Just as technology has changed the way we buy things, it’s also changed the way we ship them. Let’s look at how enterprise ecommerce logistics is keeping up with the exponential growth of ecommerce.
In 2021, five million Australian households consistently bought online each month, 1.1 million more than the average in 2020. This has of course caused considerable strain on our supply chain, and necessitated a mammoth response from Australia’s shipping carriers. Some have been up to this task, while others have struggled to maintain the pace.
Despite the strain, consumer expectations are higher than ever. And in this increasingly competitive enterprise ecommerce market, shipping is now a major differentiator – for enterprise ecommerce businesses in particular.
Gary Starr, Executive General Manager Business, Government & International Australia Post, said in Australia Post’s 2021 Delivery Experience Report:
“Shoppers’ expectations have shifted, and the delivery experience is increasingly becoming the
defining element of the online retail experience, making it critical that retailers get it right.”
What is ecommerce logistics for enterprise businesses?
All businesses who sell products need somewhere to store those products, some way to ship those products, and someone to manage the process and take responsibility for the results.
Smaller ecommerce businesses and entrepreneurial one-person operations are well-served by many software businesses and startups offering low-cost logistics solutions that plug in to their Shopify or Squarespace website.
Enterprise businesses – Australia’s biggest shippers – need to be a little more selective about who they partner with in order to preserve the customer experience they’ve worked so hard to achieve.
There are two types of large-scale ecommerce businesses: B2C (business-to-consumer) or B2B (business-to-business). As we’re an enterprise freight management platform, and you’re on our blog, we’ll assume you have some knowledge of this and skip a few steps.
How enterprise ecommerce logistics works in Australia
B2Bs and B2Cs may have very different needs and very different customers – but from a supply chain perspective, they’re actually quite similar.
Behind the scenes of the biggest retail brands (with ecommerce arms) in Australia – think sausage sizzles or your favourite uncle Dan – there’s an intricate network of warehouses and carriers. Some may operate with one centralised warehouse, and just one or two carriers. Others may have a warehouse in every capital city, and up to 20 different carriers depending on the job. It’s simply a matter of freight volume and geography.
As these organisations grow, the question becomes how they manage their inbound freight from suppliers domestically and overseas (if they don’t make their own products) and how/where they receive and store their products for lowest price and quickest delivery (if they do).
On the sending side, it’s all about creating and maintaining good relationships with carriers, juggling multiple rate cards and being on top of invoicing so everything matches up at the end of the month, and there’s no money left on the table as a result of carrier invoice miscalculations.
These are deep operational challenges that enterprise ecommerce businesses need to constantly optimise for. It’s no wonder the number of Supply, Distribution and Procurement Managers in Australia is expected to grow strongly over the next five years.
Ecommerce logistics challenges
- Inventory management
- Owning + living up to the customer experience
- Managing returns
Common enterprise ecommerce logistics solutions
Some enterprise businesses opt to do their own logistics in-house. They often choose to do this because they have a commitment to owning the entire customer experience.
In this scenario you’d have a team that takes receipt of goods, somewhere to store them, and then people to pick and pack them when an order is made. Then you’d partner with your businesses preferred local parcel courier and bulk freight carrier combination – say, Australia Post, DHL and CouriersPlease – who collect the orders and deliver them to your customers.
You can even take it a step further like Amazon, and take over the actual delivery of the orders as well – but that’s an extreme case.
Bringing logistics in-house has its benefits, but cost isn’t one of them. Knight Frank analysis shows that for every £ billion of online sales requires approximately 1.36million sq ft of warehouse space.
Dropshipping is used more by smaller ecommerce operations than the enterprise businesses we serve, but it’s an interesting tactic and worth mentioning here.
It’s a relatively simple setup whereby the retailer doesn’t ever see the items they’re selling. Once a purchase is made, it’s sent from the manufacturer (who may be in another country) to a third-party provider who takes care of the rest. Many third-party logistics providers (as we’ll mention below) offer this as part of their service.
While dropshipping is simple and hands-off for the retailer, it has its downsides. For one, you’re not in control of the carrier relationship, so you can’t be sure you’re getting the best shipping rate. You also don’t have any contact with the product – so if you’re selling a faulty batch of products, you won’t know until the returns start piling up.
Third-party logistics providers
A third-party logistics (3PL) partner takes over storing, picking and sending inventory for you. You have your products sent to their warehouse, and they do the rest – dealing with carriers and looking after customs brokering, freight forwarding, contracts and more (depending on the provider).
This is great for high-volume businesses who don’t have a lot of space, or don’t want to deal with the hassle (and resource drain) of looking after their logistics function themselves. Your 3PL partner will have their own relationships and rate cards with carriers, so you should get a good rate.
You do lose some flexibility and agility around freight and returns, but that’s the price of handing it over.
Fourth-party logistics providers
A fourth-party (4PL) logistics provider is less about physical infrastructure and more about relationships and business strategy.
To work with a 4PL you’ll need to have a few parts of your supply chain already in place – for example, a warehouse, and staff to manage goods and pick orders. Your 4PL partner will take it from there.
This is a good option if your volumes are high but you’re not getting the best rates from your carriers.
Read more about the difference between 3PL and 4PL providers (and which you should choose) here.
Discover a better logistics solution
MachShip freight management solution has been developed especially for enterprise ecommerce businesses. Our API and other integration capabilities seamlessly connect with your existing enterprise resource planning systems, warehouse management systems and e-commerce and accounting platforms.
We integrate with leading e-commerce platforms like Shopify and WooCommerce, and link with 3PLs, 4PLs and almost every carrier in Australia – so whatever logistics solution you’re using, we can help streamline your operations.
Live tracking updates delivered to the customer via email, SMS and web with consistency regardless of underlying carrier.
Optimised carrier selection, audit reports to identify better value services and scenario-based cost modelling to understand financial implications of uprating and changing carriers.
Customer facing teams able to resolve customer enquiries on the spot with complete access to quoting & tracking data.
Book a demo now with one of our cloud logistic consultants to find out if MachShip can save you time and money.