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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. – PowerPoint PPT presentation

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Title: How to overcome the challenges of ecommerce logistics at scale

How to overcome the challenges of ecommerce
logistics at scale
  • As your company enters a high-growth phase, its
    vital to focus on what it is youre 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 teams 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
    dont want to have to make the call when youre
    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
  • 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
  • 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 youre 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 fulfillment center 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

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,
    weve 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.
  • Thats a bad customer experience thats 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, theres 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
  • 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. Its 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.
  • Its 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

  • 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.
  • Thats a capability that a lot of retailers lack,
    or dont 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. Thats 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
    its important to know when these value-added
    services cause more trouble than theyre worth
  • Its 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 theres
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 arent 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 youre 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.
  • Youre 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.
  • Whats 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

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