The retail industry is a significant player in global trade. Retail logistics, in turn, is the key to delivering the right product to the right customer at the right time. Building an effective retail supply chain can meet the rapidly growing consumer demand and make your products available anytime and anywhere.
What is retail logistics?
Retail logistics is transporting goods from the production source to the customer. Although put in simple words, retail logistics involves the whole sequence of operations required to deliver the items successfully. The modern way of making purchases, including online platforms, has already become casual. It is hard to imagine all actions needed to organize the supply chain properly.
Logistics processes in the retail industry usually boil down to two related categories: inbound and outbound logistics. Regarding inbound retail logistics, materials or goods move from the supplier to a designated internal spot, usually arranged in a warehouse. It is where one of the most critical elements of the retail supply chain steps into the game.
Warehousing in the retail industry
It would be impossible to manage any retail trade without the warehouse capacity that serves as a reliable depot for the supplies you want to offer to your target audience. That is why the warehouse arrangement is a critical step in preparing for retail operations. Warehouses differ in size, structure, applied technologies, and business orientation. Depending on these characteristics, modern warehouses can be divided into several types.
Public warehouses are a prevalent option among the owners of small to midsize businesses. They are affordable and allow you to share the space with other suppliers. In other words, you can rent the public warehouse space to store your goods for a certain period. Besides, you can use additional services like inventory management and control.
Private warehouses comprise extensive storage facilities and remain a good choice for large-scale suppliers who often hold wholesale logistics operations.
Distribution centers keep goods for short periods (typically 1-2 days) due to the product’s specifics. It is a good choice if you plan to ship foods, beverages, flowers, or other perishable items.
Climate-regulated warehouses provide the opportunity to store goods that require temperature and humidity control. It concerns food, frozen products, consumer packaged goods, pharmaceuticals, etc. Usually, climate-control warehouses offer freezers or environments of a particular temperature regime.
Automated warehouses are updated, modernized spaces that apply technology to replace numerous manual operations like sorting out or item retrieval. These warehouses are empowered by inventory software and stand out with their work efficiency. That is, you will probably never face common stock issues. Various computer systems constantly stalk the state of your products. However, the active use of technology considerably affects the price of renting such a space.
After being placed in the warehousing space, the products are ready for retail operations. It is where the outbound retail logistics takes off. This process primarily starts with the customers’ order placements. Then, retailers receive the order, check if the wanted goods are in stock and in good condition, and pack and prepare the items for shipping. After that, the actual process of transportation takes place. If everything has been managed correctly, in the end, customers receive their orders on time.
Technology in retail
Retail logistics remains a constantly growing component of the global supply chain process. Over the last decades, the retail supply chain has gained significant importance due to the rapid development of technology and a global shift to online purchasing.
If earlier buyers completed their orders through specialized suppliers, giant retail companies like Walmart, Target, and Amazon have simplified the shopping process. Consequently, it has become impossible to imagine profitable retail trade without redirecting business towards technological innovations.
According to statistics, e-commerce sales are expected to overrun $6 trillion in revenue by 2023. That is why staying up to date with tech trends in retail logistics is critical. Your priority as a retailer is to avoid exceeding the stock and running out of it. It is where digital transformation steps in. By gathering data and analyzing it, you can effectively forecast customer demand. Also, you’ll have an insight into your stock availability at any time.
Such insights are beneficial due to the retail demand volatility. While it is easier to count the order volume for customary products, you are less likely to predict the request for apparel and all the goods actively involved in marketing schemes.
Moreover, modern software systems can help reduce costs by managing warehouse operations. Thus, you will always know how much space you need to store goods without overpaying.
Functions of the retail supply chain
A well-organized supply chain is probably the most substantial factor contributing to the availability of goods on the store shelves and online marketplaces. The retail logistics system performs various functions that streamline the process of items’ delivery.
Developing the product variety
In the retail industry, this is logistics that our consumer choices depend on. That is, we will not get a fancy clothing unit or delicious foods without them being delivered to our favorite store or in its online version. Effective retail logistics extends the overall volume of shopping options. Thus, we can pick whatever we want from the shelves.
According to numerous studies, empty supermarket shelves harm the buyers’ psychological state and sometimes break their trust in certain suppliers. Active production of various goods is not enough. You also have to keep them present for your customer constantly.
Adequate warehousing and order fulfillment
Retail logistics managers often overlook warehousing operations or don’t count them as an essential step of a proper retail logistics organization. However, it would be impossible to complete the order fulfillment without an effective warehouse strategy, avoiding supply chain disruptions.
Even if you cannot ship the product instantly, you can satisfy the customer demand by delivering the item from your warehouse space. Using a warehouse will always stay in the race and never lose time and money for going back and forth to get the necessary goods.
Cutting business losses
Retail and logistics management pays much attention to keeping inventory on track with the help of electronic systems. By doing so, retailers reduce business losses and avoid numerous shipping errors or order returns.
Applying tracking software in warehouses is probably one of the critical tools to cut possible business losses. It will update you on the product’s availability and notify you when some of the goods have expired or been damaged. Moreover, modern retail logistics often practices demand forecasting, which helps to plan the purchase amounts more precisely.
Key drivers of successful retail logistics
Like any other industry directly connected to logistics operations, the retail supply chain leans on several vital points. They aim to optimize the delivery flow and, as a result, encourage potential customers to repeat their purchases later. With the rapid growth of e-commerce, customers have gotten used to buying things in a few clicks. Therefore, it becomes challenging for retail logistics to meet the audience’s need for fast and easy shopping.
End-to-end logistics strategy
An adequately organized retail transportation must perform one of its primary functions – developing store production variety. If done so, you need to extend the range of options you can offer your customer. It means communicating between these two ends of the retail trade industry with manufacturers and buyers. Having learned your target audience and its demand for various goods, you can constructively address the suppliers you are working with to estimate their production capacity.
The retail shippers must realize the products remain in stock by being located in a dedicated warehousing space. Equally, the warehouse you choose has to be suitable for your supplies and provide additional services if you cannot handle the goods yourself.
The retail supply chain requires support on the different levels of infrastructure, such as inventory, administration, product storage, and transportation means. After dealing with manufacturers, you’ll have to pick a storage place that is both suitable and strategically located. Finally, don’t forget to coordinate all the operations with other people involved in the retail logistics to eliminate the possibility of disruptions.
Retail and logistics management would undoubtedly fail without maintaining the visibility of your inventory. To see the statistics of your order fulfillment clearly, you need to gather some data on your turnover rates using inventory metrics. Besides updating you on the existing inventory state, the metrics will also facilitate demand forecasting tasks.
The costs of transporting various goods go far beyond the prices. Since the retail logistics process is multi-component, you will benefit from controlling the expenses on all levels and thus cut them without damaging the entire supply chain. As a retail shipper, you can analyze the operations during transit and see if you can optimize them and save costs.
Benefits of logistics for retail supply chain
Logistics is one of the milestones of extending the modern retail sector and developing small and midsize businesses. Despite the popular opinion that logistics only concerns the delivery processes, it is no less beneficial in other stages of building the retail supply chain.
The main advantages of logistics for retail supply chains are:
- Optimized delivery time. Generally, the customers’ expectations of delivery speed are high, and sometimes even minor delays can lead to dissatisfaction and refusal to buy from a specific retailer again. All this pressure makes retail shippers constantly search for new ways of optimizing their average delivery time. Proper pre-planning is the key to resolving the issue. Retail logistics involves exploring better routes with less traffic, predicting delivery time, sorting out the types of transport, applying for consolidation programs, etc.
- On-market presence. If you invest your time into structuring the logistics process, this will inevitably result in a higher on-market presence and, accordingly, better sales. Both customer satisfaction and healthy relationships with suppliers depend on how functional you are during transportation.
- Structured inventory management. As soon as you set up a regular supply of goods, the customer demand will start to grow. At this point, retail logistics will guide you in choosing a suitable warehousing space and proper inventory management.
- Transparency and minimized risks. A well-organized logistics lets you control all the critical operations within the retail supply chain. It lets you make the proper budgeting, sales, marketing, production, and risk assessment decisions.
Retail logistics trends
The retail supply chain differs from the other logistics branches by its strong consumer orientation. That is why logistics in the retail industry is susceptible to various trends.
Digitalization remains an everlasting trend that reshapes modern shopping. In terms of massive technology adaptation, a retailer’s role in a supply chain is to determine the most effective digital solutions to boost sales activity. You can do it through numerous tools, platforms, and services. However, digitalization is not limited to increasing product visibility in online marketplaces. It also concerns enhancing shipment tracking by using tracking software, applying inventory management devices, and improving in-truck shipment conditions.
If goods are distributed online and in physical stores, it is vital to connect those two significant shopping modes closely. That is, the buyer must be sure they can repeat or return their purchase in a more suitable way depending on their preferences. Seeing your retail business is available at different channels, the audience will identify you as a reliable source to buy from. It also has much to do with advertisement implementations. So, do not hesitate to enhance your product’s brightness with the help of modern marketing instruments.
With a growing concern about the global effects of massive shopping, buyers are more likely to trust retailers who follow a sustainability strategy. We recommend using eco-friendly packaging and exploring renewable energy sources to adopt the green shipping strategy.
Retail logistics solutions
One of the main parts of launching an effective retail supply chain is choosing the proper shipping service. When considering the available options, count several factors such as pricing and expectations of delivery speed. To thoroughly plan your shipment, find out more about the best solutions for retail transportation.
Less than truckload shipping mode is probably the best way to move the goods in retail trade. LTL shipping mode allows transporting up to 20,000 lbs or 1 to 6 pallets of goods. With LTL, you will be using a part of the trailer’s space instead of booking the whole truck. Thus, even if your cargo is of moderate size and weight, it is possible to deliver it cost-effectively. Due to sharing the truck’s space with other shippers, the delivery dates of LTL are typically extended and include the chance of delays as the driver makes multiple stops in the process.
Full truckload mode is suitable for moving more oversized items or more considerable quantities of goods. With FTL shipping service, you’ll receive the whole trailer meant to condense your products only and move it straight to the destination with no extra stops. FTL mode works best when you have to deliver the cargo within specific deadlines. Also, full truckload shipments implement higher levels of cargo safety, so you can be sure goods do not get damaged during transportation.
Reefer shipping is the best option for delivering consumer packaged goods (CPG), which comprise a considerable part of the retail supply chains. Besides all the everyday products, CPG includes foods with a short shelf-life and needs to travel in trucks with thermal control systems. Designed to maintain the required temperatures, refrigerated shipping allows keeping your items fresh to the very moment of receiving.
As a wholesale shipper, you must have been facing the everyday challenges of the wholesale distribution industry. On the one hand, the competition among manufacturers and suppliers is getting stronger. To stay in the game, they want to bypass various distribution mediators and optimize the wholesale delivery to reach the customer faster.
Along with expanded product offerings, there is a tendency to tighten delivery terms. All these reasons put pressure on wholesale shippers and make them search for advanced types of transportation. The full truckload shipping mode is the key as it reduces the risk of delays or cargo loss. You will deliver the items unharmed by choosing FTL for wholesale shipments and upgrading the customer experience.
Cost of retail logistics
The cost of retail logistics operations depends on the conditions you want to hold your shipment. First, you need to learn what distance your cargo is supposed to cover and what is the approximate mileage of the road. The distance length may vary depending on whether you will ship supplies directly from the manufacturers or from the warehouse where the products are stored. That is why it is so important to choose the warehouse location strategically, knowing it can significantly shorten the route and save much time.
Second, you have to decide on a suitable shipping service: full truckload is better for fast transportation of significant amounts of goods. In contrast, less than truckload works perfectly for smaller shipments and remains cost-efficient. The shipping mode choice depends on the product’s general volume and weight, so don’t forget to evaluate these characteristics.
Third, consider the best options for packaging your goods. Nowadays, there are tons of packaging offers to find the right one. The main thing to remember is package efficiency, which means its capacity to protect the goods during transportation.
Also, the seasonality factor may influence the cost of retail logistics. There are several periods during the year when retail businesses work to the fullest because of enormous customer demand, for example, the winter holiday season, Black Friday, sale season, etc. In terms of these, logistics operations can be way more challenging than usual due to large traffic jams and longer delays. However, you can minimize these risks by proper planning and preparation.
Retail logistics with GoShip
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