Complete Guide to Logistics for E-commerce

There are many factors that determine the success or failure of a brand, but today one factor stands out above all others: the supply chain.  

The pandemic, the ensuing crisis and the consequent disruptive impact on global supply chains, have highlighted a fundamental factor: the importance of being able to have one's products available to satisfy the market, or as we would have said until recently, the importance of having one's products on the shelf.  In other words, the supply chain today must be able to maintain a brand on the market.   

Moreover, taking into account the expansion of e-commerce and the increase in customer choice, certain elements of a brand's logistics set-up are essential to meet the (ever-growing) expectations of consumers and maintain customer loyalty. 

E-COMMERCE PRE AND POST COVID
In 2019, e-commerce was a fast-growing and evolving sales channel, but it remained a positioning "choice". Not all businesses were approaching the transition to digital commerce in the same way. Indeed, for some, e-commerce was an opportunity to implement new technologies and logistics solutions capable of ensuring customer satisfaction and stimulating sales. For others, on the other hand, adopting a new sales model involved long lead times and a long-term implementation forecast.   

With the spread of the Covid-19 pandemic at the beginning of 2020, many companies found themselves having to rethink their operational processes, thus giving rise to the e-commerce expansion we have witnessed.  

In addition to the numerous advantages, however, e-commerce has also brought some growing concerns, including:   

• Unforeseen changes in demand that complicate the order fulfilment process  
• Delivery issues in the so-called last mile  
• Decentralized warehouse management  
• Returns management   
• Relations with 3-PL partners  
• Need to quickly adapt to constant changes in a climate of general uncertainty  

 

WHAT DOES THE DATA TELL US ABOUT THE FUTURE OF E-COMMERCE?

The possibility of accessing the internet and the adoption of technology by a growing number of users means that the number of digital buyers is growing year by year. But how much is the e-commerce market worth worldwide?   

According to the forecasts, the e-commerce market should reach a total value of approx. $5 trillion in 2021. China leads the rankings globally with the highest number of digital buyers accounting for 33% of the total at the global level; in second position we find the United States, followed by the United Kingdom in third place. (eMarketer data)  

What is certain is that the e-commerce market will continue to grow and expand in the future. How can brands grow at the same pace? One answer certainly comes from the logistics solutions associated with these activities.  

BUILD RESILIENT SUPPLY CHAINS

For many years, supply chain management was based on 3 pillars:   

• Globalisation  
• Low supply costs   
• Minimisation of goods in stock  

The impact of the Coronavirus outbreak on supply chains has been catastrophic in many cases and has prompted companies to build resilient supply-chains, i.e. able to react to large-scale disruptions of various kinds (from natural events to blackouts, interruption of the transport network, failure to provide services, civil unrest, etc.) and therefore that are data-driven, redundant - with strategic inventory stocks - and flexible in relation to volume changes.   

As indicated by Deloitte in a recent study, 9 out of 10 companies are investing significantly to achieve this, not only because a resilient supply-chain makes the business more agile, but also because it allows new go-to-market approaches for cross-border ecommerce to be launched.   

LOGISTICS FOR E-COMMERCE  

In general, the term "logistics" refers to the management and organisation of transport, storage and customs activities related to products and resources, facilitating the exchange of data and information. When these activities are applied to e-commerce, the ultimate goal is to facilitate the shipment of products to buyers.  
Many businesses opt to outsource their logistics to 3PL partners (third-party logistics companies) that are able to support customers in activities such as goods storage and transportation.  

In general, for online businesses, the logistics set-up includes the following steps:   

• Inventory management: Inventory management concerns using the right methods to monitor goods in stock with the aim of ensuring that the business does not find itself unexpectedly out of stock of a particular product. Moreover, it provides an understanding of which items have greater sales potential than others by analysing customer buying trends and then predicting sales trends in the near future. 
• Warehouse:  Goods storage is a procedure that businesses use to store, organise and keep track of products that need to be shipped to customers. Over the years, warehousing techniques have evolved significantly, making it easier for e-commerce players to use WMS (Warehouse Management Systems) in inventory management.  
• Order Fulfillment:  This step concerns actions to ensure that customers receive their orders quickly and in good condition. Businesses may decide to outsource this part to a 3PL partner or invest in a dedicated in-house order fulfillment centre.   

As is also clear from this quick overview, coordination of the various logistics steps is the key to success.   

But what are the key elements to consider?   

THE 3 KEY ELEMENTS  

Visibility
As an e-commerce activity grows and develops, it becomes increasingly difficult to have an overview of the inventory status. This can happen if, for example, in order to cope with growth in purchases, a business decides to expand its logistics network using multiple warehouses, drop shippers or other logistics solutions. If these structures are not communicating properly with each other, the risk is that of not being able to have a complete view at inventory management and sales level.  
There are many solutions to this problem, depending on the nature and structure of the business. The recommendation is to work with one’s logistics partners to develop shared systems and operating procedures, in order to correctly execute inventory management activities.   

Reverse Logistics
This part of the e-commerce supply chain can represent the most complex element since, if not managed properly, it can have negative effects on the profit margin.
Suffice it to say that the average rate of return for a physical store is around 8.5%, while for e-commerce is between 24% and 36% according to Transport Topics. It is therefore essential that the company has a clear view of the costs and logistics implications associated with this aspect.   

Here are some of the components of reverse logistics:   

• Return Policy and Procedure (RPP): all the company return policies that must be shared with employees and customers. The return policy is essential in order to induce potential customers to finalise the purchase.   
• Quality Control: this process involves checking the status of returns to ensure they are resalable.   
• Reworking and Reconditioning: in some cases reconditioning of returns is necessary. Using the example of a company operating in the fashion sector, this process could include dedicated activities such as small-scale sewing and ironing and, in recent years, also sanitisation processes for returned garments.  
• Packaging Management: the focus of this component is on reusing packaging and wrapping to minimise waste.   
• Failed Deliveries: this is the case of items returned by delivery operators due to delivery problems.   

One of the best practices in reverse logistics is that of managing returns separately from the rest of the goods. Creating dedicated areas, which can also be sections of the same warehouse, and assigning part of the staff solely to these activities allows the many steps of reverse logistics to be managed with greater focus, precision and efficiency. 

Decentralised Warehouses
Among the latest e-commerce trends is that of placing the products “close” to the end customers, i.e., instead of organising order fulfillment from a few large distribution centres, companies are using locations of smaller square footage but located close to the most populated centres. This is because smaller warehouses generally respond better and more nimbly to order requests and proximity reduces delivery times by shortening the last-mile transport.   

 This distributed inventory strategy allows shipping companies to offer delivery services in all major cities and areas, since the reduction in distance lowers costs and improves service. Distributing inventory regionally makes it possible to use multiple carriers for final delivery and other delivery options not available for longer distances.   

  

IN-HOUSE LOGISTICS OR OUTSOURCING WITH 3PL PARTNERS?  

One of the most common issues for e-commerce remains that of deciding whether to keep one’s its logistics in-house or whether to outsource this type of activity to 3PL partners. Although many companies are still dubious about outsourcing logistics services, having a 3PL partner brings numerous benefits.  

Want to know why? Here are the main benefits associated with outsourcing and how D.B. Group can help you achieve better results more efficiently.  

• Cost Reduction: by outsourcing logistics and entrusting the activities to a 3PL partner, companies are able to transform certain costs directly related to logistics activities into variable costs. Through our logistics solutions, for example, customers do not have to invest in space and warehouses, systems and technology or resources and security measures. 
• Greater Flexibility: in the case of both an increase as well as a decrease in volumes, customers will have utmost flexibility because we can adapt spaces and personnel based on their real needs. Furthermore, thanks to solutions such as bonded warehouses, CFS (Container Freight Stations) and facilities within Free Trade Zones, we offer our customers concrete solutions for the flexible management of duty and charge payment.
• Expertise and Know-how: relying on a 3PL partner means growing together. Our experience and know-how will be at your complete disposal; customers will therefore have no need to invest in the search for professionals with a consequent reduction in search, selection and training costs.  
•  Performance Improvement: a partner, through its expertise and technology, guarantees excellent performance. The result is in part due to the know-how acquired but also to the technologies that are put in place. In addition, as an international partner, D.B. Group offers tailored solutions in various geographical areas.  
•  Customs Assistance: our global network allows customers to develop their business in new markets. Customers can use our experience in the customs field to perform analyses on the requirements related to the import or export of products and, through our international logistics network, can enjoy the benefits of bonded warehouses and Free Trade Zones in various countries.  
•  Focus on your Business: by outsourcing your logistics management operations, you will be able to fully focus on your core business. We will take care of your goods through our expertise.   

 

Over 40 years we have developed a structured and fluid network of logistics hubs and spaces partially or entirely dedicated to our customers. We are agile and reactive: we study the needs, we develop a project, we find the spaces, we organise them in a logical and efficient manner and we create your warehouse in a very short time. We manage the outsourcing of our customers' logistics activities, from studying solutions to warehouse activities, offering a range of value-added services dedicated to the customer experience.  

We at D.B. Group work side by side with our customers in order to help them find solutions to optimise and innovate their supply chain, with the aim of creating shared value and establishing long-term partnerships.