Role of Logistics in E-Commerce


With everything turning into the digital era, e-commerce is seeing a complete transformation in its industry. While it is affecting both consumers and sellers, it is imperative for sellers to keep up with the trend for better sales. This article covers everything related to logistics sellers should keep in mind for unprecedented growth. Even established retailers are augmenting traditional brick-and-mortar store sales with e-commerce divisions. Having said this, it is no brainer that logistics will increasingly play a crucial role in the success of any e-commerce venture.

Logistics has come a long way in India. There was a time when the retailers used to directly source goods from suppliers and manufacturers. Today, there is e-commerce fulfillment distribution centers for distributing the products. Logistics includes many aspects of warehousing, inventory management, billing, packaging, labeling, shipping, cash on delivery, payment, product return & exchange, and much more. To streamline the process, the logistics firms need specialist enterprise mobility software which takes care of most of the issues like tracking, management of stock levels, locations, packaging, and fulfillment.

Logistics plays an important role in ecommerce; while most parts of the transactions happen electronically, physical products need to be shipped to customers using conventional transport means

Let’s Take a Look at the Evolution of Logistics                         

From a distribution property perspective, this evolution has passed through various general phases and very broadly in the timeline as follows:

  • In the 1970s, most retail stores were replenished by direct deliveries from suppliers or wholesalers.
  • In the 1980s, retailers started to centralize their store deliveries through new distribution centers which they controlled.
  • In the 1990s, global sourcing (for non-food products) took off, with many retailers developing import centers to receive and process mostly containerized imports.
  • From around 2000, e-commerce began to rapidly expand with pure-play (internet only) retailers leading the way in establishing e-fulfillment distribution networks

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The backstage story

While that has been the evolution of logistics, what really happens in today’s day and age is completely different from the 20th century. Read in further to know what goes on behind the scenes.

Step1-Order Download in OMS: Order is placed by the customer from the front-end (web store) which is then downloaded into an order management system (OMS). This OMS can be a part of your web-store or it can be a back-end Enterprise system where the customer order gets downloaded.

Step2-Inventory Allocation: As soon as the order flows into an OMS, the inventory from the Warehouse gets allocated to the order quantity. Thus the free quantity of that particular SKU (product) is decreased by the order quantity.

Step3-Order PickingThe operations/ fulfillment team then start processing the order in the warehouse. First, a pick list is generated against that order (usually it’s for multiple orders at one go and using wave management) and is handed over to a picker in the warehouse to pick that SKU from the bin/rack (in a zone). The picker picks that SKU from the location mentioned in the pick list and bring it back to the picking station (a stage location)

Step4-Order Packing and generation of labels: After the picking is done, the next stage is packing. At the time of packing required documents are printed that needs to be sent along with the shipment package to the customer. The order is then packed in a packing box and reports like Invoice, Shipping label are printed and kept along with the shipment.

Step5-Order shipmentAfter the order is packed, it needs to be shipped out to the customer. The order gets assigned to the courier as per the shipping location (usually either at the time of order placement or at the time of packing) and a manifest is generated. Then the shipment is handed over to the courier guy who comes to the warehouse to pick up the shipment. Once the shipment is out of the warehouse the inventory gets reduced in the system.

Step6-Shipment Delivered: The shipment then gets delivered to the respected customer and the courier company updates the delivery details back to the company whose consignment it was shipping.

Reverse Logistics

Reverse Logistics is a whole other ball game by itself. When we think of e-commerce it usually only is limited to the logistics of getting the goods delivered to the customer. But there is an entire leg of the e-commerce supply chain that comes into action after goods are delivered. Enter the world of “reverse logistics.” Reverse logistics is supplied the process of logistics but in the backward format.

But why should you do reverse logistics? While having the best logistics can give you the upper hand, being better at reverse logistics will make you the king of goodwill in the market.

Some of the benefits of reverse logistics are

  1. Reduced administrative, transportation and aftermarket support costs.
  2. Increased velocity.
  3. Increased service market share.
  4. Higher achievement of sustainability goals.
  5. Greater customer service and higher retention levels.
  6. Recovery of capital investments in assets
  7. Organized working capital

There are several reasons that make reverse logistics inevitable. Here are some of the most common

1) Returns

Some goods are invariably returned to the seller. This is true in physical retail as well as in an e-commerce setup.

2) Mis-delivered or Undelivered Goods

If you are an e-commerce player selling virtual goods that can be delivered electronically, you might be blissfully ignorant of the nightmare of misdelivered or undelivered goods. But physical goods not reaching the desired destination is a common problem that e-commerce merchants have to grapple with.

3) Damaged Goods

Ordering a brand new iPad and receiving one that has a cracked body or a scratched screen is unacceptable.

4) Malfunctioning Goods

“I received the pottery wheel, but it refuses to spin” is the last thing a successful e-commerce business wants to hear. But since 100% error-free performance is impossible, there will be occasions when goods will not work.

Just as you would put hard work into making your product better, add in little more effort in logistics and the result you will see will be phenomenal. Successful logistics leads to happier customers, retaining them and increasing market share.  The process of reverse logistics can sometimes be tedious and expensive for a seller but let us end it by saying; ‘Customer Satisfaction eats Marketing for breakfast.’

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