New to e-commerce? From now on, expect the words logistics, logistics management, logistics optimisation, and logistics company to be a regular part of your conversations with other industry players. 

Indeed, logistics is one of the most bandied-about terms in the e-commerce industry — and for good reason.

What Is Logistics?

Logistics is a crucial part of supply chain management.

Supply Chain Management

Supply chain management is a broad business function and complex concept. However, in simple terms, it is the process or series of processes that pertains to coordinating, handling and managing the people, resources, organisations, and information required to move goods and services along the supply chain.

Supply chain management is involved from the start to the end of a product's lifecycle. It oversees the activities that enable the:

  • Flow of raw materials to factories
  • Conversion or transformation of raw materials into finished products
  • Movement of finished goods from factory floors to warehouses and retailers
  • Transfer of goods from warehouses and retailers to customers

In a nutshell, supply chain management has the following five components:

  • Planning (the supply chain, identifying the required components and resources)
  • Sourcing (raw materials, resources, technology, products, services, information)
  • Producing (goods, services)
  • Delivering (goods, services)
  • Returning (handling returns of goods and services)

Logistics

Logistics is managing the flow (and reverse flow) of goods and services from one party to another. 

In the broader supply chain management function, logistics pertains to managing the flow of:

  • Raw materials and supplies from suppliers/manufacturers to warehouses
  • Raw materials and supplies from suppliers/manufacturers to factories
  • Products from factories to warehouses, fulfilment centres or retailers
  • Products from warehouses, fulfilment centres or retailers to customers

Logistics in E-Commerce

Logistics in e-commerce is managing the flow of items from their origin (e-commerce seller) to their destination (customer). It involves two primary functions: transportation and warehousing. This is why most people associate e-commerce logistics with last-mile delivery and logistics companies with shipping carriers.

However, logistics also encompasses procurement, inventory management, packaging, and distribution. As such, e-commerce logistics optimisation typically requires the use of a delivery management platform.

The Benefits of Efficient E-Commerce Logistics

Logistics is crucial to e-commerce because of its impact on customer experience. Efficient logistics and effective logistics management mean customers can get the product they ordered within the promised and expected timeframe and at the least possible cost.

Even reverse-flow logistics matter. If e-commerce retailers have efficient systems for handling returns and replacement requests, they could turn what might be an initially negative experience into a positive customer interaction.

On the seller's part, optimal and efficient e-commerce logistics translate to greater profit margins, repeat business and an enhanced competitive advantage. Ultimately, it is vital to the profitability of an e-commerce company.

Inbound, Outbound and Reverse E-Commerce Logistics

In the context of e-commerce, logistics is managing the flow of goods:

  • From suppliers or manufacturers to the warehouse or fulfilment centre (inbound e-commerce logistics)
  • From the warehouse or fulfilment centre to the customer (outbound e-commerce logistics)
  • From the customer to the warehouse or fulfilment centre (reverse e-commerce logistics)

Inbound Logistics

Inbound logistics ensures e-commerce retailers have high-quality products and stocks ready to fulfil customer orders. It involves the following activities:

  • Tracking, storing, replenishing, and managing inventory
  • Developing relationships and coordinating with suppliers to ensure timely product deliveries
  • Inspecting products delivered by suppliers or manufacturers to ensure they meet the agreed-upon specifications
  • Organising inventory in the warehouse or fulfilment centre to ensure the efficient use of space and easy access to products (and, in turn, speedy deliveries)
  • Using customer data to forecast product demand so the company can order more stocks in response to projected demand levels, preventing overstocking and stock-outs

Outbound Logistics

Outbound logistics ensure products can get to the customers quickly, efficiently and cost-effectively. It encompasses the following activities:

  • Accepting orders from all channels (online and offline), processing payments and getting items ready for shipment
  • Packaging products for their safe and secure shipment and correctly labelling packages to ensure their delivery to the correct recipients
  • Selecting carriers based on shipping rates and modes, developing partnerships with delivery partners, and arranging last-mile deliveries
  • Tracking parcels and updating customers about the status, location and expected time of arrival of their orders

Reverse Logistics

Reverse logistics pertains to returns handling. It involves the following activities:

  • Establishing product return standards and standard operating procedures for handling and processing return and exchange requests.
  • Granting returns authorisations, tracking returned products, updating inventory levels, replacing items, and refunding payments.
  • Evaluating the next steps for returned products, particularly if they will be disposed of or made available for repurchase
  • Ensuring returned products are in good condition (especially if repaired or refurbished) before they're made available for repurchase.

E-Commerce Logistics

Logistics is part of the bigger supply chain management function, and it is a particularly crucial component of e-commerce. 

Whether inbound, outbound or reverse-flow, logistics must be optimised to ensure an excellent customer experience and enhance the competitive advantage and profitability of your e-commerce company.