Running an eCommerce business involves many moving parts. As a business owner, you have to create, design, develop, and manufacture your products. You have to market or advertise your products on social media, marketplaces, and your website. In addition, you need to provide customer service to people interested in your products as well as manage your business’s accounting and bookkeeping all at the same time.
There are a thousand little tasks that your customers or employees do not always see, but you have to juggle to have a successful business. One more thing that every business has to manage is logistics. Logistics might look different for different companies, but it is equally important for all eCommerce shops, small or large/regardless of size. Without business logistics, nothing will run effectively or efficiently, and your business will face a slew of challenges.
Definition of Logistics Management
The definition of logistics management is a group of activities involving the movement and storage of goods from one place to another. Logistics management begins with raw materials and continues to the end customer. It can include manufacturing tasks such as recycling or disposal of parts and storing finished goods before they are sold to a customer.
What Does Logistics Mean in Business?
In business, logistics refers to a part of the overall supply chain in which goods are moved from one place to another. Business logistics includes the two primary functions of transportation and warehousing.
Logistics is part of the supply chain management process, which is a business’s network of organizations that work to produce and distribute goods. Logistics is used in many parts within the supply chain to move goods, including the materials for a finished product. Distribution logistics is the process of moving items from one point to another. This can be done for many purposes, including but not limited to: shipping products across country borders; delivering packages on behalf of businesses around town, or even worldwide shipment services! The key point is to manage the processes with a unified goal and approach in business logistics.
The logistics strategy and system ensure that transportation, warehousing, processing, and inventory management are all successfully managed.
How Is Logistics Important to a Business?
Logistics is an incredibly crucial part of running a business. It means that you know where your products are and the next steps for transportation or storage. Here are some of the key ways logistics can impact your eCommerce business.
Logistics Can Impact Your Bottom Line
If any part of your logistics chain is broken, delayed, or not functioning correctly, then the entire shipment of your products is affected. Your shipment may not arrive on time, it may get lost, it may get damaged, or items may be misplaced during warehousing. But when you have a reliable logistics system and strategy, these mishaps will happen less often, and you will have a better idea before these types of challenges occur so that you have a proactive solution.
Any logistics challenge that occurs can impact your bottom line, costing you more money and negatively impacting your customer experience.
Logistics Can Improve the Customer Experience
There will be fewer delays or inventory management challenges when you have a good logistics strategy. When you have more efficient order processing and shipping, your customers are happier. Happy customers will tell their friends and family about your brand, and they will come back to shop with your eCommerce store more often.
However, when your items get lost, are not actually in stock, or are unable to communicate where products are in the logistics process, you can lose customers and create a negative experience that impacts your business in the long run.
Logistics Can Improve Your Loss Prevention Strategy
Without logistics, you may have spoiled, stolen, or missing products within your inventory. Logistics can help keep track of where products are when they were manufactured, and where they are going next. This will help you sell the items that have been in your warehouse for longer through a first in first out strategy.
It will also help you know where items are to ensure there is enough product in the warehouse at the right time of year for an increase in sales from peak season or holiday shopping.
5 Benefits Of Logistics Management
Even understanding how important it can be for a business to have logistics management, it may be challenging to take the jump into business logistics. There are many benefits that your business can find on top of why it is essential.
Let’s take a look into five more benefits and how your business can implement logistics management to see growth and improvement.
1. Increase Visibility Into Supply Chain
- With increased visibility into the supply chain management for your business, you can better control costs, find efficiencies, see supply chain problems in advance, and gain insight into potential opportunities for improvements.
2. Reduce Your Business’s Overhead
- You can cut shipping costs, streamline warehouse space, and control your inventory levels when using logistics management. By managing all of the costs associated with warehousing and transportation, you may cut huge costs from your overhead.
3. Support Company Growth
- When you use logistics services, you can more accurately forecast demand, calculate inventory needs, and manage the transportation of your goods.
4. Improve Customer Service
- Good customer service leads to a positive customer experience, contributing to repeat customers and increased sales. When you deliver orders accurately and quickly, you can increase the odds of turning that customer into a customer for life.
5. Gain a Competitive Edge
- Having the information you need to make business decisions is critical for the future of your business. When you have this information and provide a good customer experience, you get a solid brand reputation, improve your edge over the competition and stand apart in the market.
What Do Logistics Companies Do?
Logistics companies help facilitate the processes of moving goods from one place to another at any point in the supply chain, from raw materials to the customer who purchases the finished item. Logistics companies oversee and control all the different elements involved in the process.
A logistics company is a third-party organization that your business can partner with. These companies have additional tools, knowledge, and expertise that help to make the logistics management process much smoother than most companies can do themselves. Logistics companies can assist with tasks including the following:
- Transportation: Determining routes, shipping partners, and packaging options
- Customs: Ensuring that all the necessary paperwork is correctly filled out for each shipment
- Warehousing: Storing the goods in a safe storage solution for the items (often including refrigeration, humidity control, temperature control, etc.)
- Inventory management: Keeping an accurate count of inventory in the warehouse
- Supply chain tracking: Assisting with tracking items through the supply chain management system that your business uses
- Order processing: Picking and packing orders through your eCommerce store in a timely, accurate manner
The Role of Logistics
Logistics can play a very important role in your business. Logistics helps to track goods through the entire process.
Within supply chains, goods are sometimes moved in bulk, from one place to another – like from your suppliers to your manufacturing facility or your manufacturing facility to your warehouse. Sometimes, they are moved one at a time, like when a customer places an order and a single item is shipped out to them.
In all of these scenarios, logistics would track where every item is and where it’s going next. The role of logistics is to follow your products through their entire life with your company until they get to their end-user.
For effective logistics to work for your company, you need to ensure a few key elements are in place:
- Materials sourcing: Logistics helps with calculating and managing contributing factors and costs. This may include backorder delays, competitor rankings, add-on services costs, increased shipment costs, and warehousing costs.
- Transportation: This is often what people think of when they hear “logistics.” It is at the core of logistics processes. Logistics will select the best mode of shipment (air, sea, land) and the best carrier based on cost, speed, and distance. It can also support customs, tariffs, compliance, and any relevant regulations that apply to the shipment.
- Warehouse: Whether items will be stored for a short time or a longer one, the logistics company needs to consider warehouse space and any special requirements of the products, such as cold storage, docking facilities, and proximity to modes of transportation.
- Demand forecasting: As mentioned as a benefit, logistics companies can help to forecast future demand for your business accurately. This will ensure that your business never runs short on high-demand products or materials.
- Inventory management: Logistics is key to moving inventory where it is likely to be sold for the best price. Good inventory management enables your business to decide to ship products that are performing poorly in one area to another rather than take a loss with discounted pricing or just take the loss on the item.
- Order fulfillment: As the final step of the logistics process, the order must be completed. Items are picked from the warehouse, packed up, shipping carriers pick up the orders, then they are sent off to the customer.
Third-party logistics companies, or 3PL partners, are outsourced companies that can handle warehousing, fulfillment, and returns. Many 3PLs will also support your business with additional logistics management for an additional fee, meaning that you can find a company to partner with that can handle inbound and outbound logistics for your eCommerce store.
7 Logistic Strategy Examples
There are a few different logistics and supply chain strategies that are common among eCommerce businesses. These strategies are often dependent on the type of goods you sell.
For example, if you own a business that sells only holiday decorations or if you sell only perishable baked goods, you will have two different logistics management strategies. It is not a one-size-fits-all in terms of logistics for eCommerce.
Focusing on your warehousing needs is critical for specific business types. If you need specialized storage, like cold storage or climate control, approaching your logistics from a warehouse strategy might be best.
Another need to consider is the physical location of your warehouse – if all or most of your sales are in one region, a warehouse in that area may be necessary.
Once you have identified the warehousing needs, you can begin to piece together the other parts of the logistics process.
Collaborative Logistic Strategy
A collaborative approach to logistics might be right for your business if you have many moving parts to your supply chain. By collaborating with each part of the supply chain management process, you can have a better view of the entire process and understand how each step affects your business.
You may be able to implement collaborative logistics software or find a 3PL that can assist with a collaborative strategy approach.
Pricing Model Strategy
If you aim to be the low-cost leader in your industry, then taking a pricing approach to logistics strategy makes sense. If you take a pricing approach, you will typically find the lowest cost transportation and warehouses you can to keep your costs down, so your prices can remain low as well.
In-house Logistics Management Strategy
Some companies like to keep everything managed in-house. This may work for very large companies that can afford to hire experienced professionals for all aspects of the business. But most of the time, this is a difficult strategy to be successful at. In-house logistics needs to be very precise to be successful.
Quick Transportation Strategy
In some cases, it’s most important to get your inventory where it needs to be fast, regardless of cost. If quick transportation is critical to your business, then this approach can help you find how to get your items from point A to point B in the fastest amount of time possible. However, this one can come with a high cost compared to other strategies.
While customers should always be at the focus of your business – they are the way you make money, after all – this strategy will help you focus on what the customer wants. This usually means a combination of lower costs and quicker transportation timelines.
Outsourced Logistics Partner Strategy
A 3PL can provide a range of logistics services, from setup to shipping to customer service. Many 3PLs, like Rakuten Super Logistics, can integrate with your existing eCommerce system by saving money on shipping costs and optimizing transit time.
They have relationships with shipping partners to help find the best cost and timeline for your transportation, and they can provide the data you need to make these important logistics decisions for your business.
Find the Right 3PL To Grow Your Business
If you are looking for a third-party logistics company to partner with to grow your eCommerce business, you need one who can help you get a clear view of the entire supply chain and ensure customer happiness at the same time.
At Rakuten Super Logistics, we can help you transport your goods through your supply chain, store your inventory, and process orders for your customers on time. If you are looking for a 3PL to aid in logistics strategies and management, get a quote today to see how we can help.