Between making a sale and delivering an online order, distribution logistics play a crucial role in the ecommerce supply chain. Distribution is indeed the heart of an online business. Without it, it would be hard to deliver orders on time and meet customer expectations.
However, getting distribution right is usually a balancing act. Firstly, you need enough inventory to meet demand while also optimising storage space to keep costs low.
It's not only important to establish a physical distribution process—it's now a necessity. And, as we've learned from the COVID-19 pandemic, you can't predict the future, which makes optimising distribution logistics based on demand a challenging task.
A significant component of distribution logistics is reducing risk and costs to create a more resilient supply chain— no matter what challenges come your way.
In this blog, you will learn what is distribution logistics, what is meant by direct and indirect distribution and how they differ, and the tips for improving your distribution logistics.
Distribution logistics constitutes the entire process of movement of products from a manufacturer or supplier to the ecommerce brands' (or retailer) warehouse where the fulfilment process takes place. From there, online orders are prepared for last-mile delivery. During the distribution phase, ecommerce brands work with various courier companies to ensure orders are delivered on time and at the most affordable rate.
Depending on the needs of a business, a distribution logistics method can include various channels. Especially for ecommerce, there are two distribution logistics approaches—direct and indirect.
It involves removing all the middlemen and handling distribution logistics in-house. Once an ecommerce brand purchases inventory from a manufacturer or a supplier, it is stored in a warehouse (rented or owned) or an office or home. Then, orders are fulfiled from there and delivered to the customers.
For direct distribution, an ecommerce brand is also responsible for the entire ecommerce fulfilment process, i.e. self-fulfilment. These brands need to invest in their own Inventory Management System (IMS), so they can efficiently track inventory. They are also responsible for creating a shipping strategy by choosing shipping methods and courier companies based on average shipping cost and profit margin.
Ecommerce brands that take care of their own distribution logistics are required to invest in their own storage needs (warehousing), fulfil orders in-house, and maintain carrier partnerships for all their shipping needs.
In this, ecommerce brands have the flexibility to outsource ecommerce fulfilment to a third-party logistics (3PL) provider. Indirect distribution basically involves sending inventory to a 3PL provider that takes care of ecommerce warehousing, order processing, and shipping on behalf of the online brand. Depending on the 3PL provider's capabilities, it offers the fulfilment resources, infrastructure, tools, technology, expertise, and customer support needed to optimise logistics operations. Notably, the ecommerce brand does not need to invest in its own fulfilment infrastructure.
For instance, with Eshopbox's actionable dashboard, you can connect to multiple sales channels and sell your merchandise on any or every sales channel. You can split your inventory in Eshopbox's multiple fulfilment centres—enabling you to reduce shipping costs and increase shipping speed while fulfiling orders across India.
Once orders are placed, they are routed to the nearest fulfilment centre location to be shipped via the most optimised shipping route.
Implementing the right supply chain technology stack can improve how you manage different aspects of your distribution logistics. It includes real-time inventory tracking, picking and packing, shipping and order delivery. When implementing the right software, you must ensure that it seamlessly integrates with your existing software, shopping cart, marketplaces, inventory, warehouse, and other fulfilment processes.
Accurately forecasting demand is essential for making informed decisions on distribution. For that, you need access to the right tools and metrics to strategically plan for demand so that you can replenish inventory on time.
With intelligent inventory forecasting, you can use past sales data and details of upcoming events to maintain adequate inventory levels. This will help you minimise inventory shrinkage, lower storage costs, and keep your customers happy.
Distributing your inventory across multiple fulfilment centres throughout the country for keeping it closer to customers is known as inventory splitting. You need to do in the most efficient manner— ensuring fast order delivery by reducing transit time and shipping costs.
Moreover, the speed of order delivery is one of the most important parameters to rank higher in search results of marketplaces. You can achieve this by splitting your inventory to offer lightning-fast fulfilment to your customers. Furthermore, choosing the right full-stack ecommerce solution will also help increase your product visibility and boost your ecommerce sales.
Reporting is essential for driving your business towards ecommerce success. You need data-driven reports and insights to make informed decisions and steer your business in the right direction. For that, you must mine data from each sales channel and attain a holistic view of your business. Alternately, you need access to technology that provides you with all the key data, insights, reports, metrics and analytics to measure your business performance and strive towards improvement.
Distribution logistics is one of the most difficult aspects of running an ecommerce brand. The complete process of figuring out ecommerce logistics and fulfilment to ensure that customer orders are delivered on time while saving costs is usually very complicated.
Rather than managing it on your own, you can consider outsourcing distribution logistics to a 3PL provider like Eshopbox.
Ecommerce brands need to secure a channel for the distribution of their products that enables them to reach their customers on time and maintain high delivery standards. Hence, understanding the concepts of distribution logistics is more important than ever. Moreover, as the supply chains slowly recover after the pandemic, the need for optimising distribution logistics is at an all-time high. With well-planned logistics, ecommerce brands can have the edge over their competitors in how they offer ecommerce delivery to their customers.