skills to be able to make the best shipping decisions: • But, in order to capitalize on these multiple carriers, you need certain capabilities and the most important one is rate service shopping. You need the technology either in your WMS, or transportation management system, to make the best possible shipping decision, giving the details of the order. • What’s the origin zip, where is it going, how much does the parcel weigh, what are the dimensions of the parcel? Which carrier? What's my service level? What carriers can execute that? • Then, rate shopping across those ca rriers to try and do that in the most affordable fashion.” • Shopping around and paying attention can save a lot of hassle and allow for affordable, quick delivery.
