7 Ways to Optimize Your Online Retail Logistics Management Strategy
If you’re looking for expert ways to optimize your logistics management strategy to peak performance ( optimum efficiency and profitability), you’ve come to the right place.
As Covid pushed more retailers online, they have had to optimize retail supply chains and adapt retail logistics for hybrid markets.
The secret to a well-optimized logistics management strategy is considering inventory and warehousing backend operations and frontend customer journey touchpoints. Additionally, the fact that online competition and customers' expectations are higher means that it’s essential to adapt your logistics strategy so that it's focused on speed, optimization, and automation.
Ultimately, retail logistics and merchandising management should be working together to boost retail logistic management strategies.
In this post, we show you key logistics management strategy hacks designed to do just that, including:
But first, here’s a recap on what logistics management is and why getting it right is vital for both off- and online retailers.
What Is Retail Logistics Management?
Retail logistics management involves directing resources, be it products or manufacturing resources, through the right channels to meet demand.
Additionally, warehousing organization, order processing, backend administration, and information processing all fall under the umbrella of logistics management, ensuring the effective movement of materials and/or resources to streamline a smoother supply or production process.
In short, it ensures all retail logistics activities work in sync for productivity and profitability, meeting (and creating) customer demand with minimal cost while increasing supply chain visibility. It involves:
- Inventory procurement and processing
- Order fulfillment and tracking
- Inventory management
- Shipping and returns management
- Retail merchandising (off- and online)
Why Online Retailers Need to Optimize Logistics Management Strategies
Logistics management is about more than just boosting productivity. It’s about creating a link between production (or supply) and your end customer. Ultimately, it helps you drive customer needs and fulfill demand while streamlining backend processes and admin to reduce costs, speed up service, and retain customers.
When optimized correctly, retail managers and teams have access to more accurate historical data and real-time supply/product movement. This data is invaluable if they want to tweak strategies to prevent disruptions along the supply and logistics chain — disruptions that cost in terms of potential revenue and expenses.
Here’s a breakdown of the top benefits of optimized retail logistics management:
- More streamlined supply chain management
- Improved customer shopping experience
- Greater control over operational costs
- Reduced resource wastage while improving delivery productivity
- Better-optimized inventory management
- Increased profitability
- Reduced inventory risk
Now, let’s get down to business and go through seven logistics management strategy hacks for medium to large retailers.
7 Ways to Optimize Your Logistics Management Strategy
1. Incorporate Newer AI and Automation Technologies
We know that automation plays a vital role in upgrading and streamlining your retail logistics management. In fact, it’s almost impossible to compete without it. By harnessing the power of AI and machine learning, retailers have access to real-time data and automatic optimization that not only boosts revenue, but drives down costs.
Ultimately, retailers need automation to streamline task management and customer service.
Retail logistics management automation tools are designed to improve efficiency and lead time, while avoiding costly mistakes and it is vital if you want to stay competitive.
Here are some top automation tools that help medium to large brands automate the important elements of retail logistics management:
- Outbound logistics automation: ShipBob and Order Tagger
- Inventory and demand planning and automation: Cogsy
- Warehouse management and automation: NetSuite
- Fulfillment automation: Acctivate
- Retail merchandising automation: Kimonix
2. Review, Measure, and Upgrade Retail KPIs
In order to be able to optimize your retail logistics management strategy, you first need access to real-time data. And before you can make sense of the data, you need to have laid out the right retail and marketing KPIs.
Ultimately, you want to ensure that every improvement you and your logistics management team make to the strategy is based on clear, measurable progress that is defined by predetermined KPIs. Logistic metrics are used to measure strategy performance and guide optimization. They include transportation, supply chain, and warehouse metrics, as well as business metric goals such as:
- Delivery times
- Equipment utilization rates
- Inventory accuracy
- Inventory-to-sales ratio
- Inventory turnover
- Number of shipments
- Order accuracy
- Picking accuracy
- Pick and pack cycle time and costs
- Shipping time
- Transportation costs
- Use of packing material
- Warehousing costs
- Order-to-delivery time
In short: you should be planning ahead and setting the right goals.
3. Strengthen Retail Logistics Backend Admin Management
An often-overlooked area worth tweaking when looking to improve your retail logistics performance and optimization is your admin systems.
Even the slightest tweak to your admin systems and/or SOPs (Standard Operating Processes), or your logistics team arrangement, can have significant implications for your logistics strategy.
Why? Because when streamlined, your backend admin will:
- Help eliminate human error (and decrease costs)
- Improve communication between retail departments and teams (information flow)
- Strengthen team connection
These all drive efficiency, optimize for important KPIs, and increase overall productivity, improving retail logistics management and results. This is even more important as more and more omni-retailers are having to put extra focus on online logistics.
Here are three ways you can optimize your admin and team management:
Go Back to Your System Foundations
Whether your logistics managers prefer TMS (transportation management system) or WMS (warehouse management system) tools depends on your brand’s specific needs. However, you want to review your backend systems and tools on a regular basis to ensure you have a solid foundation for your logistics management strategy.
Evaluate and Upgrade SOPs
Retail logistics SOPs set the foundation for how your departments manage logistics tasks by laying out critical day-to-day instructions.
One non-optimized or non-tested procedure can throw out your whole backend process, slowing down logistics and/or increasing the chance of mistakes. Both can hurt your business in terms of cost and customer satisfaction. But when tweaked, it can essentially help you automate and streamline your logistics by:
- Improving team communication and information flow
- Ensuring compliance
- Controlling costs
- Accessing and distributing the right analytics in real-time
- Improving safety
- Preventing human error and shipping duplication
- Strengthening employee connections
If you don’t already have a logistics SOP and you’re looking for ideas to build one from scratch, you can review these logistics SOP templates.
Building Strong Backend Partnerships
Don’t underestimate the power of building strong relationships with your external logistics partners. This includes partnering with third-party warehousing, shipping, manufacturing, or retail SaaS to automate vital logistical elements and streamline the entire delivery process.
Ideally, you want to find partners that fill in critical logistical gaps, whether administrative, digital, or physical equipment. They should be using advanced automation, technologies, and equipment that will help you boost logistics effectively, and ultimately, demand.
4. Put Customer Experience and Satisfaction First
Improving customer experience and satisfaction goes a long way to improving logistics management. At the same time, due to the blurring of the lines between digital and physical channels, logistics management is becoming even more crucial in improving customer experience.
This means your logistics management strategy plays a vital role in your customer satisfaction and shopping experience, while building strong customer experience journeys contributes to better retail logistics management strategies.
Let’s say you have supply chain issues outside of your control. How you manage that slowdown (customer service) and pivot in real-time to meet customer demands and expectations will impact your logistical process and your overall brand impression. If you haven’t streamlined your customer experience and incorporated real-time updates, you will be putting extra pressure on logistics management in this situation while simultaneously hurting your retail brand.
It doesn’t stop there. By combining marketing strategies with retail merchandising and logistics management, you can take customer experience and satisfaction to the next level: end-to-end connected and unified retail experiences driven by logistics and marketing.
Ultimately, isn’t the goal of your logistics management to satisfy a customer’s wants and needs?
Let’s look at some customer satisfaction stats from Forbes and OptimoRoute surveys that can help drive your logistics strategy upgrade decisions:
- Customer brand experience: 80% of shoppers say they will abandon a retailer after three bad experiences.
- Logistics marketing: Free shipping increases a customer's likelihood of buying by 75%, while simple and/or free returns more than double (60%) a customer’s likelihood of buying.
- Shopping experience: Over 87% of customers say real-time order tracking improved their buying experience.
5. Reduce Costs by Reorganizing Transport Management
It shouldn’t surprise you that transportation, more often than not, makes up the most significant logistics cost share. This makes it one of the most important elements of your retail logistics to tackle for efficiency.
Why? Because the most minor tweaks can influence your brand's ROIs, yet its admin optimization is sometimes overlooked when managing logistics. Think of transport cost and time efficiency management as finding the change under the sofa cushions. Even if you’re outsourcing transportation, there is room to improve.
Instead, by reviewing and tweaking your transportation for both time efficiency and cost, you can increase margins and reduce time wastage, both of which optimize your logistics management strategy and improve profitability.
To get you started, here are some ways your logistics team can reduce transport costs in logistics:
- Outsource and/or automate warehousing and fulfillment
- Explore shipping consolidation opportunities
- Have a preventive maintenance strategy in place
- Renegotiate outsourced logistics costs
- Improve inventory planning and management
This brings us to another top way for stores to optimize their retail logistics strategy: investing correctly in inventory and warehouse management.
6. Invest Well in Inventory and Warehouse Management
Without proper inventory and warehouse management, it is impossible to meet important retail KPIs, including inventory control and lead times. Why? Because inventory and warehouse management affects wastage, tracking, and turnaround time, all of which determine the efficiency and speed of fulfillment operations. The smallest of upgrades make a huge difference.
Let’s say you are an on- and offline retailer who has increased orders over the last year. You may find that simply changing vertical column inventory storage gives you more space for inventory and for using industrial weighing machines. This in turn helps streamline product weighing, which speeds up operations and ultimately reduces time and costs.
7. Adopt Sustainability Trends to Drive Down Costs
Another way you can reduce logistics costs while optimizing management is by adopting new sustainability trends, AKA green logistics.
For instance, by implementing an anti-idling and emission reduction policy, you not only reduce emissions but save on unnecessary costs and/or time-wasting, both of which affect ROIs. This is even truer as sustainability becomes more mainstream in logistics and fulfillment, opening up to less expensive tools and alternatives.
It is also a crucial brand selling point as more and more customers opt for retailers that include sustainability initiatives, with as many as 57% of consumers willing to change their online purchasing habits to help reduce their environmental impact.
Some of the latest logistics sustainability practices and trends include:
- Right-sizing or flat-pack (think IKEA) packaging
- Digitized admin with paper-free documentation delivery
- Alternative vehicle or fuel technology usage
- Popup warehousing
- Advanced product merchandising based on retail inventory KPIs to limit wastage
- Sustainable delivery option incentives at checkout
- Logistics partners who focus on batched ordering and reduced-emission transport
Final Thoughts: Review, Tweak, Test, and Optimize Your Online Retail Logistics Management to Peak Performance
There you have it, seven ways to optimize your retail logistics management strategy to increase efficiency and decrease costs. In other words, to boost profitability. But here’s the thing: there is no magic button to improve your retail logistics management strategy.
Each brand, market, structure, and niche is different, and a winning management strategy comes from continuously reviewing, tweaking, testing, and optimizing for peak performance. This means you want to test and tweak all of these top retail optimization hacks adapted to your specific needs and goals, including:
- AI and automation technologies
- Retail KPIs
- Retail logistics backend admin management
- Customer experience and satisfaction
- Transport management
- Inventory and warehouse management
- Green logistics
And, of course, feeding important data from logistics to your marketing and merchandising department so that all teams are working together to boost sales and efficiency, while driving down costs.