Logistical improvements: Where should you start in eCommerce?

Thanks to retail giants like Amazon, customer expectations are at an all-time high. For many eCommerce companies, ensuring timely delivery is vital to excellent customer service. But this can only be achieved with a streamlined and efficient logistics operation.

You can break down eCommerce business logistics into four main processes:

1. Warehousing and inventory management
2. Order management and fulfillment
3. Last-mile delivery
4. Reverse logistics

Each process must be optimized to reduce the impact of supply chain disruptions and provide customers with the fast delivery they expect.

This guide will outline the logistical improvements you can make to cut costs, boost efficiency, and improve the customer experience from implementing an enterprise resource planning (ERP) solution to streamlining your returns policy. First, though, let's look at why these improvements are so critical for eCommerce businesses.

Importance of logistical improvements in eCommerce

Free to use image sourced from Pexels

To meet customer demand around delivery and customer service, eCommerce companies must continuously improve their logistics strategies. For example, by optimizing your distribution strategy and delivery process, you can reduce costs and delivery times. 

This not only guarantees an excellent customer experience but also saves your business money and boosts sales. You can then pass these cost savings on to customers to give you a competitive advantage. Logistical improvements also reduce costly errors that could otherwise harm customer satisfaction.

Where to begin with eCommerce logistical improvements

Optimizing your logistics performance takes time and money. But the result is an efficient and streamlined supply chain. Here are the steps you can take to improve your logistics operation.

1. Logistics system assessment 

The first step in any logistics improvement strategy is to assess your current systems. That means reviewing your supply chain operations, including:

• Inventory levels
• Logistics costs, like warehousing, shipping, and transportation
• Customer service channels
• Raw materials sourcing
• Delivery processes

One option is to assess each area, such as suppliers, couriers, and distribution warehouses. This allows you to see how well they conform to your targets and logistics industry standards.

For instance, researchers have created a framework for assessing warehouse performance based on factors like facilities, safety, quality management system, and energy efficiency. Once you know which areas need improving, you can rank them according to their potential business benefits.

Image Sourced from journals.plos.org

Another option is to collect data on your KPIs, like inventory turnover and delivery time. Then, analyze the data to pinpoint inefficiencies.

It’s also a good idea to assess the performance of your logistics staff. You can then identify training opportunities to improve productivity and efficiency.

2. Streamlining order fulfillment

An efficient fulfillment process is essential for ensuring timely delivery to customers. But there are many moving parts to consider, including:

• Inventory management: Organizing inventory and stock taking
• Picking and packing: Finding, packaging, and labeling orders
• Shipping: Coordinating pickup times and filling out paperwork

The best way to streamline your fulfillment operations is to utilize technology. For instance, warehouse management software automates processes like picking, packing, and shipping. 

Meanwhile, inventory management software tracks your inventory so you always know what you have in stock, how much, and where it is. This is particularly useful if you’re an international company, like, for example, if you’re based in the U.K. but some of your stock is stored in France, which makes physical checks much more difficult. 

Going one step further, for a complete view of your business, it’s worth investing in eCommerce ERP software. ERP software unifies data from different departments in a single application to provide you the insights you need to improve the efficiency of all your critical business functions. You can manage orders, track shipments, and optimize inventory from anywhere and at any time. All you need is an internet connection.

3. Upgrading last-mile delivery

Last-mile delivery is the process of transporting a package from a warehouse or distribution center to the customer. Any errors or delays at this stage can directly impact the customer, so it’s vital you get it right.

Original image created by author. Statistic sourced from statista.com

Again, it’s a good idea to use last-mile delivery or route planning software to calculate the most efficient delivery routes. The software considers a variety of factors in real time. This includes delivery locations, the number of available drivers, and traffic conditions. Plus, if there’s an unexpected holdup, it automatically recalculates the route and informs the driver. 

Such software can be vital when making international deliveries which are more likely to involve unknown factors. Last-mile software collects a significant amount of data, such as driver performance, customer feedback, distance, and delivery success rate. You can use this data to further optimize your delivery process, reduce costs, and improve customer experience.

4. Returns management and reverse logistics

Returns management is vital for building long-term customer loyalty. A slow, complicated returns process harms consumer confidence in your business, and they may move to your competitors.

First, you need to map out your current returns process. For this, you need to answer questions like:

• How do returned items reach you? Do you send a courier, or do customers post them?
• What are the associated costs? Do customers pay to return items?
• Do you resell the items or dispose of them?
• Where do you store the returned items?

Next, look at ways to reduce costs and improve efficiency. For instance, create a page on your website where customers can request a return and choose their preferred method, such as home collection or parcel drop-off.

Consider using logistics software to track returns and issue refunds. And make sure you have a clear system for receiving, inspecting, and storing returned items.

5. Leveraging data and analytics

Accurate data is essential for logistics management. After all, if you don’t know how you’re performing, you don’t know what needs improving. It’s also hard to monitor whether your improvements are working.

One solution is to use an ERP cloud system. These platforms store essential data in the cloud, giving you and your team real-time insights into your business operations, including inventory and order management.

With full visibility throughout your eCommerce business, you can easily identify areas of weakness and create efficient processes across offices, teams, and locations.

For instance, ERP systems track inventory in real time,  which helps you reduce excess inventory and lower carrying costs. Plus, you can view products, orders, price lists, discounts, and carriers in a single shared database. This helps you make better decisions.

Free to use image sourced from Unsplash

6. Maintaining flexibility and scalability

Efficient business processes can only be achieved with flexibility and scalability. Flexibility means that you can quickly react to emerging trends from drone delivery to new distribution channels. Meanwhile, scalability means you can easily expand your operations, even overseas. So, logistical improvements could be an international launchpad for your eCommerce company.

A cloud-based logistics or ERP solution is one way to increase the flexibility of your supply chain management. You'll get access to real-time data on inventory costs, stock levels, and so on to help you respond rapidly to changes in demand and material costs. Logistics software is also highly scalable, so it can grow with your operations.

Alternatively, you can use a third-party logistics (3PL) company. With a 3PL company, you don’t have to worry about warehouse space or inventory; they’ll handle all that for you. Plus, with quick turnaround times and flexible capacity, you can react instantly when conditions change.

7. Fostering strategic partners and providers

eCommerce companies have a range of strategic partners and providers, including:

• Suppliers
• Delivery drivers
• Trucking companies
• Shipping providers
• 3PL companies

To improve your logistics operations, it’s vital to foster good relationships with them all. For instance, supplier relationship management involves building trust through transparency and communication. 

Trust between you and your suppliers means you can work together to reduce costs and improve efficiency. This could be done through discounts, order bundling, bulk shipments, and so on.

It’s also important to share your goals, objectives, and expectations with your partners and to thank them when they achieve them. By recognizing performance, you’ll motivate your providers and foster continuous improvement.

Finally, make sure you communicate regularly with your partners so you can quickly address issues and reduce errors. This could mean investing in a centralized communication platform where you and your partners can share updates, give feedback, and coordinate responses.

Free to use image sourced from Pexels

8. Conducting and monitoring KPIs

We’ve touched on this already, but it’s vital to monitor your KPIs to determine if your improvements are working. Your KPIs should tie in with your logistics goals.

Let’s say your goal is to reduce delivery time. In this case, you’ll need to track KPIs like shipping time, on-time delivery rate, and average days late. 

Remember to set KPIs for each stage of the logistics process. For example:

Takeaway

Logistical improvements are essential for eCommerce businesses to stay competitive. Adopting a continuous improvement strategy can boost supply chain efficiency and customer satisfaction by reducing errors, minimizing redundancies and waste, and ensuring timely delivery. 

However, the key to optimizing logistics is data, and the first step to getting comprehensive statistics on your processes is investing in the right technology. Digital tools give you access to time-saving automation as well as data to help you make better decisions. So, if you’re looking for logistical improvements, start by comparing different software solutions and finding one matching your business.

Stevie Carpenter, Content Marketing Specialist

Stevie Carpenter is a content marketing specialist with over a decade of experience helping small and enterprise-sized businesses develop innovative digital content. He specializes in content for search and lead generation, developing strategies for well-known brands in the eCommerce, SaaS, and communication sectors, among others.