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All’s well that ends well. This holds for the e-commerce space as well. Apart from a great product, a top-notch e-commerce website with seamless navigation and UX experience, superior digital payments, and convenient checkout options, the fulfilment process can often become the make or break stage as far as repeat customer sales are concerned.
Put simply, order fulfilment includes all the steps that result in the delivery of the product to the customer’s doorstep. It may be inferred that the last-mile delivery to the end customer plays a decisive role in winning customer loyalty. Continuing with our series on how to build an e-commerce website from scratch, in these concluding articles, we shall look at the logistics aspects and the importance of post-sales customer service.
The growing significance of e-commerce logistics
Since the onslaught of the pandemic, the fortunes of e-commerce have flourished along with allied sectors such as digital payments and logistics. As per a recent report by ResearchAndMarkets, the Indian e-commerce logistics market is slated to cross $ 11.48 billion by 2027, a jump from $ 2.93 billion in 2019, clocking an impressive 18.8% CAGR between 2020-2027.
What is last-mile delivery?
Nowadays, customers expect promptness, efficiency, and quality delivery. Through digital modes, the customer can constantly stay updated and minutely track the movement of the goods from the time it is shipped until it is out for delivery to the customer doorstep.
The order fulfilment process comprises multiple steps that involve:
- Picking and packaging the inventory from the godown or warehouse
- Selection of the courier partner
- Shipping of the goods
- Delivery to the end-customer
- Post-sales customer care
Last-mile delivery importance
A quick delivery time with optimally priced courier partners can significantly improve profit margins for the e-commerce player and build trust-driven relations with customers. However, the speed of delivery should not come at the cost of accuracy.
For example, say the customer paid extra charges for prompt delivery and due to an unforeseen supply chain disruption, the delivery was delayed, the bad customer experience would be a major blow to the e-commerce business. The customer might post negative feedback on social media which could adversely impact the brand.
Consider another situation, where the customer ordered an expensive smartphone and the end-product that was delivered was a lower-cost phone model. This lack of accuracy would severely damage the image of the e-commerce business, especially amongst first-time buyers.
Broadly, the following are the types of order fulfilment that are prevalent in the e-commerce industry
1. In-house order fulfilment :
This is a common feature in D2C brands that handle order fulfilment in-house. In other words, the in-house team comprising employees manage the entire fulfilment stage starting from preparation of order list for deliveries, inventory management with procurement and packaging of goods from the warehouse, shipping of goods, handling returns and customer complaints in case of delayed delivery.
- The e-commerce player has better control over the process and can save costs that would have to be incurred in the case of outsourced logistics functions.
- Stable quality of service offered to the customer which may be deployed as a brand differentiation strategy.
- Flexibility to use delivery as a customer engagement medium. For example, a D2C brand could send personalized thank you messages to frequent customers and offer special discount codes to promote higher sales.
- In case of peak order volumes during festive season sales like Diwali etc, it might be difficult for the e-commerce company to single-handedly manage the complete order fulfilment and might need to consider outsourcing a certain portion.
- There are associated infrastructure costs like secure warehousing facilities, inventory management software, maintenance of delivery staff on the payroll and training costs, 24*7 customer service support etc
2. Third-party fulfilment (3PL)
This is a common feature in the case of established e-commerce players which supply orders at scale. Here, the e-commerce company chooses to focus on the core running of the business and enhancing the product quality or diversify the offerings and leave the logistics aspect to the experts (courier agencies and delivery platforms). The 3PL companies take charge of multiple functions which include receipt of goods from the manufacturer, storage in godowns, packaging, shipping and handling returns.
- It would be prudent to outsource fulfilment in instances where the e-commerce player has limited storage capacity to store shipments or has to incur huge costs on packing materials or printing labels
- Facility to enjoy bulk discounts offered by 3PL players and negotiate optimal pricing
- Customized packaging as per specific product needs with the latest software tools and adequate manpower. For example, in delicate and easily breakable items, the 3PL agency would label the product as fragile.
- It is important to select a reputed 3PL company with a proven track record of managing bulk orders and technology expertise. In case of poor quality packaging and consequent deterioration in the product quality, the customer would be ultimately dissatisfied with the e-commerce player.
- In certain cases, the costs may spiral for the e-commerce player if the 3PL agency lacks the requisite product know-how. For example, the 3PL company may erroneously return goods as defective after inspection before dispatch, whereas the goods may actually have been in a good condition.
Under this, the customer order directly reaches the manufacturer who then handles the delivery aspects. The e-commerce shop functions as a pure intermediary and is only involved in promoting and marketing the products, without actually physically handling the goods.
- Cost savings resulting from the manufacturer managing the production, delivery, packaging and shipping.
- Lack of customization for the customer as the products are mostly mass manufactured.
- Difficult to maintain the same standard of product quality every time
4. Hybrid fulfilment
Under this arrangement, a combination of fulfilment options is available. For example, in case a company has a warehouse that is at a close location to the point of delivery, the fulfilment is managed by the in-house team to expedite the speed of delivery.
In instances where the warehouse is located far away from the customer’s shipping address, it would be prudent to opt for a 3PL agency that is in close proximity to the delivery address to save transportation costs.
It would be prudent to adopt a combination of options based on efficiencies in cost, time and resources as against a one size fits all approach when it comes to e-commerce logistics. In the next article, we shall look at the nitty-gritty of last-mile delivery i.e. factors to consider in order management, shipping, packaging and most importantly after-sales customer service.