4 Tips to Optimise Logistics for Your Online Shop

ERP and CRM systems, supply management, inventory, warehousing: Logistics is one of the most important elements in a company's development, especially if you run an online shop. Although we may sometimes think that everything is going to according to plan, sometimes the dynamics of our tools (as well as the demands of the market) change, which means you have to constantly improve your skills, processes, and knowledge.

Logisitics insights

Before we get into these tips, let's have a look at some of the trends we've see in logistics in the context of e-commerce.

UPS and Statista worked together on a survey of about 249 employees in the e-commerce industry. Respondents came from four European countries: France, Poland, Germany and UK.

Selling internationally

When asked about where these online shops ship to:

Source: Statista

As this survey has taken place earlier this year, it's interesting to see that many companies sell abroad quite often. Around 42% of respondents claimed that anywhere between 25-100% of their orders are sent abroad. Although it would be interesting to get more insights, especially in that 0-24% range, but the available numbers are interesting nonetheless.

Speaking of selling internationally, check out our European holidays marketing calendar below and make sure you never miss an important holiday in an important market:

Freedom to choose who your shop uses for deliveries

In the next chart from the same survey, you can see that a vast majority (79%) of shops are free to choose which parcel delivery providers they want to use for shipping:

Source: Statista

This probably means that a lot of businesses run their own shop. If you're primary source of revenue comes from Amazon (and you use Prime fulfilment), you are stuck with the options your fulfillment center or marketplace offers you. However, a healthy amount of shops do indeed have this freedom.

Remember, if you are free to choose which providers you use, it's smart to offer the same option to your customers. They always love having a choice!

4 tips for optimising logistics in your online shop

Why optimise the logistics processes in your online shop? Proper management means more conversions. Below you will find out why.

1. Invest in a good ERP system

ERP - what is it?

ERP systems are a way of managing a company’s resources, often in real-time, through software and technologies. It is used to collect data from many sources and then the system can perform operations based on this information.

Online shops with a small assortment of products very often only use CRM (Customer Relationship Management) systems, mainly in order to be able to manage customer relations more effectively.

For other things, such as the shipment of goods, inventory control, payments, these smaller shops will use the shop-software that the store is based on like Shopify or Woo-commerce (some have more advanced functions and some less), or they will purchase additional, smaller systems to help them stay organised.

ERP systems - not only for "big" shops

If your small online shop starts to develop dynamically, it may turn out that some functionalities won’t suffice any longer and your current system simply won’t do the job. With the help of ERP systems, you’ll be able to expand on your system or add new functions.

It is worth mentioning that you do not necessarily have to change the shop platform right away. You can integrate the ERP system with your shop-software, including your CRM system.

Shutterstock/wavebreakmedia

This is a much less risky and costly option than moving your entire shop to a completely new system. Of course, we are talking about a situation in which you are satisfied with the existing solution and don’t find it necessary to move just yet.

Depending on the needs and the size of your shop, you can choose the system modules that you will need for effective management of your online shop and continue adding more as you find it necessary.

What benefits can your ERP system bring to your store?

The integration of an ERP system with a sales software makes it much easier to automate the processes in your company and allows you to control them all the time. The more functions your system has, the more processes it is able to facilitate, especially when it comes to logistics. For example, a good ERP system can:

allow you to automatically generate waybills, thus shortening your processes as well as reducing the likelihood of delivering the package to the wrong address
help facilitate product management
update stock levels in real-time to help avoid problems with orders and delayed delivery of products to customers due to inaccurate inventory data

One of the greatest advantage of ERP systems is the creation of reports and access to advanced analytical functions (business intelligence). This can help you predict whether the demand for a given product will increase in the near future. It will then be easier for you to plan deliveries and fill in possible shortages, especially before an approaching sales season.

Implementation of such a solution is important both from a business and an image point of view. Delivery issues (such as delays or wrong addresses) generate high costs and causes customer dissatisfaction, which is why the following point is so important:

2. Ensure product availability

You've probably heard some variation of the following concept: gaining new customers costs about 7-10 times more than maintaining existing ones? With this in mind, you should ensure that the availability of a product listed on your website matches the actual stock in your warehouse.

Extended or delayed delivery times often translate into order cancellations and will pretty much ensure that a customer won’t shop with you again in the future. And every customer, especially when you are just developing your shop, is worth their weight in gold. Don't let them run off to your competition just because of poor inventory management!

Shutterstock/Just dance

What can you do to do to avoid such “surprises”? Again, it is worth investing into a well-integrated ERP system, as mentioned above. Not only will it save you time and money, but it will help you build a reputation as a reliable shop, and that will help you build customer loyalty.

Additionally, if you advertise using Google Shopping, ensure that your Merchant Center account is properly set up and up-to-date. This way, you can be sure to advertise products that you actually have in stock.

3. Select the appropriate logistics model for your online shop

Every online retailer has found out how important it is to go the extra mile. Speaking of going the extra mile, it’s important to think about the good location of your facilities. The location of your warehouse can have a great impact on the efficiency of your deliveries. Warehouses are increasingly being located closer to urban centres, or even in cities, in order to be able to deliver products more efficiently.

You can choose from several logistics models - you can use your own warehouse, dropshipping, fulfillment or just-in-time method.

Dropshipping

Shutterstock/SivaStudio

Dropshipping is recommended for smaller online shops. With the dropshipping model, all logistical tasks are taken over by the wholesaler (or manufacturer), whose commission you pay. Because the products are sent out directly to the customer, online shop owners do not rent warehouse space and do not deal with the delivery of products.

The advantage of this solution is that you do not have to invest in goods, reduce storage costs and customers could potentially get their goods faster (depending on where you source your products from).

The big downside is that you don't have complete control over the whole process. It is up to the wholesaler to deliver the product to the customer. The speed of the delivery and the condition of the products can feel a bit out of your hands.

Just-in-time

With the just-in-time (JIT) model, goods are produced (or ordered from manufacturers) only after the shopper has completed the purchase.

The advantages of this model are clear. You don’t have to produce an excess amount of goods and then store them in a warehouse hoping that they sell. As you save money on storage costs and upfront production costs, your business’s cash flow increases as well. There is also less risk of wasted inventory this way.

Someone must have a warehouse full of fidget spinners. They didn't follow the Just-in-time model. (Shutterstock/Ink Drop)

The disadvantages, however, also exist for this model. Timing can be a problem. If you don’t have the product in stock and need to produce it once the order has been made, then you run the risk of production issues delaying order fulfilment. Delays could lead to cancelled orders. On top of that, production costs can fluctuate with this model. If a certain material suddenly becomes more expensive, this will end up eating into your profits.

Fulfilment

With a fulfilment model, as with dropshipping, all logistics services are outsourced. However, in this case, the goods are your property. By choosing this model, you pay for the space in the warehouse, the preparation of delivery service, and the courier services.

Marketplaces like Amazon have become famous for their fulfilment models where 3rd party sellers store their products in Amazon’s warehouses. Amazon employees will then fulfil your orders by preparing your shipments and sending them out for delivery.

The big advantage of fulfilment is that you have much more control over the whole process. The process of accounting for the performed services is also more convenient.

The disadvantage of this model is that we still do not have physical contact with the goods. This solution, although recommended to smaller companies, is also not one of the cheapest.

Own warehouse

When you use your own warehouse, everything belongs to you and depends on you. The warehouse can be located right next to the company's headquarters, which gives you the opportunity to control the goods, their condition, the quantities in stock, and the shipment processes.

Therefore, you do not incur any additional costs for these services like in the dropshipping or fulfilment models. Complaints and returns are also much simpler because you are able to control the quality of your products and take care of their proper packaging.

This is a good solution for smaller companies. If you have some extra space in your cellar, it can be used as a “warehouse”, which can be very convenient if you sell small products or have a limited range of products.

Shutterstock/Ground Picture

4. Focus on delivery quality and give customer choices

If we are talking about the last mile - a solid delivery company is the basis. Your image will also depend on the timeliness and the condition of the delivery upon arrival.

Although usually the most important criterion for choosing such a company (especially at the early stages of running an online store) is the price, it is worth offering your customers several delivery options.

Customers that shop online very often already have strong opinions about transport companies. If they see that you don’t offer their favourite choice(s), they very well may decide to buy the product elsewhere. Why? If your chosen logistics company can't guarantee them fast, reliable, and safe delivery, they won’t see any harm in checking your competitors’ offers. Naturally, there is a risk that they will spend their money there instead.

Conclusion

Logistics is one of the most complicated issues when it comes to running an online store. Warehousing and delivery process management can affect both your image and conversion rates, especially if you get negative reviews based on them. So don't be afraid of new technologies and management methods - you should take advantage of their benefits, so you won’t need to devote so much time to every small task.

Although we can and should learn from our mistakes, new technologies allow us to catch them more quickly and make improvements to our processes. And if it improves the customer experience as well, it will benefit you in more ways than one!