E-commerce Logistics: Everything You Need to Know

Jul 4, 2023

In the world of e-commerce logistics, efficiency and customer satisfaction reign supreme. As the e-commerce landscape expands rapidly, logistics becomes increasingly vital in meeting customer needs and expectations.

In this comprehensive guide, we will delve into the intricate workings of supply chains, inventory management, and fulfillment processes that drive the seamless flow of goods. By understanding and effectively managing the logistics process for their e-commerce operations, businesses can equip themselves with the necessary tools and strategies for sustained success in the competitive online marketplace.

What is e-commerce logistics?

Ecommerce logistics refers to the movement of goods in online retail. It involves managing inventory, order fulfillment, warehousing, transportation, and delivery. This process ensures smooth operations from order to delivery. It involves planning, technology integration, and collaboration with carriers and providers.

The goal is to optimize the ecommerce supply chain and offer fast, reliable, and cost-effective delivery. Conquering the ecommerce logistics process is vital for meeting consumer expectations in the digital era.

Why logistics is key for e-commerce

Logistics is a key factor in the success of ecommerce businesses. It encompasses a range of activities involved in managing the flow of goods, from order processing to order delivery. By enhancing their logistics capabilities, a business can operate better, meet customer needs, and gain an edge over competitors. Let’s discover why logistics is important for e-commerce and how it affects business operations and customer happiness.

Efficient order processing

Logistics ensures smooth order processing by coordinating activities such as order verification, inventory allocation, and packaging. It streamlines the entire process, ensuring that customer orders are quickly and accurately processed, reducing errors and delays.

Effective inventory management

Logistics helps ecommerce business owners optimize their inventory management processes. It involves tracking inventory levels, forecasting demand, and coordinating with suppliers to maintain adequate stock levels. By effectively managing inventory, businesses can reduce stockouts, improve order fulfillment rates, and avoid excess inventory costs.

Timely delivery

Logistics is essential for ensuring timely delivery of customer orders. It involves selecting a reliable logistics partner or shipping carrier, optimizing transportation routes, and coordinating the logistical process to ensure efficient order fulfillment. Delivering orders on-time in-full is crucial in meeting customer expectations and building trust, as customers increasingly expect fast and reliable shipping options.

Cost optimisation

Logistics plays a significant role in cost optimization for ecommerce businesses. It involves optimizing shipping costs, warehouse utilization, and packaging efficiency. By finding the right balance between cost and service quality, businesses can offer competitive pricing while maintaining profitability.

Customer satisfaction

Logistics directly impacts customer experience by ensuring timely and accurate delivery. Customers appreciate receiving their orders on time and in good condition. A well-executed logistics process contributes to customer delight, fostering loyalty and repeat purchases.

Global reach

Logistics enables ecommerce brands to expand their reach globally. It involves managing international shipping, customs procedures, and cross-border logistics. By efficiently navigating these complexities, businesses can tap into new markets and serve customers worldwide.

According to ecommercedb.com (2023), revenues from e-commerce logistics are projected to surpass €500 billion by 2023 and €770 billion by 2026 growing at a CAGR upwards of 13%. This highlights the growing importance of logistics in the e-commerce industry and the need for businesses to focus on effective logistics management.

How does e-commerce logistics work

To run a successful online business, it’s essential to understand the inner workings of the entire ecommerce logistics process. This section will delve into the fundamental processes and components that make up the world of e-commerce logistics. From the moment a customer places an order and until the point they receive it on time, each step plays a vital role. Let’s explore how e-commerce logistics works and the key elements involved in the process.

Order placement

A customer places an order through a business’s online store. When placing the order, the customer provides details such as quantities and their address.

Inventory management

Efficient inventory management is crucial for ecommerce brands to meet customer demands. To keep track of their stock, businesses use inventory management software. These apps help monitor stock levels, track product availability, and plan for restocking. Effective inventory management ensures product availability when needed, and helps prevent stockouts.

Warehousing and fulfillment

Fulfillment centres serve as key components of e-commerce logistics. They provide the necessary warehousing and order fulfillment services. These centres receive, store, and process inventory. They aim to ensure that products are available and ready for shipment when a customer order is received. The fulfillment centre picks the items from the inventory, packs them with the right labeling, and arranges for their shipment.

Shipping and delivery

A shipping carrier or a 3PL (third-party logistics provider) handle the transportation of products. They ensure that orders are delivered to customers in a timely and secure manner. Shipping costs and delivery times impact customer experiences and influence their purchasing decisions. So, it’s important to select the right delivery partners.

Order tracking and visibility

E-commerce logistics relies on tracking systems to provide visibility into the status of online orders. Customers can track their packages and receive real-time updates on their delivery progress. This creates customer delight and instills trust in the e-commerce brand.

Returns and reverse logistics

Efficiently managing returns is an integral part of any e-commerce business. Reverse logistics involves receiving returned items, inspecting them for their condition, and managing refunds or exchanges. By simplifying the returns process, businesses increase customer trust in their brand.

Understanding how logistics works empowers an ecommerce company to streamline their operations, deliver exceptional customer experiences, and stay competitive in the dynamic e-commerce landscape.

5 Key factors of e-commerce logistics

Effective logistics management is the backbone of successful online retailers. It involves balancing various factors to ensure seamless operations and customer satisfaction. Let’s take a look at the five key factors that impact success in the e-commerce industry.

Supply chain strategy

A well-managed ecommerce supply chain is essential for business profitability. It encompasses the entire journey of a product – from sourcing raw materials to delivering the final product to customers. Key considerations of this critical element include:

  • Sourcing and procurement: Selecting reliable suppliers and negotiating favorable terms.
  • Production and manufacturing: Efficiently converting raw materials into finished goods.
  • Distribution and fulfillment: Ensuring smooth transportation, warehousing, and order processing.
  • Reverse logistics: Managing returns and product exchanges.

Inventory management

This is crucial to avoid stockouts and meet customer demands. The aspects to consider here include:

  • Demand forecasting: Utilising historical sales data and market trends to predict future demand.
  • Order fulfillment: Ensuring products are available and ready for shipping.
  • Inventory tracking: Implementing systems to monitor stock levels and prevent stockouts or excess inventory.
  • Warehouse optimization: Optimising stock storage and organising products for efficient retrieval.

Logistics network

Establishing a robust logistics network is vital for efficient e-commerce operations. Key considerations for building this include:

  • Fulfillment centres: Strategically located facilities for product storage and order processing.
  • Warehousing: Efficient storage and inventory management practices within fulfillment centres.
  • Transportation: Choosing reliable shipping carriers and optimising transportation routes.
  • Last-mile delivery: Ensuring timely and reliable delivery to customers’ doorsteps.

Technology and automation

Leveraging technology-driven systems and process automation enable logistics transformation. This might require upfront investment but the returns are significant. It involves key considerations such as:

  • Inventory management software: Streamlining inventory tracking and replenishment processes.
  • Warehouse management systems: Automating warehouse operations, including inspection, storage, picking, packing, and shipping.
  • Order management systems: Simplifying order processing and tracking.
  • Real-time shipment tracking solutions: Providing customers with visibility into their order status.
  • Ecommerce platform integration: Enabling seamless connectivity of logistics systems with online retailers’ stores.

Customer experience

Customer experience is a driving force in e-commerce logistics. It can make all the difference in the success of an e-commerce business. Factors that contribute to positive customer experiences include:

  • Transparent tracking: Providing customers with real-time updates on the status of their orders.
  • On-time delivery: Ensuring timely and reliable product delivery to meet customer expectations.
  • Hassle-free returns: Implementing efficient return processes to handle product exchanges or refunds.
  • 24/7 customer support: Offering responsive and personalised assistance to resolve customer concerns.

How to handle logistics for e-commerce business

Efficient handling of logistics is essential for the success of a business’s supply chain function. From order processing to delivery, every step must be carefully managed to ensure operational excellence and customer delight. Let’s explore some best practices for e-commerce logistics management.

Streamline order processing

This is the foundation of smooth logistics operations in an e-commerce company. Consider the following practices:

  • Automated order management: Using a system to manage orders and simplify the order fulfillment process.
  • Centralized order processing: Consolidating orders from various sales channels for efficient processing.
  • Order tracking and updates: Providing customers with real-time updates on order status.

Optimise inventory management

This is crucial for maintaining product availability and avoiding stockouts. Consider the following strategies:

  • Demand forecasting: Analysing past sales information and key trends to predict market demand.
  • Just-in-time inventory: Implementing a system where inventory is replenished as needed to reduce holding costs.
  • ABC analysis: Prioritising inventory based on value and demand to optimise storage & replenishment.
  • Cycle counting: Conducting regular inventory checks to ensure accurate stock levels.

Choose reliable shipping partners

Establishing the right delivery partner network is vital to ensuring timely and cost-effective deliveries. Consider the following factors:

  • Carrier options: Research and compare various carriers and transport modes to find the best option for your business.
  • Service levels: Evaluate the speed, reliability, and tracking capabilities offered by your ecommerce logistics partner(s).
  • Negotiate rates: Leverage your shipping volume to negotiate favourable rates with carriers.
  • Package optimisation: Optimise packaging to reduce volumetric weight and shipping costs.

Implement effective warehouse management

Efficient warehouse management is crucial for logistics. Consider the following practices:

  • Layout optimisation: Organise the warehouse layout for easy navigation and quicker product retrieval.
  • Streamlined picking and packing: Organise the pick and pack processes for higher order throughput.
  • Inventory labeling: Use clear labeling for easier inventory tracking and reduced picking errors.
  • Returns handling: Establish effective processes for managing returns and reverse logistics.

Leverage technology solutions

Using technology & automation systems can greatly improve logistics efficiency. Consider the following technologies:

  • Warehouse management system (WMS): Automate warehouse operations, inventory control, and order processing.
  • Transportation management system (TMS): Optimise delivery routes, carrier selection, and shipment tracking.
  • Real-time analytics: Gain data-driven insights into logistics performance and identify areas for improvement.
  • E-commerce platform integration: Connect your logistics systems with your online store for streamlined operations.

How is e-commerce changing logistics

The rise of e-commerce has redefined the world of logistics and supply chain management forever. We can’t imagine it going back to the days before e-commerce existed. It has brought about massive changes in how goods are stored and delivered. Let’s take a deeper look:

Increased demand for faster delivery

Online shoppers expect faster deliveries, with many seeking same-day or next-day delivery options. E-commerce has forced logistics providers to innovate and optimise their operations. According to a 2021 report by RILA, 90% of e-commerce consumers expect their order deliveries in 2-3 days; and nearly 30% expect same-day delivery.

Growing emphasis on last-mile delivery

The last leg of the delivery process – final product delivery to the consumer – is called the “last-mile delivery”. This relatively new phenomenon has gained prominence in supply chain conversations everywhere. It is arguably the most critical factor for the success of e-commerce logistics as consumers value convenience. Efficiency in this process has become a differentiating value-driver.

Integration of technology

E-commerce has driven the adoption of advanced technologies in logistics operations. Using automation, robotics, and AI helps improve efficiency and reduce errors across the entire supply chain network.

Expansion of fulfillment centres

Ecommerce businesses are establishing a network of strategically located fulfillment centres. This enables faster order fulfillments and is fast becoming a supply chain growth catalyst. These centres serve as neighbouring hubs for inventory storage, order packaging, and shipping. This allows businesses to deliver online orders faster. According to a recent report, the rapid growth of e-commerce logistics will create the need for an extra 1.5 billion sqft of fulfillment centre space by 2025 globally.

Rise of third-party logistics providers

With the surge in online sales, many ecommerce companies contract 3PLs to handle their logistics process. These third-party logistics providers specialize in managing various aspects of the ecommerce supply chain – warehousing, transportation, and order fulfillment. Once you have chosen the right ecommerce logistics partner, you can focus on your core competencies.

Emphasis on customer delight

E-commerce has placed a significant emphasis on providing an exceptional customer experience. Logistics plays a crucial role in meeting consumer expectations of quick delivery, real-time order tracking, and hassle-free returns. Successful businesses strive to create a positive end-to-end experience for online shoppers.

Success at the convergence of e-commerce and logistics

As e-commerce grows, logistics remains vital for smooth operations and higher customer lifetime value. Adapting to the changing e-commerce landscape and leveraging technology are essential for success.

By embracing innovation and staying ahead, businesses improve efficiency and meet ever-changing customer needs. Logistics, with its focus on efficient delivery, streamlined processes, and customer-centricity, drives success in this fast-paced world of e-commerce.