Aug 3, 2023 | Blog
Inventory management is essential for smooth order fulfillment, and it directly impacts your online store’s efficiency and growth potential. What exactly is inventory management, and why should you, an eCommerce business owner, focus on optimizing it? In this guide, we’ll go over the ABCs of inventory management, detailing the terms and formulas in this field and how you can optimize inventory management for your online store.
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Inventory Management for eCommerce Warehouses:
Aug 3, 2023 | Blog
A warehouse management system improves your eCommerce business by helping your team pick, pack and ship more items faster. It also provides real-time visibility into your supply chain to give you a full picture at any moment.
If you want to learn more about warehouse management systems, you’ve come to the right place. Read on for a complete guide on warehouse management systems (WMS).
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Warehouse Management Systems (WMS):
Jul 14, 2023 | Blog
eCommerce shipping is a key link of the supply chain that can make or break your business. Think that’s a bit of an overstatement? Well, last-mile delivery is recorded as the most costly part of the order fulfillment process – it’s one of the most pressing logistical challenges. Plus, if order inaccuracies occur, and items are shipped to the wrong location, you’ll have to face the additional costs of returns and refunds.
This is why it’s so important to optimize the shipping process. You need to cut down labor costs, transit times, fuel costs, and establish a seamless workflow. Easier said than done, though, right?
In this guide, we’re going to take a look at how you can optimize the shipping process from different angles. Questions such as how much to charge your customers, what sort of hits your business should absorb, how to protect your own investment, and which data-driven tools to use, will be addressed and answered.
Jul 14, 2023 | Blog
Pick and pack fulfillment is a major part of your order processing and inventory management efforts. Improving your picking and packing process means improving your warehouse operations’ speed and accuracy. Better speed and order accuracy, in turn, leads to fewer returns and happier customers.
In this guide, we’ll cover everything about achieving business success with pick and pack fulfillment. Read on to learn more!
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Picking & Packing in an eCommerce Warehouse:
Jul 14, 2023 | Blog
If you’re about to take your eCommerce business to the next level, selecting the right 3PL (Third-Party Logistics) partner is an essential success factor. Not only do they help manage your day-to-day operations and fulfillment but having a reliable 3PL can also streamline customer service, reduce costs, and drive growth. We’ll outline key considerations so you can confidently choose a 3PL that meets all your unique needs!
3PL Partner Meaning
3PLs are the real MVPs of eCommerce. By leveraging 3PLs, merchants can offload a sizable portion of their supply chain management and never worry about fulfilling orders on time. With 3PLs handling everything from warehousing to order fulfillment and shipping coordination to retail distribution, exchanges, and returns, merchants can sit back and let their 3PL do all the heavy lifting. In the end, 3PL partners mean more time for merchants to focus on other areas of their business rather than managing their own warehouses or logistics.
How to Choose a 3PL Provider
3PL has revolutionized eCommerce, allowing businesses to choose the right 3PL partner and focus on maximizing sales rather than worrying about supply chain management. If you’re considering a 3PL partner for your business, be sure to weigh these factors on how to choose a 3PL provider that’s right for you!
Flexible and Feature-Rich Integrations
When you’re on the hunt for a 3PL, how do you decide which provider is the right fit? Capability is key: if your third-party provider doesn’t have the capacity and expertise to cover all your bases, from fulfillment services and reverse logistics to subscription box solutions, you may be in for a bumpy ride. Keep an eye peeled for providers offering flexibility and feature-rich integrations with your eCommerce platform – that way, as consumer demand continues to skyrocket, you can rest assured knowing you’ve picked a partner able to roll with the punches. With capability and scalability in spades, there won’t be any supply chain kinks that they can’t help you iron out!
Adapting to a Changing Market
When it comes to stability in the logistics industry, you deserve the best. That’s why it pays to look for a 3PL with a track record of adapting to a changing market – ensuring your business that potential innovations won’t rock their stability down the line. Plus, multiple locations allowing for shorter shipping times and increased national reach is a bonus – so you can have confidence that your supply chain needs are taken care of! An esteemed reputation for providing top-notch service is worth considering when it comes to peace of mind.
Communication and Trust
How do you ensure your 3PL has the best reputation around? Find a partner that knows the importance of making connections! It’s not just about happy customers – it’s about happy vendors, carriers, and employees. A great 3PL will take the time to understand your business needs, so communication is key here – make sure they take their engagement levels seriously and bring in their expertise. With a compatible culture and shared values, you can be sure they’ll exceed expectations every step of the way.
Safety First
When it comes to safety, what you should look for in a 3PL is the same thing you’d do when checking the brakes on a cart: check twice and confirm. Spot-check that your 3PL has the most up-to-date PCI, FDA, and DEA certifications and a HAZMAT Shipping Certification. After all, safety first!
Top-Tier Customer Experiences
With a third-party logistics provider, customer service and attention to detail often make or break the relationship. The good news is that experienced 3PLs will rise to the occasion to provide business solutions that leave you nodding your head in approval, like how easy it is to calculate savings and track delivery times. Plus, with omnichannel retail taking over the market, you’ll want to find a partner that knows how to navigate through these complexities and provide top-tier customer experiences. Look for someone with an impressive track record, a reusable approach, and expertise in handling similar operations.
Scale Without Breaking a Sweat
If you’re feeling cramped and think it might be time to upgrade your operations, outsourcing is an ideal option. You only need the perfect third-party logistics provider who can make scaling up a breeze. Your provider can help you address peak demand without investing in physical infrastructure and personnel. Don’t forget to ask them one crucial question: “What’s the maximum amount of scalability you offer?” That way, you’ll know just how easily they can pick, pack, and ship your goods should demand suddenly skyrocket.
Customized Solutions
Third-party logistics can help your business stand out by providing customized solutions tailored to your unique needs. Each provider will offer a unique blend of software integrations, postponement strategies, and tailored production techniques – so make sure you work with an experienced 3PL who can leverage these things. Once you kick off the process, you’ll be able to tap into cost savings while still providing excellent service.
Accuracy is Everything
When it comes to 3PL providers, there’s no room for inaccuracy. If your 3PL can’t keep its inventory and orders accurate, you’re in for a world of customer disappointment and not-so-fun losses. Make sure the 3PL partner you pick employs a robust Warehouse Management System that keeps order and inventory accuracy levels high. It’s worth all the effort to find the right provider because, in this business, accuracy is everything!
Respond Quickly and Effectively
Responding quickly and effectively when issues come up is a key factor of success for any company or individual. It can be the difference between a smooth-running operation and one that consistently trips up on large and small snags. Since no one can predict the future, understanding the importance of being responsive helps ensure that whatever comes your way is addressed in an efficient and timely fashion. Don’t leave your customers hanging – make responsiveness a priority! After all, how would you feel if you were constantly waiting around for answers?
Enterprise-Level Technology
In this ever-changing technological era, how do you choose the right 3PL provider for your business? Well, it’s simple: get yourself one that provides enterprise-level tech. Nothing says ‘sophistication’ quite like having a streamlined order-to-delivery process – and that’s exactly what advanced technology solutions can give you. And while you might not require such complex systems now, who knows how future-proof you’ll want your business to be in the near future? So don’t take any risks – ensure your 3PL has robust technology from the get-go!
How Much is a 3PL?
You don’t have to worry about how much a 3PL costs; in fact – it could save you money! Bulk ordering from the same vendor can save your bottom line with discounted rates. And who knows, if you’re persuasive enough, you might even command better terms for yourself. You won’t need to invest in warehousing and haulage tech, labor costs, and the like – 3PLs can do everything for you. That means no more spending money on expensive mistakes and worrying about how to handle logistics without help.
Powering the Best 3PLs in the Business
Taking your eCommerce business to the next level is no small feat and choosing your 3PL partner can be a make-or-break factor. Your 3PL can help you manage operations, streamline customer service, reduce costs, and drive growth, but how do you know they’re right for you? Well, that’s where due diligence comes in. Weigh out all the options mentioned in this blog, and don’t settle until you find one with enough experience and savvy to fuel your eCommerce rocket ship. When it comes to WMS, ShipHero has the goods. So, if ShipHero WMS powers your 3PL, rest assured that your business will be on its way to success in no time!
So, there you have it! If you want to learn more about all things 3PL, check out our guide here, which dives deeper into this fascinating world! These are just a few reasons why choosing the right 3PL is essential to your business success.
Jul 14, 2023 | Blog
3PL Myths and Misconceptions
There are some common myths and misconceptions when it comes to using a 3PL provider. Here are a few you may have heard:
Myth: “It’s too expensive to use a 3PL.”
In reality, using a 3PL can actually save your business money in the long run. A 3PL has economies of scale and can often negotiate better rates for things like warehousing and transportation. And by outsourcing logistics to a 3PL, you’ll have more time and resources to focus on growing your business, which can ultimately lead to more revenue.
Myth: “A 3PL will take over my business.”
A 3PL is there to support your business, not take it over. The idea is to work together to create a logistics solution that works for you. You’ll still be in control of your inventory and customer relationships.
Myth: “I’ll lose control of my inventory.”
When working with a 3PL, you’ll have access to real-time inventory data, giving you more control and visibility over your inventory than ever before. Plus, 3PLs often have advanced inventory management systems in place, which can help you keep track of your inventory and reduce the risk of stockouts.
Myth: “A 3PL can only handle basic logistics tasks.”
3PLs have a wide range of capabilities, and many offer a variety of services beyond just storage and transportation. For example, many 3PLs can also handle things like order fulfillment, reverse logistics, and even eCommerce integration.
Why Do Companies Choose to Work With a 3PL Provider?
Companies choose to work with a 3PL provider despite the misconceptions surrounding the use of 3PL because it is often the most cost-effective solution for their needs. Not only can 3PLs negotiate better rates for warehousing and transportation, but they have also put in the money to develop a logistical infrastructure. While companies like Walmart might have the capacity to spend the cash required for such an infrastructure, many other companies do not. In addition to this, they are also logistics experts and can help you strategize the best approach for your business.
What Is a Reason for Using a 3PL Logistics Partner?
Let’s go back to Sarah who runs “Fashion Avenue”. Before using a logistics provider, her business was growing quickly, and she found herself spending more and more time on manual tasks. Despite her best efforts, she was struggling to keep up with the volume of orders and was frequently running out of stock. But her day-to-day changed when she decided to partner with a 3PL logistics provider. The 3PL provider was able to take over the handling of her inventory, packing, and shipping orders, and coordinating with carriers. This freed up Sarah’s time and resources, allowing her to focus on growing her business. Ultimately, picking a 3PL logistics provider saved Sarah both time and money. And it can do the same for your business as well.
What Is the Difference Between a 3PL Logistics Partner and a Broker?
A 3PL logistics partner is a comprehensive and integrated solution for your logistics needs, providing a wide range of services such as warehouse management, inventory control, transportation management, and other logistics services. They are a partner in your business and work closely with you to create a logistics strategy unique to your specific needs. On the other hand, a Broker is a middleman who connects shippers with carriers and other logistics providers. A broker is not responsible for the physical handling or storage of goods and typically provides less visibility and control over the logistics process.
What Industries Use 3PL Logistics Partners the Most?
3PL logistics partners are the go-to solution for many industries that require a full-service logistics provider. They rely on the expertise and resources this logistical partner has to offer. Industries such as e-commerce and retail, manufacturing and production, healthcare and pharmaceuticals, food and beverage, automotive, industrial and heavy machinery, fashion and apparel, and chemical and hazardous materials all extensively use 3PL logistics partners to manage their logistics operations.
How Do You Manage a 3PL Logistics Partner?
Managing a 3PL logistics partner effectively is crucial for a smooth and successful logistics operation. You should clearly communicate your logistics needs, goals, and expectations to the 3PL logistics partner, including setting performance metrics and service level agreements (SLAs) that both parties agree on. Performance should be continuously monitored against the agreed-upon metrics and SLAs, and regular data and reports requested to help measure performance, identify trends and make informed decisions.
How Can I Monitor My Third-Party Logistics Partner Performance?
Monitoring the performance of third-party logistics providers is critical to ensure that your logistics operations run smoothly and meet your business needs. So how do you monitor your 3PL partner’s performance?
- Service Level Agreements (SLAs): For example, you might set an SLA that requires your 3PL partner to ship 95% of orders within 24 hours of receipt.
- Key Performance Indicators (KPIs): For example, you might set a KPI to track the number of stockouts, the accuracy of orders, or the on-time delivery rate of your 3PL partner.
- Data and reporting: You could request a report that shows the number of orders shipped, the number of orders with errors, or the average time it takes to ship an order.
- Audits and inspections: These will help you identify issues and ensure the 3PL is following your agreed-upon procedures and standards.
Key Takeaways
Your business and your customers deserve the best. They depend on you to get their orders shipped on time and in one piece. Moving to a third-party logistics company for these needs allows you to keep your promises to those who buy your products. With this partnership, your orders can get there faster, with fewer mistakes, at a lower cost than if you were trying to achieve the same on your own. Meaning a 3PL solution is your ticket to keeping up with the competition!
eCommerce Integration With 3PL FAQs
How Do You Integrate With 3PL?
Integrating with a 3PL logistics provider is a process that requires clear communication, collaboration, and planning. Start by reviewing your logistics needs, goals, and expectations with the 3PL logistics partner, including setting performance metrics and service level agreements (SLAs) that both parties agree on. Have a plan which outlines the logistics processes and procedures and includes details such as inventory management, shipping, and returns. Finally, monitor the performance of the 3PL logistics partner against the agreed-upon metrics and SLAs, and look for opportunities for improvement.
What is 3PL in eCommerce?
A 3PL will handle the warehousing, shipping, and fulfillment of orders for an eCommerce business. This can include tasks such as receiving and storing inventory, picking and packing orders, and arranging for shipping and delivery. Using a 3PL provider can also help eCommerce businesses focus on their core business, such as product development, marketing, and customer service, instead of worrying about logistics operations.
What Are eCommerce Integrations?
eCommerce integrations refer to the connections and links established between an eCommerce platform and other software systems or tools used to manage and run an online business. These integrations can help automate and streamline business processes. Here are a few examples of eCommerce integrations:
- Payment gateways: PayPal, Stripe, Square
- Shipping and logistics: FedEx, UPS, DHL
- Inventory management: ShipHero, TradeGecko, Stitch Labs, Brightpearl
- Marketing automation: Klaviyo, Constant Contact
- Accounting and finance: QuickBooks, Xero, Zoho Books
- Customer relationship management (CRM): Salesforce, HubSpot, Pipedrive
- Dropshipping integrations: Oberlo, AliExpress, Spocket
Jul 14, 2023 | Blog
The secret to success with any eCommerce business is to keep your customers happy. Rapid order fulfillment, free shipping, and excellent customer service are some of the best ways to do that. When determining an eCommerce business plan, many fail to factor in (or underestimate) product returns.
Returns are a necessary evil for any eCommerce business, and if you don’t handle them properly, they could swiftly break you. Frequent returns negatively impact your profit margins but also destroy conversion rates, bring down customer loyalty, and threaten the survival of your business as a whole. Developing and enforcing a strong returns policy is a must if you want your business to be successful. Counteracting return fraud should also be a focus to further prevent lost profits.
In this article, we’ll cover the ways in which your return policy impacts sales and how to change your policy to benefit your business. We’ll also cover some of the best eCommerce return practices to make sure that returns don’t ruin your business.
How Do eCommerce Returns Affect Your Profitability?
To a certain degree, keeping your customers happy is about transparency. Customer expectations in the world of online shopping are high considering they can switch to a competitor’s site or Amazon in just a few seconds.
The customer experience in today’s world is critical to success. Your customers want to know that the products they are purchasing are of the highest quality and they are getting the best value for their money. Customers want to know their order will be processed quickly and efficiently and that they can contact customer service with questions or concerns, which will be resolved in a timely manner. They also want to know what your return policy is upfront, before clicking “buy”.
Your eCommerce return policy affects your business more than you may realize. According to research, about 67% of online shoppers will check a company’s return policy before buying. What do customers like and dislike about return policies? Let’s take a look:
- About 80% of consumers surveyed expect free returns.
- Only 25% of online merchants offer free returns.
- Over 83% of consumers read a company’s return policy before buying.
- About 71% of customers decide not to purchase when restocking fees are charged for returns.
As an eCommerce business owner, you need to account for all variables when it comes to profitability. While it might cost your company money to offer free returns, doing so could, in turn, boost your sales. In fact, customers are twice as likely to make a large purchase (over $1,000) online if free returns are offered.
To give you an example of what a good return policy can do for your business, consider the Zappos model. They were the first eCommerce retailer to offer a 365-day, free two-way shipping, and returns policy. What’s more, the free return shipping policy allowed customers to return their shoes for any reason. This was absolutely unheard of in 1999.
According to Zappos’ VP of Services and Operations, the company’s best customers have the highest return rates (up to 50% of everything they purchase) but they also spend the most money which makes them the company’s most profitable customers. At first glance, it may sound like their return policy is hurting business but, over time, those loyal customers end up spending more, which offsets their returns.
Simply put, a lenient return policy (when properly executed) can make a huge difference for your business and for your profit margins by creating a more loyal customer base.
What Really Drives Returns?
In order to improve your returns policy, you first need to gain a better understanding of who is returning your goods and why. Here are some of the most common reasons for returns:
- Damaged Goods – Items arrive at the customer’s door having been damaged prior to or during the shipping process.
- Mis-Delivered or Undelivered Goods – Items fail to arrive at the desired destination.
- Malfunctioning Goods – Items arrive at the desired location but do not work properly.
- Gift Returns – Items are received as gifts and returned by the giftee if they don’t want the product.
- Exchanges – Items are exchanged for another item.
- Inaccurate Description – Items received are not as described, either in terms of size or style.
- Changed Mind – The customer simply changed their mind about the product.
In addition to identifying why certain items are being returned, it is also helpful to develop customer profiles to determine who is making the most returns and how to prevent it from damaging your business. For example, some customers intentionally take advantage of lenient return policies by purchasing items to wear once and have no intention of keeping them after. There are also others who order multiple sizes and options for the sole purpose of trying them on at home.
Having developed a better understanding of your customer base and the most common reasons for returns, you can now work on developing a stronger return policy.
Tips for Developing a Hassle-free Returns Policy
Now you understand that the majority of customers will check a company’s return policy before making a purchase. It is also important to note that nearly 50% of customers will continue buying from a company if they have a hassle-free return policy. So, how do you create a return policy that improves your profit margins while also retaining your customers?
Here are some simple tips to help you develop a strong return policy that wins over customers while keeping return rates low:
Offer Returns in a Specific Time Window
Your customers want to know that if they aren’t satisfied, they’ll be able to return the item easily. For example, if you sell footwear, your return policy can state that all shoes can be returned within 30 days if they’re still in good condition.
Keep your Return Policy Clear and Concise
A clear return policy makes it easy for customers to understand which products can be returned and which can’t. If you have products that have a separate return policy, be sure to list them on the product page so customers are aware of any special return policies.
Make your Policy Easy to Find
Your customer shouldn’t have to search for it. A strong return policy should show that you stand behind your product to instill confidence in your business to build trust with the consumer.
Never Copy a Return Policy from Another Company
You should personalize your return policy to your business and products. While there are templates available to help you craft a return policy, they’re meant to be customized to your brand’s unique return policy.
Try to Keep the Language Light
Avoid phrases like “you must” and “you are required to.” You want your returns process to be easy, not scary.
Set Clear Expectations
Some customers expect immediate refunds or a gift card when returning a product. Your return policy should list out the steps involved during the return process so they know how it all works. Make it clear whether you offer an exchange for returned products or if you provide store credit or a full refund.
The bane of any online retailer’s return policy is deciding between full refunds or store credit. While there is no one clear answer as to which one to choose, we recommend surveying your customers to see what they’d prefer.
Provide Specific Return & Exchange Instructions
Tell the customer whether they need to use the original packaging or if they can use their own. Tell them if they need to include the order slip and if they can print a return label online.
Educate your Staff
If they understand the return policy, they can communicate it to your customers quickly and efficiently. If your staff is confused about the returns policy, it could lead to negative interactions with customers when they try to return products.
No company is perfect but having a strong returns policy will prevent returns from destroying your business. Even with a strong policy, however, you should be prepared to take a hit now and again. If you make a mistake with shipping or packaging, you may be forced to eat the cost yourself for the sake of keeping your customer happy. Unlike physical stores, customers can’t just walk in and return a product at no cost to you. Always keep the customer and your long-term bottom line in mind.
What About Reverse Logistics?
The term reverse logistics is sometimes used interchangeably with returns, but they are not quite the same. Technically speaking, reverse logistics refers to monitoring the life-cycle of a product after it arrives at the customer’s door. This includes the ways the product can be reused, how it should be disposed of, and other ways to create value with an expired product – it also involves the return of products from the end consumer back to the manufacturer.
In order to develop a reverse logistics procedure, you need to first think about the different stages a product goes through during a return. First, you’ll need to consider the physical shipping of the returned product – how you will get it from the customer back to the warehouse. Next, you may need to test the returned item to identify existing flaws and document any problems. Then, you’ll need to repair, recycle, or restock the item.
To help you get a better understanding of the reverse logistics portion of your company’s supply chain, there are four key analytics to consider:
- Volume – Take a look at which products are being returned most often – if it’s a large volume of the same products, you may need to consider a recall or making changes to your production.
- Percent of Sales – What percent of your net sales is lost to returns and how many of the returned items can be reincorporated back into your inventory?
- Product Condition – See if you can identify a pattern of failure or malfunction to determine what is going wrong with the product and what condition it is in when it is returned.
- Financial Value – Are the returned products able to be recycled or resold? Think about ways to use returned items to minimize the blow to your profit margins.
Once you’ve gathered this information, you can gain a deeper understanding of your company’s reverse logistics and use that information to optimize your workflow. Improving the efficiency of your reverse logistics system provides numerous benefits, including the following:
Reduction in related costs
When you plan ahead for returns and implement a system to ensure that orders are fulfilled correctly, you can minimize related costs for administration, shipping, quality assurance, tech support, etc.
Faster processing
By implementing a reverse logistics system, you can increase the speed with which orders and returns are processed which keeps your customers happy.
Improved customer retention
A poor return policy can prevent a customer from coming back, but a strong policy instills confidence in the brand and makes customers more likely to purchase again, even after you’ve made a mistake.
Recoup your losses
By using a reverse logistics system to gather data on returns, sellers can decide how best to use returned products to reduce losses. You could fix and restock the product, scrap it for parts, or repurpose it in another market.
Final Thoughts
Handling returns in a quick and efficient manner is the key to keeping your customers happy. With a strong returns policy, you can minimize the damage caused by shipping errors, manufacturing defects, and other issues that necessitate a customer return. When your customers feel like they can trust your company to correct errors in a timely manner, they will be more likely to become repeat customers.
Sep 14, 2023 | Blog
Third-party logistics (3PL) is one of the ways that a company can outsource order fulfillment. An eCommerce order fulfillment process starts when a customer submits the order and finishes when the product reaches their door.
What seems like a simple process can become quite complex depending on the storage location of your company’s inventory, the customer’s location, the size of the order, and the timetable for delivery. It becomes even more complicated when you factor in the potential for returns.
Suppose you can’t handle your eCommerce fulfillment in-house. In that case, it’s probably time to outsource and let a third-party logistics (3PL) company take over.
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to 3PLs:
Give a listen: Our newest podcast, PalletSide Chat has a few episodes that directly cover 3PLs. Take a listen here!
Jul 14, 2023 | Blog
What is eCommerce Shipping?
Fulfillment starts as soon as your customer hits the checkout button on the eCommerce platforms and purchases the products in their shopping cart. Once the site confirms the order, the chain moves forward. Small-scale eCommerce stores often store their inventory in their garages. At the same time, as you go up the scale, vendors usually employ the services of inventory storage facilities and warehouses. Upon confirming the purchase, service providers package, label, and ship the products to the destination address.
Shipping can be pretty challenging to handle on your own, especially if you have a growing business. This is the point where third-party logistics (3PL) companies can be a big help. They optimize the fulfillment process and cater to your needs, and even help you minimize logistics costs. Various companies have different shipping policies and shipping rates, such as Amazon Prime, which offers overnight shipping.
But not every business can pull this off. This is why your company’s shipping policy should be based on a combination of your budget and your customers’ needs.
What to Keep in Mind when Shipping
There are many factors that eCommerce merchants have to account for when it comes to shipping. All the seemingly small details contribute to your overall shipping costs and total transit times. These factors ultimately determine customer satisfaction and directly impact your business’s reputation and future growth. Since your company’s eCommerce shipping strategy is so important, it’s worth investing time and resources to conduct proper research. Here are some of the best practices that online stores employ for shipping, to help you decide which one may suit your business best.
Offer Free Shipping
An effective way to reduce shopping cart abandonment is to provide some incentive to your customers. Companies usually use discounts and coupons to their customers for this purpose. Offering free shipping to your customers makes them feel more comfortable about placing an order.
Contrary to what the name might suggest, free shipping isn’t actually free. Either you take the hit and pay for the fees outright, or the fee is absorbed in a way that customers pay for it. You can do this by incorporating shipping costs into the sale price of your products. This way, you can offer free shipping without compromising your own profits.
Charge Real-Time Carrier Rates
Another popular shipping strategy among online vendors is charging real-time carrier rates. This process is transparent and gives your customers a little wiggle room. How? Well, let’s say you partner up with multiple carriers. You can now let customers pick and choose the shipping option that best suits their need.
Shipping labels like FedEx, USPS and DHL have different shipping costs, and no one carrier offers lower rates across the board – the pricing depends on numerous factors. eCommerce platforms such as Shopify integrate real-time shipping rates of these carriers into their dashboard so that they are easy to handle. Customers can then choose what works for them, whether it is overnight shipping, two-day shipping, or flat-rate mail.
Charge a Flat Rate
If you don’t want the hassle of calculating shipping prices for each package, then flat-rate shipping is another reliable option. As the name suggests, this shipping option charges a single rate for each shipping order, regardless of the size or nature of the product.
This option is most suitable for businesses that sell a small variety of products with similar dimensions and weights. However, be sure not to set a very high flat rate for the items – it might scare away the customers. Postal services like USPS usually have several flat-rate shipping options.
Offer Local Delivery
If your customer base is near to your inventory storage facility, then offering local delivery is one way to go. Keep in mind, though, that this only works for local customers. You can set up the local delivery zone through the use of zip codes – customers within this area qualify as local customers.
Suppose you are catering to a large customer base outside your local area. In that case, you can still offer the local customers this option by putting an appropriate button at the checkout. The local delivery option can be set to be free of charge or at a low flat rate, depending on your budget. This option is best for strengthening your local customer base.
How to Calculate Shipping Costs
An essential part of devising your shipping strategy is determining your shipping costs. If you partner up with a shipping label, couriers base their shipping rates on a number of factors. These factors range from the package weight and size to the origin and destination address. The bigger the product is and the farther away you have to send it, the more you’ll typically end up paying for shipping.
Before settling on your company’s shipping rates, be sure to assess the following factors:
Consider your Margins
One thing eCommerce merchants should focus on is their profit margins – they determine the success of your business. Shipping fees are a significant part of the total fulfillment expenses – deal with them improperly, and you could end up losing money. Before you set up the total price of a product, consider all the little expenses like shipping costs, credit card fees, and packaging, in addition to the cost of the product. Your sale price should leave room for profit after taking care of all of these expenses.
Packaging and Marketing
From a historical perspective, packaging and shipping were just ways to get the products to the customer. The up-gradation of technology and the evolution of business strategies have now transformed packaging and shipping into a marketing opportunity. And why not – telling your brands’ story with your product packaging and creating a memorable unboxing experience is a brilliant opportunity.
Packaging inserts and other items could take the whole experience up a notch when the customer unpacks their order – think of unboxing videos online and the publicity they gather! Of course, this type of marketing is another shipping expense and would add to the total costs.
Packaging Options
While you can utilize packaging for marketing purposes, don’t lose sight of its original purpose – the package still has to securely hold all the goods. Of course, the safety level for each product depends on its nature. For example, you can ship sweaters and other clothing items in poly mailers, and they would be secure. But for fragile items with higher value, you might need to invest in sturdy boxes and maybe even packing peanuts.
While the nature and size of the product help determine your packaging needs, your customers’ values and preferences also need to be accounted for. Eco-friendly packaging options are often pricier than the standard options, but they appeal to the growing number of eco-conscious consumers. This is why it pays to at least provide eco-friendly packaging as an option to customers.
Insurance and Tracking
Insurance and tracking help increase customer loyalty among online shoppers. They help secure your products and provide you with a safety net in case of any mishap. Shipping labels often provide relatively inexpensive or even free options for insurance and tracking. Like UPS and USPS Priority Mail, some carriers offer free coverage for mail orders above a specific amount.
Customs Declaration and Forms
International shipping requires proper customs documentation that details the nature and the size of the shipment. More often than not, international shipping also comes with specific regulations and tariffs. Of course, these fees add up to the total shipping cost. Suppose you are catering to a global customer base. In that case, it’s wise to set your shipping policy so that it includes these costs. If you let the customer know of the customs fee beforehand, they won’t be surprised at the unexpected charges once they receive the parcel.
Should you Offer Free Shipping?
Now that you have an idea of what constitutes the shipping expenditures, the next step is to determine whether to offer free shipping or not. Free shipping options are attractive to customers and directly impact conversion rates, but can your business afford to eat the costs and offer them? Well, several factors determine the feasibility of this decision.
The most important factor to consider is your company’s available budget and revenue. If your profit margins are high, offering free shipping probably won’t hurt you. Moreover, package dimensions, and the destination’s zonal distance are also factors to consider. Don’t forget to further account for the shipping rates of the shipping company you have partnered up with.
So far, we have discussed costs on the business owner’s end. Your customers are another critical determinant of your decision to offer free shipping. For example, if your target audience isn’t really interested in free shipping, then you won’t have to offer it in the first place. Of course, you can only determine how important free shipping is to them after doing some A/B testing. To sum things up, every company’s needs are different. As such, their decision to offer free shipping may vary.
How to Offer Free Shipping Without Reducing Profits
Offering free shipping to your customers might not be feasible for every business. Sometimes, you end up losing more money than you make by taking this route. So, how can you realistically offer free shipping without breaking the bank?
Here are some pointers:
Decide if Shipping is a Marketing Expense or COGS
If you want to offer free shipping, first determine how it affects your business. As stated earlier, you can utilize shipping as a marketing opportunity. If so, then free shipping expenses can be considered as marketing expenses. This is a profitable investment if it drives your sales up.
If free shipping isn’t doing much for your sales though, then the shipping costs might be an addition to the Cost of Goods Sold (COGS), and you may need to adjust your sale prices accordingly. Of course, new businesses might need to experiment a bit with free shipping to truly understand its impact. Test it first to determine whether the shipping expenses are a marketing expense or COGS.
Offer Free Shipping to Limited Shipping Zones
One way to realistically offer free shipping is to limit the free shipping to specific zip codes and areas. For example, a US-based business might offer domestic free shipping. Still, since shipping to other countries like Canada and Australia comes with tariffs and customs fees, the free shipping offer might not extend to those countries. Shipping carriers base their rates on the zonal distance of the shipment, so it might be expensive to offer free shipping to far-flung areas. The point is to establish your free shipping policy on your carrier’s shipping rates and limit free shipping to nearby areas.
Surcharge your Expedited Rates
To offset your free shipping expenses, you can increase the rates of expedited shipping. This only works if your expedited shipping option is attractive enough. As an example, between free shipping with 10-day transit time and expedited shipping with 2-day transit time, chances are both options will attract a fair share of customers. So, you’ll be able to offer free shipping to the customers by surcharging the expedited shipping rates.
Offer Free Shipping with a Minimum Purchase Amount
Setting a shopping threshold for free shipping is among the best practices employed by eCommerce platforms that offer free shipping. Amazon Prime is such an example. The logic behind it is simple enough. Customers must have a fair number of products in their carts before they can take advantage of free shipping. The profit margin from the sold goods covers the free shipping expenses.
eCommerce shipping FAQs
How do eCommerce Sites Calculate Shipping?
eCommerce sites like Shopify have integrations or built-in shipping cost calculators that determine the total shipping costs based on several factors. These include the shipping partner, package dimensions and weight, the zonal distance between the point of origin and the destination, and the transit time.
How is Shipping Calculated?
You can calculate the total cost of shipping through several determinants – some companies use shipping software for these calculations. These shipping costs include packaging fees, transit fees, and in the case of international shipment, tariffs and customs fees. The transit fees depend on the carrier rates that differ for normal, flat-rate, and expedited shipping options.
How does eCommerce Delivery Work?
eCommerce stores either go for self-fulfillment or employ the services of a third-party logistics (3PL) company. In the latter case, the fulfillment partner handles shipping by teaming up with different couriers. Once the eCommerce store confirms the order, the fulfillment partner sources the product from an inventory storage facility, packs it, and sends it out for shipping. The courier then ships the product to the destination.
What is the Cheapest Way to Ship for a Small Business?
The cheapest shipping option for a small business is the mail service. USPS is a great shipping carrier with affordable rates. If you want to cut down on the transit time, you could partner up with a third-party logistics company – they also sometimes offer discounts.
eCommerce shipping is a vital part of the supply chain, and one of the most expensive stages too. To avoid hefty transit costs, delayed orders, and unhappy customers, optimizing the shipping process is vital. A powerful eCommerce shipping solution like ShipHero can help you meet your business goals and optimize your shipping process.
Jul 14, 2023 | Blog
Whether you’re an established eCommerce brand or have just started, you know that the tools you use are important to making your business run. And one of the most important tools you can have is software that works.
The right Warehouse Management System (WMS) will handle automation rules, receiving, picking, packing and rate shopping in just a few simple steps. ShipHero does this by making the complicated, easy – not simple, just easy.
We’ve been working to provide our clients and prospects with more than just awesome software – we want to share our best practices and the lessons our clients have learned as they use our WMS to grow their own brands. If you want to learn more about warehouse management systems, you’ve come to the right place. Read on for a complete guide on warehouse management systems in 2023.
What is Warehouse Management?
Warehouse management is the process of overseeing all operations and activities in a warehouse. This generally includes receiving, picking, packing and shipping goods, planning workloads, training staff and handling customer returns.
While warehouse management is barely visible to customers, it’s integral to ensure goods are delivered on time. Good warehouse management ensures every activity is run as efficiently as possible, from maximizing inventory storage to organizing goods for easy picking to ensuring returns are handled professionally.
However, running a warehouse can be costly, especially for smaller eCommerce businesses. Instead of managing their own warehouses, they sometimes hire third-party logistics (3PL) companies. Outsourcing warehouse operations helps eCommerce businesses focus on expansion and sales instead of spending considerable time and resources to manage inventory and take customer orders.
What is a Warehouse Management System?
A warehouse management system (WMS) is software that assists you in the warehouse management process. A warehouse management system gives you real-time updates on your inventory levels, warehouse team productivity and order fulfillment progress.
Warehouse management systems are essential for managers because they can use them to gauge work performance and spot improvement areas. They also provide managers with the data and reports to make informed business decisions.
The best warehouse management systems assist your company with five key processes:
Inventory Receiving and Storing
One of the primary purposes of a warehouse is to receive and store inventory items from a manufacturer or distributor. Warehouse management systems let you scan and organize each new item upon arrival and storage, so you’ll know which items have arrived and where they’re stored.
Inventory Tracking
Inventory tracking ensures you get real-time updates on your stock levels. This helps in determining how many items you can sell and whether you should order more items based on accurate forecasts of consumer demand.
As your eCommerce business grows, inventory tracking will become even more important because you may handle hundreds of goods and dozens of different product types simultaneously. Manual inventory tracking is more prone to human error and may result in costly mistakes.
Picking and Packing
When employees pick and pack items, they take the goods from warehouse shelves and pack them for shipping. Warehouse management systems can generate picking lists that instruct your warehouse team to pick items as efficiently as possible.
Your warehouse management system also automatically generates shipping labels, which packers attach to products after packing them.
Shipping
Warehouse management solutions let you track the shipping progress in real time. You can also show the shipping progress to customers so they know where their items are at any time.
Reporting
Your warehouse management system should provide advanced reporting features that cover order fulfillment accuracy, staff inventory forecasting and warehouse expenses.
Automating report creation means you don’t have to spend much time gathering data. Instead, you can immediately use the insights from these reports to improve your warehouse operations.
Who Are Warehouse Management Systems For?
Warehouse management systems are useful for any company that operates a warehouse, regardless of industry. Here are examples of industries that can benefit greatly from WMS:
Manufacturing
Manufacturers need to have good warehouse management systems because they have complicated warehouse operations that may involve combining multiple materials into new goods.
A WMS can help manufacturers track each material as they’re sent in for processing and alert the staff to reorder when stocks are running low to keep production running. The system can also regulate production line speed based on consumer demand forecasts, preventing overstock or understock.
Retail and Consumer Goods Chains
Managing a retail chain is challenging because you operate multiple stock rooms in each store. A warehouse management system helps retail business managers by tracking items as they move from your main warehouse to individual stores. It also monitors stock levels in each store and puts orders in whenever an item is running low in stock.
Food and Beverage
Food and beverage warehousing is trickier than most because products often need to be stored at specific temperatures and have expiration dates. A WMS for F&B manages shelf placement to ensure everything is stored in its appropriate places. It also regulates picking and packing to guarantee all items shipped don’t expire before they reach store shelves.
Third-Party Logistics (3PL)
Warehouse management is at the core of every third-party logistics company, and they need a warehouse management system to excel in their job. Many 3PLs use adaptable warehouse management software to meet the various demands of their clients and juggle multiple warehouse operations simultaneously.
Some third-party logistics companies even choose a baseline warehouse management system and develop their own modules according to their needs, creating client-specific dashboards tailored to every job.
Why Should I Use a WMS?
You should use a WMS because manual warehouse management is prone to human error, especially if you run a large eCommerce business.
Here are five other reasons why you should use a WMS:
- Enhance Inventory Management Efficiency
Warehouse management systems improve your inventory management by monitoring its levels, increasing pick and pack efficiency and improving order fulfillment processes. By automating these various inventory management processes, you’ll get all the information needed to run your warehouse smoothly without spending precious time asking around or looking for data.
- Improve Customer Happiness
While customers don’t directly interact with your warehouse, it plays a big part in their satisfaction. Smooth warehouse operations with the help of a WMS means customers receive orders quickly and accurately. Even if their item is defective, a good WMS can help you handle product returns to ensure customers get their replacement goods quickly.
- Get Larger Profit Margins
The right warehouse management software improves your sales and order processing speed without adding new warehouse staff. This means you can process more items and sell more products without a considerable increase in cost, ultimately improving your profit margins.
- Gain Insights for Future Improvement
Warehouse inventory management systems generate reports on essential warehouse performance parameters like order accuracy, orders fulfilled and staff efficiency. By analyzing these reports, your management team can develop plans to improve your eCommerce business further down the road.
- Stay Updated With Local Regulations
In addition to keeping up with customer demand, businesses must also follow local regulations and rules. A good WMS should give you the tools necessary to stay compliant with these regulations by recording real-time data, making your company easier to audit.
How Do Warehouse Management Systems Work?
Warehouse management systems work by monitoring and automating key warehousing processes. Here’s a look at how warehouse management systems help you in those areas:
Inventory Receiving and Shipping
Tracking the goods that enter and exit your warehouse is one of the primary functions of a WMS. For incoming items, the WMS will register them in the system and send the products to the appropriate shelf or container for storage.
For outgoing items, the WMS will show you which shipping service is delivering the products and provide real-time tracking information. The WMS can also show the tracking information to the customer, so they know when their products will arrive.
Inventory Management
A WMS helps you track and manage physical inventory levels in the warehouse. When inventory stock starts to get low, the WMS can notify you to order more from the distributor or supplier before stock runs out.
Picking and Packing Orders
When a customer order comes in, your warehouse crew picks and packs the items to get them ready for shipping. Warehouse management systems create picklists to help your team pick items faster. The WMS also creates shipping labels, so the items can be ready for shipping as soon as they’re packed.
Warehouse Performance Reporting
Real-time warehouse reporting is one of the greatest strengths of a WMS. You can easily get insights into your warehouse’s operation by generating real-time reports. Instead of spending hours gathering data, you can immediately use this information to make informed decisions and improve your warehouse team’s performance.
Advantages of Using a Warehouse Management System
While it may be a considerable investment, a warehouse management system pays for itself in many ways. Here are eight great benefits you’ll get by implementing a WMS:
Inventory Control
Inventory control involves managing your warehouse’s inventory levels to prevent understock and overstock. Automating inventory control through a warehouse management system means you don’t have to spend time checking inventory levels regularly. Instead, your system will notify you when it’s time to order new products.
Traceability
Transparency and traceability are essential for both businesses and customers. Tracking where products are in real-time allows you to identify bottlenecks and delays in the supply chain. On the customer side, real-time product tracking ensures they know when their items are arriving.
Some product safety regulations also require your goods to be easily traceable to prevent fraud and counterfeiting. From a safety standpoint, knowing where a product comes from and where it’s going also makes product recalls easier when necessary.
Improved Customer Service
The relationship might not be immediately clear, but a warehouse management system contributes to customer service. Your WMS gives you real-time updates on how many items are in stock and which ones are out of stock, which means customers likely won’t order something that’s out of stock.
Warehouse management improvements help you ship products quicker, satisfying your customers’ demands for fast deliveries.
Task Management
There are many tasks in your warehouses or distribution centers, like picking and packing orders, loading trucks and handling returns. Your WMS can create these tasks and assign them to the relevant employees immediately based on where they are in the warehouse.
Your software’s task management features also prevent workers from walking from one end of the warehouse to another when completing their work by assigning them to well-defined work zones, increasing overall warehouse efficiency.
Containerization
Containerization is when you merge multiple individual shipments into a single container to ship together. You can save on shipping costs by sending multiple items in one big batch.
Your WMS assists in containerization by choosing which items go into which container, ensuring they stack well and nothing gets crushed or damaged in transit.
Increased Speed of Orders
A warehouse management system increases the overall order processing and fulfillment speed by making product picking, packing and shipping more efficient. You can deliver more items to more people by increasing order speed, increasing total revenue and customer satisfaction.
Labeling
Without a WMS, you may need to create shipping labels manually, which takes a lot of time and effort. A warehouse management system can automatically generate shipping labels, so your warehouse team only needs to attach them to packages before sending them to the carrier.
Labor Tracking
Labor management features provided by a WMS track your warehouse staff performance in real time, giving you insights into how your team works. Tracking labor lets you identify possible logistics bottlenecks, pinpoint improvement areas and learn which employees may need extra training to succeed.
Types of Warehouse Management Systems
There are four warehouse management system types, each with unique benefits and drawbacks. Here’s a look at each WMS type:
Standalone System
A standalone warehouse management system is the most basic WMS in this list because it only offers warehouse management features and nothing else. A standalone WMS is usually installed on-premise, meaning the vendor will come to your warehouse and install a physical server for the WMS.
Standalone warehouse inventory management software is typically the most affordable due to its limited features, but it may not be enough if you need extra functionality from your WMS. Standalone warehouse management systems are best for businesses without a large software budget and limited warehousing needs.
Cloud-Based System
A cloud-based warehouse management system means the vendor provides its services through the Internet without any physical on-premise installations. Cloud WMS users usually pay a subscription fee to use these services instead of an upfront expense, making them more affordable for new businesses without large premises.
Cloud-based WMS is scalable, meaning you can pay for extra accounts and features if necessary. It’s also easier to update since the vendor can do it online. However, as with most cloud-based services, you need a strong and stable Internet connection to make the most out of a cloud-based WMS.
ERP Module
ERP (enterprise resource planning) is a software bundle that merges numerous business functions like accounting, inventory and human resources in one package. It’s a good choice if you want to merge all your company information into one dashboard that’s accessible by all employees.
While ERP systems often have a warehousing or inventory management module, it’s not the system’s core functionality. Additionally, implementing ERP is often expensive and time-consuming, so you may be better off implementing dedicated warehouse management software if you can’t commit to full ERP implementation.
Supply Chain Modules
Supply chain management systems work at a much broader scope than a WMS but generally still provide warehousing features. These modules work best for companies that work with numerous supply chains, like manufacturers and retail businesses.
How to Choose the Best WMS
Choosing the best WMS means picking the one that caters to all of your warehousing needs at a reasonable price. Here are five tips to help you pick the right WMS for your business.
Identify Your Needs
You should first identify what you need out of warehouse inventory management software. Create a list of feature priorities based on your requirements as a guide when shopping for warehouse management systems. Don’t blindly follow the latest warehouse technology trends because what other companies need may not be what your company needs.
Define Your Budget
Ensure you have a budget before shopping for a warehouse management system. Search for popular WMS providers online, and estimate how much you’re willing to spend on the features you need.
Consider Your Company’s Product Demand
These days, manual demand forecasting can be unreliable, and you may find yourself out of stock in periods of high demand or overstocked in periods of low demand.
If your product demand fluctuates according to the seasons, it might pay to choose a WMS with demand forecasting. A warehouse management system’s demand forecasting can use historical sales to predict popular product demands, letting you increase or reduce orders based on the forecasts.
Research the Vendor
Purchasing a warehouse management system isn’t a one-and-done deal. You need to build a relationship with the vendor because they’ll provide technical support and apply updates regularly. To pick the right vendor, note how helpful their representatives are and how in tune they are with your needs and requirements.
Plan for Scalability
When shopping for warehousing software solutions, make sure they provide you with room to grow. Ask your vendor representative about how much scalability and customizability their software has – this ensures it can meet your business needs even when your company grows.
Key Takeaways
A warehouse management system makes your warehouse processes more efficient through various features like automated reports, pick list generation and shipment tracking.
While a good WMS offers many benefits, it’s often a major financial commitment, so you need to choose the right one before implementing it. To do so, you need to identify your company’s needs, define a budget and pick the right WMS provider that can scale with your business.
Warehouse Management System FAQs
How do you improve warehouse management?
You can improve warehouse management by measuring your current performance and identifying areas for development. From there, you enhance your warehouse management by:
What does a WMS do?
A WMS (warehouse management system) assists you in the warehouse management process by giving you real-time inventory updates, automatic report creation and demand forecasting, among other features.
What’s the cost of a warehouse management system?
The cost of a warehouse management system varies depending on the vendor and the features you choose. Expect to pay at least $1,500/month for an entry-level cloud warehousing system.
