Logistics costs refer to the costs of handling logistics of an ecommerce business, i.e. managing, storing and transporting inventory and packages for fulfiling online orders. The COVID-19 pandemic caused unprecedented disruptions in the supply chain; consequently, post-pandemic logistics costs have risen and are cutting into ecommerce sellers’ profits. Thus it is becoming important for ecommerce sellers to analyse their expenses and reduce logistics costs- from inventory to transportation.

What are the types of logistics costs?

Logistics costs can broadly be divided into the following categories:

Warehousing and inventory management

To fulfil an order, you will need to store inventory, whether in an ecommerce warehouse, a rented facility or your home. The more your inventory, the larger the space required to store and maintain it and the higher would be the expenses.

Sometimes, ecommerce sellers split inventory across multiple warehouses and incur the cost of maintaining all of them. Moreover, inventory is to be tracked and maintained across the supply chain through an IMS (Inventory Management System) to ensure optimal stock levels and lightning-fast order fulfilment.

Transportation

Transportation costs include the cost of transporting inventory to ecommerce warehouses as well as last-mile delivery. Last-mile delivery is the process of delivering an order to a customer using a courier service.

In case customers initiate returns, then ecommerce sellers also have to collect the returned orders and bring them back to storage or fulfilment facility.

Labour

The third major type of logistics cost is labour. Manpower is required in the order fulfilment process, such as picking and packing orders. Moreover, if you have a customer support cell, you would also have to incur expenses to maintain it.

How to reduce logistics costs?

Let’s look at how ecommerce sellers are reducing logistics costs:

• Ecommerce sellers can calculate their monthly expenses to assess their expenditure and income and get a rough idea of much should be saved to ensure profitability.

• You can bring fulfilment in-house if your daily order volume is low and manageable on a small scale.

• Ecommerce sellers can use a robust IMS (Inventory Management System) to prevent stock-outs which can create panic and lead to excessive costs to replenish inventory quickly.

• You can optimize inventory levels and save the cost of maintaining excess inventory by analysing your average daily sales.

• You can store inventory across fulfilment centres of robust 3PLs (Third-party logistics) like Eshopbox instead of renting your facilities which can be more expensive.

• You can use a technology-driven pick-and-pack system to reduce the need for manpower and the chances of human errors.

• Ecommerce sellers can have tie-ups with multiple courier partners to get the best shipping rates. On the other hand, you could also take advantage of negotiated shipping rates that Eshopbox can provide.

• You can choose delivery partners that optimize route selection to deliver orders faster and cheaper.

• Ecommerce brands can significantly reduce overall logistics costs by partnering with tech-enabled and robust 3PLs like Eshopbox.

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