Ecommerce Logistics Guide

As the ecommerce industry grows, the logistics of getting orders to customers has become more complicated — especially with the novel coronavirus impacting entire ecommerce supply chains.

One thing that remains constant in these uncertain times: Consumers don’t like to wait.

How do you put your brand in a spot to offer expedited shipping without putting in the time, resources, and investment of several warehouses?

In this post, we’ll go into the details of how ecommerce logistics work, how it differs from brick and mortar retail, how to offer better shipping options, and why outsourcing fulfilment logistics has become commonplace for ecommerce businesses.

So, what do you want to learn?

What is ecommerce logistics?
5 factors from cart to customer
Finding the right middleman for faster shipping
How ecommerce logistics differs from brick and mortar logistics
What is needed to excel at ecommerce logistics?
The top 3 ecommerce logistics trends of 2023
How ecommerce companies can offer 2-day shipping
Ecommerce logistics FAQs

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What is ecommerce logistics?

Ecommerce logistics refers to the processes of storing and shipping inventory for an online store or marketplace. Ecommerce logistics starts with moving inventory from the manufacturer and lasts until it arrives at the end customer’s destination. This includes inventory management, picking, packing, and shipping of online orders.

With so many millions of packages shipped across the country on any given day, it’s vital that systems are in place to keep them on track and make sure they’re delivered to the right place on time.

Digital fulfilment is one of the most critical pieces of ecommerce logistics, which includes:

• Inventory management
• Warehousing and storage
• Order fulfilment, or the picking, packing, and shipping orders

Each of these components is a world of complexity unto itself, and keeping them all running smoothly together is no small task.

Businesses must ensure that they have adequate stock levels in a distribution centre close to that customer’s location. If they outsource fulfilment, their 3PL must be reliable and capable of fulfilling orders at pace, even during peak and holiday periods.

Any lapse in communication or execution within your retail supply chain can have a negative impact on the customer experience.

Modern logistics or ecommerce: 5 factors from cart to customer

Looking back 30-40 years ago, there was a relatively straight line between suppliers and retailers. As ecommerce has grown and become a worldwide channel, it’s become much more complex across inbound and outbound logistics processes. There are now more moving parts and middlemen who help ensure products reach customers. The task to organise logistics processes is even more challenging for entrepreneurs launching a B2B ecommerce channel as the journey gets split into two parts: from manufacturers to retailers and from retailers to end consumers.

1. Suppliers

Suppliers or manufacturers are those who have inventory ready to ship to a business destination. They manufacture the products and ship them to fulfilment or logistics centres once a purchase order has been placed.

2. Fulfilment centres

Fulfilment centres are the large warehouses that hold inventory close to the end consumer, so each order is picked, packed, and shipped as soon as it’s placed to ensure a speedy delivery. Fulfilment centres can be owned or leased by an ecommerce business, or by a third-party logistics service provider (3PL) company who is a professional retail fulfilment company that performs services for many brands.

3. Distribution hubs

Large ecommerce retailers have their products in multiple locations throughout the US or the world for both direct-to-consumer (DTC) and B2B orders. Rather than keeping all your inventory in one location, which can lead to longer delivery times and more expensive shipping costs, splitting inventory allows for quicker shipping of DTC orders.

You may choose to use a separate facility for B2B ecommerce orders, which require different fulfilment processes from DTC orders. The differences include packaging requirements, ecommerce warehousing needs, and ultimate shipping destinations and customer types.

4. Sorting facilities

Facilities that sort items are usually for large-scale ecommerce shops that are moving bulk quantities of many SKUs.

5. Couriers

Shipping couriers handle the transportation of products to their destination. Common US couriers include FedEx, UPS, USPS, and DHL and typically transport packages via truck and plane.

Finding the right middleman for faster shipping

Faster shipping options result in more sales for ecommerce businesses, but not every brand has the logistics network to do this themselves. This is why many find a partner to handle ecommerce logistics like a 3PL. But with so many middlemen involved, orders can be delayed if one link in the supply chain is broken.

With the right 3PL partner, you get:

• The ability to store inventory in several of the 3PL’s fulfilment centres so you don’t have to manage your own warehouse(s)
• Robust technology that tracks your inventory and orders and offers advanced analytics
• The ecommerce logistics expertise needed to improve your supply chain
• Bulk discounts and ability to reduce your delivery times and shipping costs
• The ability to offer quicker shipping options like 2-day shipping

With ShipBob, your supplier can send items directly to our fulfilment centres. We then ship each order from the fulfilment centre that’s closest to the shipping destination as soon as it’s placed by your customer.

How ecommerce logistics differs from brick and mortar logistics

Ecommerce logistics and brick and mortar store operations vary in a few ways. While ecommerce logistics is focused on getting products to the customer’s house, brick and mortar logistics focuses on getting products in stores.

Number of end destinations

Ecommerce shops can ship their packages to billions of consumer addresses across the world, whereas brick and mortar businesses are more focused on distribution to and from stores or wholesalers.

Size of shipments and order volume

Shipments to brick and mortar stores may contain hundreds of items that are sent to one destination on pallets via freight. Many ecommerce stores ship orders containing anywhere from one to several items mostly via parcel to many different customers.

In-store pickup vs. home delivery

More established brick and mortar businesses such as Target are moving towards using their stores as fulfilment centres. Similarly, retail locations may offer more flexibility to customers in the form of in-store or curbside pickup. Of course, ecommerce logistics provide the greatest convenience by delivering directly to the consumer.

What is needed to excel at ecommerce logistics?

To excel at ecommerce logistics, you need to focus on supply chain efficiency. This incorporates a mix of technology, resources, and best practices designed to help you scale as your business grows.

Distributed inventory

Keeping all of your inventory in one location might save you money in the short-term, but it can be more expensive in the long-run and as you grow due to how shipping zones work.

“ShipBob has fulfilment centres in major cities all over the US, so we can spread out our inventory across the country to reduce the shipping costs and zones associated with shipping orders to destinations that are far away.”Founder of My Calm Blanket

For example, if your inventory is in Florida and an order is placed in California, the cost of shipping the order to a high zone on the other side of the country is going to be very expensive. It would be much cheaper to ship the order to a customer in California from a warehouse in California.

Using multiple strategically located fulfilment centres is key to doing this.

“Expanding into a second ShipBob fulfilment centre brings a 13% cost savings to our bottom line. We are also able to increase our 2-day shipping ground coverage by 103%.”Pablo Gabatto, Business Operations Manager at Ample Foods

Inventory management software

Managing your inventory — especially when it’s done outside your four walls — requires tight reporting and real-time insight into quantities across SKUs and locations. Instead of manual static options like inventory sheet templates or spreadsheets, use software designed for ecommerce logistics processes.

Here are a few helpful features your 3PL’s digital logistics technology should offer:

• Tracking real-time inventory counts
• Setting reorder points so you know when it’s time to send more inventory
• Easily managing SKUs and product variants
• Integrations with your tech stack
• Insights into how many days of inventory you have on hand

Warehouse management systems

If you run your own warehouse and manage all components of ecommerce logistics, you’ll also need a warehouse management system (WMS). These systems are used to track warehouse performance and provide valuable insights for improving your warehouse processes.

A good 3PL will have their own WMS that feeds insights and data directly to you.

Have your own warehouse?

ShipBob has a best-in-class warehouse management system (WMS) for brands that have their own warehouse and need help managing inventory in real time, reducing picking, packing, and shipping errors, and scaling with ease.

With ShipBob’w WMS, brands with their own warehouse can even leverage ShipBob’s fulfilment services in any of ShipBob’s fulfilment centres across the US, Canada, Europe, and Australia to improve cross-border shipping, reduce costs, and speed up deliveries.

Request WMS pricing here.

Reporting and insights

Are your orders delivered on time? What’s your cost per order? What would your shipping costs be if you went from one fulfilment centre to two (or two to three, and so on)?

With the right reporting technology, you can automatically get valuable insights into your ecommerce logistics systems to see how you can create a lean supply chain and save costs where needed.

“ShipBob’s analytics tool is really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we’re alerted when a SKU has less than a certain quantity left.”

Oded Harth, CEO & Co-Founder of MDacne

Modern ecommerce logistics provides big benefits

Partnering with the right 3PL can be key to your business’s success. The goal is to find an ecommerce logistics partner that can help maximise your profits as an ecommerce brand by optimising your supply chain. The right partner can provide the following:

1. 2-day shipping capabilities

Many ecommerce businesses are now focused on having the logistics network needed to offer 2-day shipping for their customers. Part of this includes distributed inventory. With their inventory distributed throughout the country (or countries), they can ship orders from warehouses closest to customers to get orders delivered faster.

3PLs like ShipBob also offers a 2-Day Express Shipping Express Program, available for all ecommerce platforms, that enables 100% coverage in the continental US from even just one fulfilment centre location.

2. Valuable insights

Ecommerce technology continues to offer enterprise-level insights at a cost that’s affordable for ecommerce businesses. Modern reporting and distribution metrics allow you to see what is working and what isn’t in your supply chain.

“ShipBob is really committed to their customers and keeping themselves accountable. We strive to be very data-driven, and ShipBob’s analytics tool has been great. We can see inventory reconciliations and easily view SKU velocity, transit times, and inventory distribution recommendations”

Pablo Gabatto, Business Operations Manager at Ample Foods

3. Better return processing

Getting ecommerce returns back into inventory can be costly and time-consuming. With modern ecommerce logistics, it’s easier than ever before. 3PLs can process returns to make it simple and cost-effective.

4. Scalability

With all of the above benefits, ecommerce businesses can scale far faster, while having the logistics network needed to keep their customers happy.

“Before ShipBob, we used a fulfilment centre that frankly couldn’t scale with us. Since moving to ShipBob we’ve grown 30% year over year, which is a testament to their scalability, service, and technology.”

Carl Protsch, Co-Founder of FLEO

The top 3 ecommerce logistics trends of 2023

Rapidly evolving, logistics are the backbone of ecommerce businesses: It helps you differentiate your customer experience from that of your competitors — or leads to breakdowns that leave you in the dust. Here are three logistics trends to be mindful in 2023 and beyond:

1. Consumers want faster delivery

We can thank the persistence and high expectations of urban millennials for the rise in same-day delivery options. In fact, 64% of millennials are more likely to make an online purchase if same-day delivery is offered, and 61% of shoppers would willingly pay more for same-day delivery.

In addition to having the right technological capabilities in place, fast delivery requires that ecommerce businesses expand their geographic footprint. Otherwise, you can’t physically ship something from one side of the country to the other without paying a lot of money for it.

2. Last-mile delivery is key

An increase in online order volume plus a rise in customer expectations places additional pressure on the final leg of the logistics process, often referred to as last-mile delivery.

Last-mile delivery is the transportation of a package from a distribution hub (often through a shipping courier) to the package’s final destination with the goal of delivering the package as quickly and cost-effectively as possible. And last mile is big business: Same-day and last-mile logistics are estimated to be valued at $1.35 billion this year.

Where logistics often fall short in consumers’ eyes is precisely here: within that last mile. There are many factors that can trip a delivery at the final hurdle; most often, the recipient isn’t home or there’s a problem with the local courier.

Major shipping couriers such as FedEx and UPS often hand their deliveries off to USPS for the last mile to help speed up local delivery and reduce the chance of failed delivery attempts.

3PLs like ShipBob are going even further to make last-mile logistics better for ecommerce business owners, and their customers. For example, ShipBob:

• Obtains quotes from all major shipping couriers before to get the best prices for business owners — that means both businesses and customers benefit from fast, affordable delivery.
• Analyzes customer data to optimise shipping. With distributed inventory, inventory is split across strategic fulfilment centres and then sent from the warehouse that is located closest to the customer. When your orders travel to lower shipping zones as opposed to higher, farther away zones, you save both money and time in transit.
• Provides real-time ecommerce order tracking. When it comes to last-mile delivery, communication is vital. You can access shipment tracking information in real-time, then automatically send these details along to your customers.

People who pay for expedited delivery expect to receive their packages when and where they ask for them. A failure during the last mile can have unfortunate and negative effects on a business.

3. Brands need to get creative and spread risk

2020 proved to be an unprecedented year as the world dealt with the effects of the COVID-19 pandemic and supply chain shortages. Things changed overnight.

With many consumers being quarantined or unwilling to leave their homes, more shoppers ordered from ecommerce businesses than brick and mortar stores.

Some ecommerce businesses saw more orders than ever before. But others saw their sales decline. Those that survived are the ones who thought outside the box.

Here are some tips on dealing with pandemics and supply chain shortages.

• Provide “hoarding” opportunities (e.g., subscription discounts, bundles, or large supplies at a discount) for people to purchase.
• Go out of your way to message about COVID-19, supply chain shortages, inflation, — people are looking for that right now. Don’t assume your existing language on shipping will suffice. Add a banner to your website.
• Test different discounting strategies. Pivot fast if something doesn’t work, and try something new.
• Diversify both manufacturing and fulfilment locations, when possible. On the manufacturing side, that might take awhile, especially with the demand and uncertainty today. On the fulfilment side, that can be done much faster. The importance of proper supply chain management is showing right now.
• If you have your own fulfilment production teams that are still operating, make sure you’re taking appropriate measures, such as increasing how often you clean and disinfect the entire facilities, require protective gear to all people internally and visitors like couriers, extend sick time, and possibly find ways to give extra financially to those who need help with childcare or health issues.

Businesses can’t always be fully prepared for times like this, but you must respond quickly and react to the environment.

“We want the customer experience of purchasing on our website to be similar to Amazon Prime. This is possible with ShipBob, without inflating the shipping cost to an insane level. To do this, we strategically place products around the country. We are storing inventory in three of ShipBob’s fulfilment centres.”

Tim Fink, Co-Founder of EnduroSport

How ecommerce companies can offer 2-day shipping

2-day shipping has quickly become the standard shipping option that consumers want. With studies showing that 25% of customers will abandon their carts if shipping options are too slow, ecommerce businesses need to offer 2-day shipping if they want to keep growing.

Setting up the logistics infrastructure for 2-day shipping takes time and requires significant investment. You have to lease more warehouses, hire labour, negotiate shipping discounts with couriers, implement software, order inventory, and so much more. For most ecommerce businesses, this isn’t feasible or profitable. That’s why they partner with 3PLs.

Many growing ecommerce businesses partner with ShipBob to offer 2-day shipping and gain benefits like infrastructure, expertise, and technology as a result. With 2-day shipping proven to increase conversion rates, it helps ecommerce businesses grow from new and returning customers alike.

Conclusion

Consumers are demanding more from all the places they purchase online. Having a strong ecommerce logistics partner can maximise efficiency, reduce shipping costs, and provide a great customer experience.

Partnering with the right 3PL can give your business the freedom and flexibility to grow without having to manage ecommerce logistics in-house or hire a logistics director. Interested in ShipBob’s fulfilment services? Request a pricing quote here.

To learn more about choosing a 3PL, download our free e-guide, “How to Choose a 3PL for Your Ecommerce Business” below.

If you want to learn more about how ShipBob’s logistics capabilities compare to other 3PLs, read this review.

Ecommerce logistics FAQs