The retail industry is a major player in global trade, and logistics is the key to delivering the right product to the right customer at the right time. By building an effective retail logistics strategy, it is possible to meet the rapidly growing consumer demand and make your products available anytime and anywhere.
What is retail logistics?
Retail logistics is the process of transportation of goods from the production source to the customer. Although put in simple words, retail logistics involves the whole sequence of operations required for the successful delivery of items. The modern way of making purchases, including online platforms, has become so casual that it is hard to imagine all actions needed for the proper organization of the supply chain.
Logistics processes in the retail industry usually boil down to two interconnected categories: inbound and outbound logistics. In terms of inbound retail logistics, materials or goods are moved from the supplier to a designated internal spot that is usually arranged in a warehouse. This is where one of the most important elements of the retail supply chain steps into the game.
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 very popular option among the owners of small to midsize businesses as they are affordable and allow you to share the space with other suppliers. In other words, you can rent the public warehouse space for storing your goods for a certain period, as well as use additional services like inventory management and control.
- Private warehouses belong to the category of big 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 for 1-2 days) due to the product’s specifics. This is a good choice in case you are planning to ship foods, beverages, flowers, or other perishable items that are meant to be distributed straight away.
- Climate-regulated warehouses provide the opportunity to store goods that require temperature and humidity control. This concerns food, frozen products, many types of consumer packaged goods, pharmaceuticals, etc. Usually, climate-control warehouses offer their own freezers or environments of a special 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 the problem of the item’s misplacement or deadstock, as 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. This is where the outbound retail logistics takes off. This process primarily starts with the customers’ order placements. Then, retailers receive the order, check if wanted goods are in stock and in good condition, and finally 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.
The role of technology in retail logistics
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, nowadays the giant retail companies like Walmart, Target, and Amazon have amazingly 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 it is critical to stay up to date with tech trends in retail logistics. Your priority as a retailer is to avoid exceeding the stock and running out of it. This is where digital transformation steps in: by gathering data and analyzing it, you can effectively forecast the customer demand as well as have an insight into your stock availability at any time.
Such insights are extremely useful due to the retail demand volatility. While it is easier to count the orders’ volume for consumer packaged goods or other 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 cut down costs by managing warehouse operations. Thus, you will always know how much space you need for storing goods without overpaying for it.
Functions of the retail logistics system
A well-organized supply chain is probably the strongest factor that contributes to the availability of goods on the store shelves and online marketplaces. The retail logistics system performs a range of 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 placed in its online version. Effective retail logistics extends the overall volume of shopping options so we can pick whatever we want from the shelves.
According to numerous studies, empty supermarket shelves have a bad impact on the buyers’ psychological state and sometimes break their trust in certain suppliers. Active production of various goods is not enough – you also have to constantly keep them present for your customer.
- Effective warehousing and order fulfillment. Warehousing operations are often overlooked by the retail logistics managers or not counted as an important step of a proper retail logistics organization. However, without an effective warehouse strategy, it would be impossible to complete the order fulfillment avoiding frequent supply chain disruptions and delays.
Even if you cannot ship the product at the moment of the order placement, you can satisfy the customer demand by delivering the item from your warehouse space. By using a warehouse, you 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 different electronic systems. By doing so, retailers effectively reduce their business losses and avoid numerous shipping errors or order returns.
Applying tracking software in warehouses is probably one of the key tools to cut possible business losses as it will keep you updated on the product’s availability at all times and notify you when some of the goods have expired or got damaged by external factors. Moreover, modern retail logistics often practices demand forecasting which helps to plan the purchase amounts more precisely.
Key drivers in successful retail logistics
Like any other industry that is directly connected to logistics operations, the retail supply chain leans on several key points to remain productive. All of them are aimed at optimizing the flow of delivery and, as a result, encourage the potential customer to repeat their purchases later. With the rapid growth of e-commerce, customers got used to buying things in a few clicks, and it becomes challenging for the retail logistics to meet the audience’s need for fast and easy shopping.
- End-to-end logistics strategy. A properly organized retail transportation has to perform one of its main functions – developing production variety in stores. If done so, you are always expected to extend the range of options you can present your customer with. This means communicating with both manufacturers and buyers being a kind of agent between these two ends of the retail trade industry. Having learned your target audience and its demand for various goods, you can constructively address the manufacturers you are working with to estimate their production capacity.
- Reliable warehousing. The retail shippers must realize the products always remain in stock by being located in reliable warehousing space. Equally, the warehouse you choose has to be suitable for your supplies and provide additional services in case you are not able to handle the goods yourself if necessary.
- Strong infrastructure. The retail supply chain requires support on the different levels of infrastructure, such as inventory, administration, products storage, and transportation means. After dealing with manufacturers, you’ll have to pick a storage place that is both suitable and strategically located so you won’t have to waste time going the extra mile. Also, you need to think of the appropriate transport units depending on the type of goods you are going to move. Finally, don’t forget to coordinate all the operations with other people involved in the retail logistics to eliminate the possibility of disruptions.
- Inventory visibility. Retail and logistics management would certainly fail without maintaining the visibility of your inventory. To see the statistics of your order fulfillment clearly, it is essential 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.
- Expense control. The costs of transporting various goods go far beyond the prices. Since the retail logistics process is multicomponent, you will benefit from controlling the expenses on all levels, and thus cut them with no damage to the entire supply chain. As a retail shipper, you can analyze the operations that take place during transit and see if you can optimize them and thus save costs.
Benefits of logistics for retail supply chains
Logistics is one of the milestones of extending the modern retail sector and developing small and midsize businesses. Despite the popular opinion of logistics importance only in actual delivery processes, it is no less beneficial in other stages of building the retail supply chain strategy.
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 certain 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 with the aid of logistics software, sorting out the types of sustainable and fast 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 to choosing the right warehousing space so that you are always able to manage your inventory and avoid supply chain disruptions.
- Transparency and minimized risks. A well-organized logistics gives you access to control all the critical operations within the retail supply chain so you can check whether your performance is efficient enough. This gives an opportunity to make the right decisions about budgeting, sales, marketing, production, and risk assessment.
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 a variety of trends emerging in all groups of buyers to stay relevant and proactive.
- 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. It can be done through numerous tools, platforms, and services that customers are now actively using. However, digitalization is not limited to increasing the products’ visibility in online marketplaces. It also concerns enhancing shipment tracking by using tracking software, applying inventory management devices to simplify warehousing operations, and considering improving in-truck shipment conditions throughout the transit.
- Omnichannel distribution. If distribution of goods is done both online and in physical stores, it is important to keep those two major ways of shopping closely connected. That is, the buyer must be sure they will be able to 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. This 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.
- Sustainability. With a growing concern about the global effects of massive shopping, buyers are more likely to trust retailers who follow the sustainability strategy. To adopt this strategy, it is recommended to use eco-friendly materials and packaging and invest your effort into exploring renewable energy sources.
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 terms of retail trade. LTL shipping mode allows to transport 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 larger items or bigger 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 in cases when you have to deliver the cargo within certain 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 consist of a huge part of the retail supply chains. Besides all the products of everyday use, CPG include foods that have a short shelf-life and need to be transported 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 common 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 try to optimize the wholesale delivery so that they reach the customer faster.
Along with expanded product offerings, there is a tendency for tightening 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. By choosing FTL for wholesale shipments, you will deliver the items unharmed and upgrade the customer experience.
Cost of retail logistics
The cost of retail logistics operations is based on the different conditions you want to hold your shipment on. 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 are going to ship supplies directly from the manufacturers, or from the warehouse that you have the products stored in. 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 big amounts of goods, while less than truckload works perfectly for smaller shipments and remains cost-efficient. The choice of the shipping mode is directed by the general volume and weight of the products, so do not forget to evaluate these characteristics.
Third, consider the best options for packaging your goods. Nowadays, there are tons of packaging offers so you will surely find the right one. The main thing to remember is package efficiency, which means its capacity to protect the goods during transportation.
Also, the cost of retail logistics may be influenced by the seasonality factor. There are several periods during the year when retail businesses are working 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 tougher than usual due to large traffic jams and longer delays. However, even these risks can be minimized by proper planning and preparation.
Retail logistics with GoShip
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