What Is Ecommerce Logistics
Ecommerce is the process of fulfilling orders that are placed by an end-customer, usually placed via online marketing channels. This is also known as Direct to Consumer (D2C) or efulfilment. It includes all the elements of delivering an order to a customer; from warehousing of goods to final mile transport and it even extends to the transport and processing of unwanted items through the returns process.
The requirements of ecommerce logistics are strikingly different to the traditional logistics processes associated with bricks and mortar store replenishment. It is important to tailor logistics operations to these requirements to improve service to the customer and reduce the operating costs of this type of fulfilment.
The Key Components of Ecommerce Logistics
Ecommerce logistics or efulfilment is different to the logistics of traditional ‘bricks and mortar’ retailers or wholesalers. The volume flows and order profiles are significantly smaller, the SKU range is significantly larger in many cases and the customer requirements are just different. These factors drive vast variances in process, where best-in-class operators really stand out. The key components of ecommerce logistics are summarised in the table below:
Component | Description |
|---|---|
Inbound | With the apparel and fashion sector, bagging each item protects it from damage that may occur in warehouse environments that are dustier than retail stores. Each bag might also need barcode labelling to support faster scanning in the putaway, replenishment and picking processes. Whilst suppliers can provide items in ‘ecom ready’ formats, some retailers might need to do this themselves when moving product between retail and ecommerce warehouses. |
Storage | Smaller pickface sizes are more common in ecommerce warehouses. Some operations have far broader SKU ranges whilst the order line depth means that pickfaces can reduce in size as they are less likely to sell out before a replenishment can be made. |
Picking | The order profile of ecommerce orders is far smaller than store replenishment or wholesale orders. The lines per order (or number of SKUs on an order) is small with the units per line (the number of units of each SKU) is typically one, especially in fashion. Orders can also be streamed, with single-unit orders and multi-unit orders picked in different ways. Single-unit orders are picked in big batches whilst multi-unit orders are picked in smaller batches or batch-picked and then sorted into individual orders. Adapting the process is critical to mitigating the loss in pick productivity versus fulfilment through other channels. |
Packing | Packing is the essential process of placing the ordered items in a box or a bag to protect them on the journey to the end-customer. The package is also used to display barcode information that will help for the courier to direct it through its own processes to the consumer. This is an extremely labour-intensive process and requires significant optimisation to mitigate against the associated labour and consumable costs. This is where carrier labels are added and any value-added services such as gift wrapping might take place. |
Despatch | Retailers can have multiple routes of delivering to customers. This might include the delivery to a home or office location, a local collection point or for collection from one of its own stores. To do this, parcels must be sorted after packing and prior to despatch. This is particularly important for retailers that ship internationally and may work with many different parcel couriers. |
Transport | Transport is a big differentiator for ecommerce logistics and is almost always contracted out to dedicated parcel carriers. This is split into first, and final mile. The first mile is the transport leg from the warehouse to the carrier sortation hub. The final mile is the leg from the local delivery hub to the customer or the collection points. |
Returns | A natural by-product of ecommerce and direct to consumer fulfilment is the return of unwanted items. This arises from customers not being able to try on or fully gauge the quality or fit of items before purchasing. The returns process includes the transport of goods from the customer back to the warehouse as well as any processing to make items good for resale. Items returned that cannot be made good need an exit route to recover as much value as possible. |
Visibility | Customers are excited to receive their parcels and so providing them with visibility of where the parcel is, when it will be delivered and when it has been delivered is crucial. Systems development and integration into courier systems and web portals is the foundation of making this happen. It provides greater confidence to customers and better data to capture the handover of goods and support performance analysis. |
The Benefits of E-commerce Logistics
The potentially significant benefits of developing of ecommerce logistics capabilities include:
- Faster fulfilment of customer orders
- Efficiency improvements, particularly in labour intensive picking and packing processes
- Increased storage density and appropriate pick slot sizes
- Better supply chain visibility of fulfilment progress
- Leveraging synergies between different fulfilment channels for omnichannel retailers
How BoxLogic Can Help
BoxLogic supports ecommerce businesses to build efficient and reliable logistics operations through the:
- Design and optimisation of the warehouse layout and processes
- Assessment of warehouse and site requirements of a new facility
- Evaluation of warehouse automation technologies across picking, packing and sortation
- Design, selection and implementation of warehouse and logistics systems
- Outsourcing and tendering of efulfilment or transport activities
- Location analysis and distribution network design
- Driving operational synergies between ecommerce and other channels
- Benchmarking operational performance and costs
- Cost-to-serve analysis of ecommerce channel fulfilment
Our Process
BoxLogic pride ourselves on delivering projects using a proven approach that can be tailored to each client’s specific requirements. We use a blend of our team’s extensive sector experience and our methodical data driven approach to provide the best feedback for your business.
We work closely with our clients to deliver successful outcomes. We are flexible in our approach but there are always regular touch points throughout projects to update on progress, confirm assumptions, share results and make decisions about the preferred direction.
We start by visiting the operation to rapidly build our understanding of how it works and establish strong working relationships across the project team and stakeholders.
Our consultants work with data to confirm assumptions of the existing operation that is used as the foundation of any downstream work. These might include throughput or storage volumes, growth projections, productivities, customer distribution etc. depending on the project goals.
Using the assumptions developed during the analysis stage, a range of scenarios or options will be modelled to evaluate the solutions that provide the most attractive results.
After selecting a preferred approach, our team develop an end-to-end solution in more detail and support the client to build a financial case for change. This could also include further detailed drawings, further validation with the market or other steps that build confidence in the solution.
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Frequently Asked Questions
Ecommerce logistics is characterised by the presence of several functions and processes that do not take place in the traditional replenishment of stores or depots. The key difference is the atomisation of throughput volumes into much smaller orders to many more destinations with much greater flexibility. This is most notable in the transportation of goods to people’s houses, collection points or lockers instead of a small number of deliveries to retail outlets.
The smaller order profiles require new ways of picking, packing and despatching goods in the warehouse. Returns are another significant by-product of ecommerce, particularly in the fashion sector, where unwanted items are returned to the warehouse to be processed for refunds and put back into stock if required. Stock has a longer residence time in the warehouse and therefore must be protected from damage, typically with polythene bags.
There are two approaches to setting up ecommerce logistics operations: outsourcing to specialist service providers or establishing an in-house operation. The former may be quicker to implement, more scalable with lower up-front investment whilst the latter provides greater control over costs and service to the customers.
To fulfil online customer orders on a website, many small and large businesses choose to outsource their ecommerce logistics operations. This allows them to focus on their product, marketing, and customer service, rather than directing capital expenditure at buying warehouse premises as well as hardware and systems. The 3PL (third-party logistics provider) can use its customers’ carrier rate cards or sometimes use its own rate cards.
For companies that want to run their own operations in-house, they may need to reconfigure the storage layout to optimise it for ecommerce storage quantities and picking. Packing benches will need to be setup to process orders. New processes created in the warehouse management system and integration into other systems including the ERP, carrier systems and ecommerce platform.
Transport carriers need to be engaged. The impact on the warehouse team may be significant with potential changes to working hours and therefore contracts. Training needs to be rolled out so that work is conducted to the agreed standards.
Inventory management in ecommerce relates to the positioning and availability of items to maximise the probability of sales through the highest margin channel. For pure ecommerce retailers, this could simply be ensuring that the right items are in stock in the right quantities, particularly for retailers operating out of multiple locations.
For omnichannel retailers, this will be more complex and involve decisions around how much stock to allocate to the ecommerce stock pool and the retail outlets with the remainder held back for replenishing both channels accordingly. This is commonly done by setting ‘min/maxes’ for each stock pool, which involves setting minimum and maximum stock quantities for each SKU that automates replenishment.
The aim for retailers is to sell their merchandise at the highest margin possible and one way of achieving this is through making all stock available to the widest audience possible. Some retailers therefore operate in such a way that any online orders can also be fulfilled from stores. These require Order Management Systems (OMS) to select the optimal fulfilment route for each order, which may be fulfilled from stores, from the warehouse or a combination of both.
Efulilment is another term for ecommerce logistics and is the combination of processes, technologies and organisations to deliver an order placed online to the customer. This includes the website that takes the order, the systems that interface with payment providers, 3PLs and carriers, the warehouse that processes the order, the transport company that delivers the product and more.
There is a relatively new and specific type of 3PL (third-party logistics provider) that has gained significant traction recently by focusing entirely on supporting customers in the ecommerce space in the form of efuflilment specialists. They have streamlined and standardised the process of fulfilment to support rapid customer onboarding via flexible warehouse management systems operating standard integrations to customer systems. Multiple customers are housed in shared-user facilities to reduce operational overheads and drive cost reductions.