How to overcome the challenges of ecommerce logistics at scale

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How to overcome the challenges of ecommerce
logistics at scale
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• As your company enters a high-growth phase, its
  vital to focus on what it is youre delivering to
  your customers metaphorically and literally.
• Unless you have the bandwidth to focus on
  logistics, this essential but complicated element
  can be a painful drain on your teams resources
• Here are nine lessons, along with a hand-chosen
  resource for each, on overcoming the challenges
  of ecommerce logistics

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Find an Ecommerce Logistics Partner Early

• The right 3PL partner can save you time and
  stress. By all means, listen to your gut, but you
  dont want to have to make the call when youre
  flooded with backorders
• There are definitely advantages to insourcing
  your logistics and doing everything yourself. The
  most obvious advantage is control, but there's a
  whole ton of advantages to outsourcing.
• The most obvious ones are access to capabilities
  that you don't have. So whether that's
  technology, whether it's resources, expertise,
  new geographies, by outsourcing you can basically
  buy that from a specialist who does it 24/7,
  which is a huge advantage.

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• There are also advantages from a cost
  perspective. Typically, 3PLs have economies of
  scale to give you a better cost per unit on what
  you're able to achieve yourself.
• Other things are like scalability, the ability to
  grow your business and access infrastructure that
  you would not be able to deploy by yourself
  because maybe you don't have the capital or the
  ability to deploy that by yourself.
• The economies of scale and access to expert
  capabilities offered by 3PLs create a competitive
  advantage and support that you might not be able
  to provide on your own, at the scope and speed
  you need.

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Focus on Your Core Competencies

• I would probably say that one of the most
  important advantages to outsourcing your
  logistics is the ability to focus on your core
  competencies
• What is it that truly makes your business tick?
  Is logistics your core competency? Is it
  fundamental to your business model? If not,
  outsourcing can make a lot of sense.
• Recently logistics, particularity e-commerce
  logistics, has gotten much, much more
  complicated. So more fulfillment locations, more
  carriers to manage, changing technology, and so
  on.
• New geographies, new countries. And keeping on
  top of this as a retailer can be extremely
  difficult. So retailers have to have an honest
  dialogue about when logistics is really
  interfering with the success of their business.
• If youre worrying more about issues in a
  warehouse, than how you could be potentially
  delighting your customer or selling more product,
  it might be the time to outsource.

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Ensure Quality and Order Accuracy

• My words of advice would be to start with the
  basics. Quality and order accuracy and getting
  orders out of a fulfillment center in a timely
  fashion is the single most important capability
  that you need to look at when you're talking to
  potential vendors.
• Nothing disappoints the consumer more than
  screwing up the basics. No amount of wow factor,
  no amount of marketing buzz will ever overcome
  this and it should be the most important
  discussion point with the vendor.
• People are conditioned now to expect a high level
  of accuracy and quality. Anything less is
  disappointing.

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Synchronize Your Inventory

• Inventory management is exceptionally important
  and it's also, frankly, a science. How much
  buffer to have, and how much you want to have in
  stock, really varies based on the retailer
  situation, what they sell and where they find
  themselves financially.
• Excess inventory is bad, right? It ties up cash
  that you could use more productively in other
  areas of your business. But on the flip side,
  weve all been in situations where we've been
  shopping online, you find the thing that you
  wanna buy, but unfortunately, there are no units
  on hand.
• Thats a bad customer experience thats a result
  of maybe not having the appropriate controls on
  your inventory. As we said before, the goal is
  the right inventory, in the right time, at the
  right place, in the right amount. And doing that
  effectively is a lot harder than it sounds.
• If you go online, theres a lot of information
  about how to evaluate how much inventory to hold,
  to calculate and analyze your inventory turn
  rates, your turnover days and so forth. But it
  boils down to a few variables

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• How much does your inventory cost?
• How much do you typically have on hand at any one
  time?
• How predictable is your demand?
• How do you replenish your inventory?
• This looks very different if inventory is coming
  from China, as you can imagine. You have a one
  month or two month lead time, versus a vendor
  that sits up the road.
• The simpler those variables are, the more
  feasible it is for you to manage your inventory.
  The more complicated they are, the more difficult
  it will be which means it might make sense to
  consult with experts.

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Connect Your Warehouses

• Depending on where you store different parts of
  your inventory, keeping track of what products
  are where is vital to ensuring timely delivery
• The need for affordable speed is driving this
  regionalization trend in fulfillment. Its very
  difficult and expensive to service customers
  across the United States from a single site,
  while at the same time, meeting their
  expectations in terms of what a consumer today
  wants in terms of the delivery time.
• Its even more difficult to service international
  customers from a single site and delight them at
  the same time.
• Retailers have to cover multiple warehouses,
  drop-shippers, potentially stores, and doing so
  across potentially across multiple countries in
  an attempt to find a most efficient fulfillment
  location. Managing that fragmentation is
  difficult.

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• The hardest part is really knowing how many nodes
  do I need and defining how much inventory to hold
  where in that network, when and in what amount.
  That's what we typically call demand planning.
• Thats a capability that a lot of retailers lack,
  or dont really have the tools to be able to
  analyze effectively.
• Also, if you are in multiple nodes, you need
  tools to be able to see that inventory, light it
  up, so to speak, and execute orders across that
  inventory. Thats called order sourcing, or
  distributed order management. Those are areas
  DHL's invested in significantly to try and
  overcome these challenges.

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Balance Value Added Logistics, Costs, and Focus

• Making sure that your products are perfectly
  packaged can increase customer satisfaction, but
  its important to know when these value-added
  services cause more trouble than theyre worth
• Its always a good idea to ask about what
  value-added service capabilities does that
  fulfillment provider have
• What kind of experience and capabilities to they
  have with kitting?
• Are they able to handle custom packaging?
• Can they do gift bags?
• Can they do custom messages?
• Can they work with fancy tissue paper?
• Can they work with samples?
• Can they personalize the package and so forth?

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• These are all becoming increasingly important and
  having a provider that can manage these and
  understanding how much it costs to manage these
  are very, very important questions to ask. But as
  a reminder, it can also go too far.
• Some of these value-added services add tremendous
  operational complexity to the fulfillment process
  and, as a result, they drive cost into the
  fulfillment process and retailers really need to
  make sure that they have the appropriate return
  on that investment.
• You always need to balance the operational
  implications with the marketing wow factor.

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Free Shipping, Fast Shipping
Offering a no-cost delivery can encourage people
move forward with their shopping. Whether theres
a limited promotional offer or a minimum order
size, these techniques will help get orders
through the checkout Free shipping is
absolutely very important. Plenty of evidence
tells us that not offering some sort of free
shipping is one of the leading reasons why
shopping carts get abandoned. And there are ways
to manage the cost of free shipping, such as
having a minimum order size to qualify for it,
offering it only with promotions, or with select
items, and so forth. With the free shipping
option, make sure you have an ecommerce logistic
solution that is affordable.
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Regionalize Inventory to Reduce Cost

•  big shipping companies that span the country
  offer one-size-fits-all solutions to delivery,
  but they arent always the easiest and are
  rarely the cheapest
• We know a lot of, particularly some of the bigger
  brands, the bigger retailers are now
  experimenting with same day delivery. The
  answers to that paradox really exist in the
  supply chain.
• We talked about regionalizing inventory to remove
  distance from the equation. Distance equals time
  and money and cutting distance down can save a
  lot of dollars while maintaining or even
  improving service levels. If youre shipping LA
  to LA, you can use the USPS workshare products
  and get two days and that sure beats two day
  express product from Kentucky or somewhere in the
  middle of the country.
• Localization opens up many options to leverage
  different types of carriers.
• Youre not dependent on national incumbents
  anymore. You can start to work with regional
  carriers, metro couriers, and so forth, that can
  bring tremendous savings to the table, versus
  their national counterparts.

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Leverage Technology for Logistics Rates

• Different rates for different shipments can
  offer significant savings, but it requires the
  technology, information, and skills to be able to
  make the best shipping decisions
• But, in order to capitalize on these multiple
  carriers, you need certain capabilities and the
  most important one is rate service shopping. You
  need the technology either in your WMS, or
  transportation management system, to make the
  best possible shipping decision, giving the
  details of the order.
• Whats the origin zip, where is it going, how
  much does the parcel weigh, what are the
  dimensions of the parcel? Which carrier? What's
  my service level? What carriers can execute that?
• Then, rate shopping across those ca rriers to
  try and do that in the most affordable fashion.
• Shopping around and paying attention can save a
  lot of hassle and allow for affordable, quick
  delivery.

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