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Tuesday, December 20, 2016

Importance of Logistics In E-Commerce

Logistics, involving the transit of goods from the warehouse to the final consumer, is a very crucial link in an e-commerce transaction chain.

An e-commerce transaction begins with a customer placing an order on the company website and ends with the product being delivered to the customer's address within the promised time frame. In case of a Cash On Delivery (COD) transaction, cash is collected at the time of delivery.


Also, in case of any return, the product needs to be collected from the customer and sent to the warehouse/inspection center of the e-commerce company. 

According to Nielsen, "for e-commerce to function efficiently, it is necessary to have a consistent logistics system that will provide support through warehousing, inventory, delivery, invoicing, handling cash-on-delivery and product-returns. 

It is common for e-commerce companies to outsource the logistics function to a 3rd party provider (popularly referred to as 3PL in Industry parlance). 

It is then up to the Logistics service provider to ensure: 
  • Warehousing and Inventory Management
  • Prompt movement of goods post order confirmation. 
  • The product does not get damaged in transit. [The importance of packaging and handling arises here]
  • The right product is being delivered to the right address. 
  • The product is delivered within the promised time frame. 
  • In case of COD transactions the correct amount is collected. 
  • Returns are collected on time. 
  • Delivery staff are cordial in the way they interact with customers. 

Given the fact that delivery of the right product within the promised time-frame is such an important part of an online transaction, an e-commerce company must try to retain some sort of control over the process, involving movement of goods from the warehouse to the final customer, so that any failure on the part of the logistics provider does not hurt the brand value of the e-commerce company.

In an e-commerce transaction, often the only 'physical' interaction that customers have with the company is through the 'delivery staff'.

It is important, therefore, that the delivery staff are cordial in the way they interact with the customers, both at the time of delivery and return pick up, as this influences the perception the customer forms about the company to a considerable extent. Delivery and return processing remains one of the most crucial aspects of the e-commerce value chain.


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