The volume of ecommerce sales has been increasing for years and the arrival of Covid-19 has helped these figures to multiply exponentially. There are 100% ecommerce companies that do not have physical shops, such as ASOS, Zalando, or the giant Amazon; and traditional retail companies that have joined the digital revolution, combining both business models and operating in an omnichannel environment.
Unlike the traditional retail logistics process, ecommerce logistics has certain peculiarities that make it particularly complex. Customers tend to be individual, vary a lot and are not very loyal; and on the other hand, loads tend to be small packages, so demand is more volatile and difficult to predict, and the flow of goods is more irregular.
So what is the secret of ecommerce success? The answer is the logistics process. Logistics management is at the heart of the industry’s success and has become a competitive advantage in itself. Many customers choose a particular company because of the delivery time, the options for receiving orders (home delivery, in-store collection or at stipulated points), or the facilities for returning products. In other words, the service becomes part of the brand’s value proposition.
The following are the key points that need to be addressed for optimal management of ecommerce logistics:
1. Customer and channel management
In the retail sector, the focus should always be on the customer and customer satisfaction. At this point we have to take into account that customer demands are increasing (customers want faster and cheaper, or even free shipping) and we are in a highly competitive environment. So what can we do to satisfy the customer while maintaining the profitability of the shipment?
To satisfy the customer we must be able to deliver orders on time, reliably and maintain fluid communication with them at all times.
- Ensure on-time delivery of all orders. Good logistics planning and efficient order preparation, picking and goods transport processes will ensure that you deliver all orders on time.
- Inform the customer about their order in real time. Customers want to know where their order is at all times. That’s why traceability of logistics processes is key to mitigating that uncertainty.
- Offer a customer service that is attentive and accessible at all times through different channels. You must always be available to the customer regardless of the channel they decide to use to contact you. In the event of any incident or doubt, you must respond quickly and with resolution. Having a bad customer service can be very negative for the company due to bad reviews from dissatisfied customers.
2. Stock management
It is also important in the ecommerce sector to have good stock management and control. Inventory information must be accurate and updated in real time to avoid problems. This is a challenge if there is a large volume of orders to be handled at high speed, if the reference base is exploding or if we have mixed flows (serving from the same warehouse or several distribution centres to physical shops and end customers).
In order to manage the inventory in an optimal way and to avoid breakages:
- Manage and update stock in real time. ERP inventory information must be aligned and connected with WMS and warehouse identification recording devices in order to update data in real time and reflect actual product availability.
- Predict demand and plan the supplier orders you will need to supply the warehouses. The warehouse is the heart of ecommerce logistics, especially in the omni-channel strategy, when distribution centres are shared for physical and online shopping. Therefore, in order to always have the necessary stock in the warehouses and to be able to meet the needs of consumers, future demand must be predicted and orders to suppliers must be planned. This maximises demand fulfilment, minimises stocking costs and so on.
3. Order preparation and picking
The order preparation and picking process is especially complex in ecommerce shipments due to the enormous volume of orders of few units. Picking uses most of the warehouse resources, both material and human, as well as often being an inefficient and not very optimised process.
In order to improve and speed up order preparation and picking:
- Reduce the distances operators have to travel in the warehouse when picking. It optimally locates products within the warehouse by placing, for example, the most popular products in the areas closest to the picking area, or by placing products that are usually purchased together close to each other. It is also possible to organise the enormous number of SKUs in the warehouse according to A-B-C rotation criteria and logistical parameters. In addition to organising orders and assigning operators in such a way as to minimise the number of trips and keep them as short as possible.
4. Transport and distribution
Many areas can also be optimised in the area of distribution, for example:
- Use forecasts to plan the logistics network and performs simulations with different hypothetical demand scenarios.
- Determine the optimal mix of assets that will be needed, both in-house and outsourced.
- Find the ideal locations and capacities of distribution centres.
- Calculate the impact of winning or not winning a tender and determine the bid price, and can make data-driven decisions on contracts with subcontractors.
- Optimally plan maintenance and minimise downtime and disruptions.
- Optimise transport routes, fleets, drivers and loads. Generate an optimal transport plan including all variables such as stops, loading and unloading times and locations, customer-specific requirements, regulatory restrictions, border crossings, tolls, waiting times, traffic patterns, etc.
- Minimise the impact of last minute changes and incidents such as traffic, breakdowns, accidents or changes in customer orders.
5. Reverse logistics
As we have already mentioned in previous articles on reverse logistics, in recent years, just as online shopping has increased, so has the number of product returns by customers. Many ecommerce opted at the time to make returns more flexible and easier, which has quickly become a very standard practice in the sector.
Reverse logistics is currently one of the biggest challenges facing companies, as it is an inherent pillar of the sales process, but does not bring in direct revenue. In order to optimise the reverse logistics process:
- Align transport planning, returns management and warehouse planning in the same system. In this way, you can have an optimal collection system to manage returns in an agile and orderly manner.
- Optimise delivery and collection journeys, reducing times. For example, if the customer asks to change the size of the product, you can take advantage of the delivery driver’s journey to deliver the correct size and collect the package to return it. Route optimisation can also be applied to reduce mileage and fleet usage, making the most of the limited resources available.
- Analyse the causes of returns to improve logistics processes. For example, if the return is due to a failure in the preparation of the order, it will be important to collect information to correct the errors and try to prevent them in the future.
New technologies offer companies in the ecommerce sector the possibility of acquiring these prediction, optimisation, automation, simulation and monitoring capabilities in real time, in order to adapt to the new digital paradigm and business model.
At decide4AI we have extensive experience in the development and implementation of process optimisation and automation solutions along the entire supply chain. With them we can help you improve your operations and achieve great benefits that have a direct impact on the bottom line.