1) An overview of the eCommerce Shipping Industry
When we talk about the eCommerce shipping industry, what normally comes to mind are big trucks transporting loads of parcels or huge ships docking on the port with large containers. But is that what eCommerce shipping really is? Let’s investigate.
The eCommerce shipping industry involves all the processes that transport the final order to the customer’s doorstep. It includes receiving, processing, picking and packing, and finally shipping orders via carriers for the final delivery. Some experts even say it starts from manufacturing and storing inventory at a warehouse or a fulfilment centre where orders are processed and packed.
Shipping is a significant factor that impacts sales and relationships with customers. Over the last couple of years, shipping has become increasingly competitive, with mammoth enterprises like Amazon and Walmart reshaping how shipping should work to wield the best customer experience and profits. This article discusses all the crucial details to understand the eCommerce shipping industry better.
2) The Five Players of the eCommerce Shipping Industry
The shipping industry requires an assortment of personnel and infrastructure. The five players listed below majorly facilitate the eCommerce shipping process.
Suppliers get the product or the raw materials ready for shipment at the behest of the eCommerce com[any.
Shippers are either the eCommerce business or a third-party logistics provider that receives, processes and ships the order.
A warehouse is a physical storage facility where stock or inventory is kept before being sold online. A warehouse is not simply for storing but also for stocking, checking inventory quality, sanitization, etc. Warehouses come in all shapes and sizes. There are usually six types of warehouses.
- Private: owned by businesses, retailers, manufacturers, and distributors privately
- Public: owned by a government agency and rented to private businesses
- Consolidated: operated by multiple suppliers at the same time for one city or region
- Cooperative: held by numerous firms who are usually involved in the same sector and work together towards a common goal
- Government-owned: owned and operated by the government of a state or country
- Bonded: owned by the government and acts as a depository of imported goods
3PLs are critical agents in the shipping industry. They are usually partners that assist an eCommerce brand in the order fulfilment process and take care of the inbound-outbound logistics.
3PLs usually work with fulfilment centres that are physical storage like a warehouse but do many more activities than the former. 3PLs and fulfilment centres receive orders from the eCommerce business, pick and package the order, and ship it to be delivered to the customer by working with shipping carriers.
Outsourcing the fulfilment process to the 3PLs is a good strategy for a business to save time and money, especially since 3PLs can negotiate shipping rates on their behalf.
Shipping carriers are companies and firms transporting the orders customers place with an eCommerce business. They have their fleet and move goods across the land, water, and air.
There are two types of carriers: one that offers long-range services across the country and even internationally, and the other that works within a region's confines. For an eCommerce business serving a particular geographical area, the latter can offer more affordable services.
3) Functions of the eCommerce Shipping Industry
As we know who are the principal members of the eCommerce shipping industry; let’s now focus on the four major functions involved in shipping:
3.1) Receiving Orders
The first stage in the shipping process begins when an order is placed to the eCommerce business, typically by confirming the product purchased, the address entered, and the payment method specified. Henceforth, the second step proceeds, which involves the eCommerce business relegating this order to their shipping partner or 3PL service provider.
3.2) Order Processing
Once the order is received, it goes for processing. The order processing happens with the procedure of manifestation or confirmation by the shipping carrier to pick up and deliver the order done by the Airway Bill and the shipping label. These documents are crucial to verify the cargo and its destination.
3.3) Order Fulfilment
Order fulfilment is the final stage before a parcel is shipped for delivery. It is the primary stage where inventory is involved. Let’s look at the activities an eCommerce business undertakes in the order fulfilment process:
- First, ensure that inventory is on-hand. If 3PLs are involved, the stock must be sent to them first.
- Second, ensure that inventory is appropriately stored in the warehouse with each SKU present in the designated location.
- Third, ready the packing slip that includes details about the packaging materials, quantities of the product, or any custom packing requirements.
- Fourth, designate the shipper to pick up the product.
Once the parcel leaves the warehouse or fulfilment centre, the tracking information shared by the carrier is then forwarded to the business and the customers to keep them updated.
3.4) Managing Returns:
Returns might be a nightmare for eCommerce businesses; however, it is a major part of the shipping industry, better known as “reverse logistics”. Returns are initiated in two ways: customers ship the order, or a carrier agent receives it from them. Returns management involves a series of processes:
- Receiving return requests
- Processing the return request
- Alloting pickup and managing pickup exceptions in case an Non-Pickup report is filed
- Refurbishing and restocking the returned items.
Only after checking the product’s condition and quality that it is relegated to be fixed, resold, refurbished, recycled or discarded.
4) How does the eCommerce Shipping Industry Work?
4.1) It starts with inventory and warehousing
After a product is manufactured, the first step is to store it in a warehouse or fulfilment centre. Every SKU is stored with the anticipation that it can be packed and shipped once an order is placed. Warehouse typically performs the following functions in facilitating shipping:
- Receiving inventory
- Verifying inventory
- Assigning products as SKUs and storing them in designated areas for easy picking
- Packaging and consolidating them as loads
- Dispatching shipments
4.2) Next is Order Picking and Packing
Picking and packing ensure that the product is secured, sealed and labelled before it is ready for shipping. There are multiple picking methods in practice: finding individual items, picking items in batches for numerous orders of the same product, picking scores of items based on specific criteria, then sorting them into separate orders, using pallets and cases etc.
Packaging too has many varieties. Specialised and bulk packaging are popular packaging choices amongst eCommerce brands.
4.3) The Last-Mile Delivery
It comes in the series after the first and second mile deliveries, which entail the movement of goods from the manufacturer or the eCommerce business to a storage facility where they move subsequently to their final destination for the last mile delivery. It is the final stage where the shipping company assigns a courier agent to collect the parcel from the designated warehouse and hand it over to the end customer.
4.4) Delivery Exceptions Management
The last-mile delivery is sometimes fraught with delays and troubles like a customer's unreachability, incorrect address, refusal by customers to accept orders, refusing payments, and fake attempts to deliver, leading to non-delivery. NDR is a critical occurrence in the shipping industry, and in extreme cases, the order is returned to the warehouse.
NDRs can be effectively handled with an NDR management software.
5) Challenges in the eCommerce Shipping Industry:
5.1) High costs of Shipping and Slow Speeds
While customers prefer free shipping, the businesses are laid with high shipping costs. They are real dampers on profits.
Shipping costs vary depending on the time (standard, priority and international shipping), region, weight and size of products and are determined by carriers. Therefore, if businesses plan to include the free shipping option, they must shoulder the extra costs.
Moreover, since the pandemic days, the eCommerce shipping industry has been wrecked by a hike in fuel prices, limited cargo capacity, disruptions in supply chains, complexities in route planning and last-mile deliveries. All of these factors also contribute to slow shipping.
5.2) Limited Coverage
The areas customers live also add another layer of challenge in shipping. For example, shipping to rural areas is increasingly tricky than in urban areas. Similarly, rugged terrains like mountainous regions where GPS signals might malfunction are more complicated to reach than a city in a valley.
5.3) Parcel damage and loss
A frequent issue in in-transit is damage and loss. This inadvertently arises when the package is improperly handled, and unsuitable packaging leaves the item vulnerable to damage, absence of cushioning materials, humidity, and late deliveries lead perishable products to decay.
5.4) Managing Order Returns
Managing returns is a set of critical challenges involving inspection, verification, testing, troubleshooting, and recycling the returned order right at a Returns Forwarding Centre. Information flow is another challenging area, especially when returns are authorised, and the details have to be relayed accurately to the carrier.
5.5) Managing Fleet
Managing a fleet is becoming a difficult task with rising operational and insurance costs. Problems such as lack of qualified drivers, complicated regulations, and volatile fuel prices are major contributing factors.
6) Ways to Overcome these challenges:
6.1) Tackling Shipping Costs
High shipping costs can be managed with some smart policies like outsourcing shipping to 3PLs for long distance deliveries and reducing dimension weight of packages. Reusing packaging, using polymailers and whenever possible buying packaging supplies in bulk from carriers are good options to avoid supplementary costs. Buying in bulk can also avail you discounts and free envelopes from some carriers. Another smart method is to opt for prepaid shipping when placing orders with carriers.
6.2) Choosing the right fulfilment partner
A good 3PL partner can be a lifesaver. 3PLs effectively handle order fulfilment and takes the right decisions to ease the shipping process. They decide when to consolidate received orders to cut back shipping costs, manage inventory to reduce the cost of storage, and direct freight routes to manage shipping speed.
6.3) Automate shipping
In this digital era, technology is an eCommerce business’ best friend. Using software for warehouse and inventory management, integrating with multiple carriers, and tracking shipments make the shipping process a seamless and easy-to-control reality.
Similarly, using AI, RPA and ML automate placing orders, assigning drivers, locating SKUs across warehouses, and the overall warehouse operations.
6.4) Distributed Inventory
The distributed inventory method can eradicate the problems of area coverage and slow shipping speed. In this case, inventory is sent to different fulfilment centres chosen strategically near the end customers for reduced shipping time and costs.
The best policy against damage and shipment loss is insurance. The chances of incurring a financial loss from theft or damage are removed. Moreover, insurance is quite affordable for bulk shipments.
6.6) Plan for reverse logistics
Having a strategy for handling returns is the best way to plan for reverse logistics. Here are a couple of tips to ward off returns:
- Display accurate information, like product size and description
- Offer good tracking and customer service to avoid any order cancellations in transit.
- Avoid sending any incorrect product.
- Avoid product damage with careful packaging.
- Keep track of why customers return orders to identify problem areas and find solutions.
- Keep an extended return window period to take away customers’ urgency to return.
The eCommerce shipping industry is a major arm of eCommerce logistics. It is a medley of well-connected parts that ensures that orders placed by the customers reach them timely and safely. Though there are significant challenges in the sector, with the help of innovations and fast emerging trends, the eCommerce shipping industry is transforming for the better.