Logistics operations account for at least 11% of the average online retailer’s sales costs. This means that if you sell a $100 product, you’ll have to spend about $11 on storage and transportation.
The good news is that such costs can be cut in half without sacrificing customer satisfaction. To accomplish this, ecommerce businesses must invest in improving logistics efficiency through the use of appropriate technologies and optimized logistics management processes.
In addition to lowering logistics costs, increased efficiency shortens delivery times, maintains quality control, and delights customers. As a result, improving supply chain efficiency is regarded as a non-negotiable for expanding ecommerce retailers.
This blog will give more information on logistics efficiency, highlight the challenges faced by online merchants, and discuss how outsourcing these logistics operations to a third-party logistics (3PL) company can aid in the development of good shipping habits.
Logistics Efficiency Definition
Logistics efficiency is a measurement of how well your company manages its logistics operations. It necessitates that online vendor closely monitor and optimize the movement of product shipments to ensure that customers receive their orders quickly and affordably.
Common Logistical Difficulties
Logistics is a complex aspect of supply chain management. New online businesses that want to grow quickly will face numerous logistical challenges, such as truck breakdowns and fluctuating tariffs.
But perhaps the most pressing, and at times difficult, concerns are such:
- Increasing Costs
E-commerce logistics costs include everything from fuel, warehousing, depreciation, insurance, and taxes to manpower expenses related to the transportation and storage of goods.
Since COVID-19, most of these costs have risen, making fast and reliable shipping prohibitively expensive. This, in turn, has an impact on the profitability of your online retail business.
Smaller retailers who sell low-value, heavy, or large items bear the brunt of the crisis.
- Expectation of Customers
Fast and free shipping has become the norm. The majority of customers expect same-day or next-day delivery. Customer fulfillment experience expectations are rising, thanks to companies like Amazon and UPS.
You must run high-performance shipping logistics operations supported by a just-in-time strategy to gain a competitive advantage and ensure customer satisfaction.
- Visibility of the Supply Chain
The more moving parts there are in your company, the larger it becomes. Furthermore, as your business grows, you are more likely to encounter logistics issues. This is especially true if you don’t have visibility into your entire inventory.
It is critical to implement real-time inventory tracking mechanisms to avoid surprises for you or your customers. To that end, tech-enabled logistics firms can be extremely useful.
- Government Policies
When it comes to shipping orders between states or even countries, SMBs must constantly deal with bureaucratic red tape. Furthermore, it is frequently difficult for online merchants to keep track of the constantly changing processes, permits, taxes, and customs tariffs in-house.
Improving Logistics Efficiency
In today’s e-commerce environment, retail businesses must carefully consider supply chain optimization. Here are some practical suggestions to help you improve logistical efficiency and the bottom line of your business:
- Software and Technology
Invest in tech-powered logistics systems that will assist you in making better, more data-driven decisions to ensure customers receive the correct order at the right time.
To achieve end-to-end supply chain control, you can use such systems in conjunction with technologies such as GPS tracking, the internet of things (IoT), big data, machine learning, and radio frequency identification (RFID).
Logistics automation can also help to build a lean supply chain by saving time, cutting costs, and speeding up the order processing and fulfillment process.
- Key Performance Indicators (KPI)
To understand business logistics performance at any given time, continuous efforts must be made to track perfect order metrics, distribution metrics, and warehouse KPIs. Then, in order to make sense of all this data, you can run real-time supply chain analytics, which provide powerful business insights.
The supply chain KPIs will also assist you in determining whether shipping carriers or logistics companies are providing the promised service levels.
- Collaboration with a 3PL
The lifeblood of any online retail business is logistics. However, because of the many moving parts, it will be overwhelming for new DTC brands to manage it in-house.
Outsourced logistics services can make all the difference in this situation. When it comes to improving supply chain efficiency, an on-demand logistics solution allows businesses to take a hands-off approach.
If you’re shipping orders internationally, work with an international logistics provider who can get you the best rates from shipping companies while also guiding you through customs and compliance.