Cost reduction in B2C e-commerce logistics
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You are a decision-maker in e-commerce, your company is facing challenges right now in times of crisis, keyword recession, and you are looking for ways to reduce your costs and increase efficiency? Do you want to face up to the challenges? Then you should definitely switch on do-not-disturb mode now, read our latest article and benefit from our experience. We show you concrete savings measures and activities that you can implement immediately to optimize your B2C logistics. These include the optimization of carrier and CEP conditions, logistics tendering and the fine-tuning of pick & pack costs. The optimization of shipping packaging and the more efficient use of IT systems will round things off. If you implement these measures, you can reduce costs and increase your efficiency in the long term - become a winner and gain a real competitive advantage for your business!
Basic principles: Cost reduction e-commerce logistics
In the fast-paced world of logistics and online retail, there are several challenges. One is the pursuit of cost efficiency, a constant companion to ensuring a lean business. Companies are constantly looking for ways to reduce their expenses without affecting the quality of their services or products. In the best case scenario, customers should not notice anything, or only have a positive reaction. In this article, we would like to give you a sound insight into the basic principles of cost reduction in logistics and show you aspects of how companies in the retail sector can successfully put these into practice. We pay particular attention to areas such as B2C e-commerce, fulfillment and supply chain management in online stores.
In order to implement cost-cutting measures effectively and promptly, a methodical approach is required that is divided into four parts. The first step is to derive a clear and transparent cost target, which forms the basis for identifying focus areas with the highest savings potential. This management principle aims to achieve continuous improvement. Specific measures are then developed and implemented. The final stage involves close tracking and reporting in order to continuously monitor the success of the measures and initiate further steps if necessary.
The definition of the cost target forms the starting point of this approach and takes into account both internal and external factors, such as competitiveness or profit margins. In the next step, the biggest cost drivers within the individual divisions are identified and defined as focus topics, taking into account other relevant factors such as known potential or planned major projects. The design of processes and structures plays a decisive role here. This approach can reduce complexity and initiate genuine change management.
In order to derive concrete measures, special workshops are held in which a diverse team of employees, managers and experts from different areas come together. This approach makes it possible to include different perspectives, look at the situation as a whole and integrate comprehensive knowledge into the process, thus avoiding a pure clear-cut approach. The establishment of a tracking and reporting structure ensures the successful implementation of measures and creates transparency for everyone involved. Good inventory management, which also includes the storage of products, is an important part of this structure.
Having outlined the basic principles of cost reduction in logistics, in the next part of this article we would like to look at specific cost-saving measures that are particularly relevant to the B2C e-commerce sector. We will focus on innovative approaches and proven strategies to help companies achieve sustainable cost reductions in logistics. The online store can thus remain competitive even during the crisis.
Cost-cutting measures B2C e-commerce logistics
Renegotiation of carrier / CEP conditions for e-commerce companies
In the highly competitive world of logistics, optimizing shipping costs is essential to maintain competitiveness and maximize profits. As a retailer or manager of an online store, you know that negotiating carrier and CEP terms can play a crucial role in increasing the efficiency of your business. Of course, without customers being affected. Warehouse metrics also play a vital role. Here are some key strategies you can use to negotiate the best possible terms for your business:
Annual rate negotiations: Review and negotiate your current CEP and freight rates at least once a year to ensure competitive conditions. (New) tenders can be helpful here.
Performance-related discussions: Hold quarterly discussions with your carriers and their sales teams to analyze delivery KPIs and identify potential improvements.
Main and backup carrier: Establish a partnership with a main carrier and use backup carriers during peak load phases to enable continuous performance comparisons.
Innovative shipping solutions: Consider using alternative postal services and direct feed models for cross-border shipments to reduce shipping costs and utilize more efficient delivery options.
Same-day delivery: Cooperate with same-day providers in urban areas to create flexible delivery options and reduce cost-intensive express services.
Optimize packaging sizes: Revise internal processes to minimize the number of large parcels or bulky goods shipments and reduce associated surcharges.
Single shipments instead of order splits: Avoid multiple parcel shipments per order by combining the orders of individual customers into a single shipment.
Own delivery in local areas: If you have stationary branches, you can organize delivery in the local area using your own vehicles or crowdsourcing solutions.
Use start-ups for the last mile: If there are no brick-and-mortar stores, use innovative start-ups for local delivery.
By implementing these strategies, you can increase the efficiency of your carrier and CEP partnerships, thereby reducing costs and improving customer satisfaction, giving your company a competitive advantage. Effective collaboration between sales and distribution and targeted marketing can help to better align warehousing and logistics processes with customer demand and ensure the long-term success of your business.
New invitation to tender for 3PL / fulfillment service provider and subsequent adjustment of pick & pack costs
Efficient logistics processes and fast deliveries are important success factors in online retail. Many companies therefore outsource their logistics in order to concentrate on their core activities and benefit from specialized service providers. When choosing the right partner, a comprehensive analysis of requirements and needs is essential. A clear definition of requirements and expectations as well as close communication and coordination are crucial for successful collaboration. There are differences between pure 3PL logistics service providers and fulfillment service providers that take over the complete processing of orders.
3PL logistics service provider vs. fulfillment service provider: differences and relevance for D2C scaleups
Pure 3PL logistics service providers concentrate on handling the storage, picking, packing and shipping of goods. Fulfillment service providers, on the other hand, offer additional services such as customer care and payment in addition to logistics. For many D2C scale-ups, however, customer care is already covered in-house, which is why the need for a comprehensive fulfillment service provider is decreasing. This allows companies to focus more specifically on negotiating logistics costs and thus achieve better conditions.
Successful logistics tendering: what is important
Several factors need to be considered in order to carry out a successful logistics tender:
Clearly define the requirements: Make sure you know exactly what services you need, what the shortage is and what criteria are crucial for you (e.g. speed of delivery, scalability, flexibility).
Market analysis: Research potential service providers (e.g. website) and create a list of providers that meet your requirements.
Tender documents: Create detailed and clear tender documents that contain all relevant information.
Selection process: Develop a structured selection process to evaluate the bids received and find the best service provider for your company.
Smart renegotiation: How to use insights from the tender to drive down the price of the current service provider
Once a logistics tender has been carried out, the information and offers obtained can usually also be used to renegotiate the contracts with the current service provider. Here are some tips on how you can best approach this:
Use the market overview: Present your current service provider with the market prices and conditions that you determined during the tendering process. Show how the competitors' offers compare to the existing conditions.
Performance comparison: Compare the services and conditions of your current service provider with those of competitors and highlight potential for improvement.
Create a win-win situation: Show your service provider how adjusting the conditions can benefit both sides, e.g. through a higher order volume or improved cooperation.
Negotiation skills: Prepare well for the negotiations and be prepared to compromise. Set yourself realistic goals and try to find a joint solution that is acceptable to both parties.
Executive Summary: Outsourcing logistics in online retail can bring considerable benefits if the right service provider is selected and the contract terms are regularly reviewed and renegotiated. A successful logistics tender helps to achieve the best possible conditions and secure your own success in the industry. It is crucial to clearly define your own requirements, analyze the market in detail and use the knowledge gained skilfully in negotiations with service providers.
Cost reduction with the help of lean logistics & lean management
Lean Logistics & Lean Management digital: Practical topics and application examples for cost reduction
Kanban system for stock levels: a kanban system helps to reduce stock levels and thus lower storage costs. The product is only reordered once a certain minimum quantity has been reached. By using Kanban boards or digital tools, employees can do everything themselves: monitor stock levels better and reorder more efficiently.
5S method for workplace organizationIn the warehouse, the 5S principles of sorting, systematizing, cleaning, standardizing and self-discipline can help to optimize work processes and reduce waste. Employees can work faster and more efficiently, which leads to higher productivity and a reduction in logistics costs.
Value stream mapping for process optimization: Value stream mapping can be used to visualize and analyze logistics processes in e-commerce, such as order processing. Waste and bottlenecks are identified in order to subsequently optimize the process. For example, unnecessary transport routes can be avoided by storing a frequently sold product closer to the packing station.
Poka Yoke as a means of avoiding errors: In e-commerce, incorrect order deliveries can be prevented by using Poka Yoke. For example, color coding, barcode scanners or pick-by-light systems can be used to ensure that the correct items are selected and packed. This leads to greater customer satisfaction and reduces the costs of returns and complaints.
Cycle time optimization for efficient processes: In e-commerce, cycle time optimization can help to make processes more efficient and avoid bottlenecks. By determining the ideal cycle time for various processes, such as picking and packing, resources can be better utilized and productivity increased.
Kaizen for continuous improvement: The Kaizen principle helps to constantly scrutinize and improve processes. Through regular meetings and workshops, employees can work together to develop and implement solutions, in particular to optimize stock levels, order processing or shipping (company standards).
Overall, it can be seen that lean logistics and lean management in e-commerce enable considerable cost reductions through the application of specific methods and tools. The goal of optimizing inventory, workplace organization, process flows, error prevention and cycle times makes a significant contribution to increasing productivity and reducing waste.
Optimization of packaging
Cost reduction through optimization of shipping packaging in e-commerce
Material selection: As a decision-maker in e-commerce, it is important to choose the right materials for shipping packaging. Pay attention to cost-efficient and sustainable materials and prefer classic cardboard colors from the manufacturer instead of expensive, special designs to avoid additional costs.
Design customizations: Make sure branding and agency specifications don't lead to uncoordinated specifications that can result in high additional costs. For example, a white inner box may be slightly more expensive than necessary. Optimize the design to reduce costs and promote sustainability - good for the image and the climate.
Obtain specialist knowledge: Consult cardboard packaging experts to find the right balance of cost, wall thickness and material strength. This way you can ensure that your shipping packaging is both stable and inexpensive.
Provision of cardboard packaging: The way in which you provide cardboard packaging can have a significant impact on prices. Check whether just-in-time delivery is possible for your company and whether you can also order half truckloads. Above all, this can help to reduce storage costs while ensuring flexibility in shipping packaging.
As a decision-maker in e-commerce, you can significantly reduce costs and at the same time promote sustainability and increase the profitability of the company by optimizing shipping packaging.
Cost reduction through more efficient use of IT (e.g. ERP, warehouse management systems, etc.)
Automation of processes: In e-commerce, the automation of order and returns processing is a key step towards reducing costs. By integrating IT systems, for example, orders can be automatically transferred to the merchandise management system and forwarded directly to the logistics service provider. This saves time, reduces manual errors and speeds up order processing.
Data analysis and business intelligence: Use the data collected in your online store and CRM system to create targeted marketing campaigns. Analyze customer behaviour and identify high-value customer segments. For example, you can send personalized emails or offers to existing customers based on their interests and purchase history. This increases the likelihood of repeat purchases and helps to reduce marketing costs.
System integration: Integrate your CRM system with the ERP system to ensure that customer data, order history and stock levels are automatically synchronized. This allows customer service, for example, to respond quickly and efficiently to inquiries without wasting time on manual research. This not only reduces labor costs, but also increases customer satisfaction.
Inventory optimization: Better integration of ERP and WMS systems allows you to analyze inventory more accurately and optimize it based on sales data. Identify slow-moving products and avoid overstocking to reduce storage costs. At the same time, you can reorder fast-moving products to avoid supply bottlenecks and loss of sales.
IT training and employee skills: Invest in IT training for your employees so that they can use the existing systems effectively. For example, trained staff can make better use of CRM and ERP systems to identify sales opportunities and approach customers in a targeted manner in order to increase sales.
Overall, there are so many ways to increase the cost efficiency of the warehouse, supply chain and logistics and thus remain competitive in the highly competitive e-commerce market. A methodical approach to defining cost targets, identifying focus areas, developing measures and tracking success is crucial. Concrete cost-saving measures such as optimizing carrier and CEP conditions, logistics tendering and fine-tuning pick & pack costs as well as optimizing processes and shipping packaging and the more efficient use of IT systems can help companies to reduce their costs in the long term and increase their efficiency.
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In our training course"Increasing efficiency in e-commerce logistics: strategies for long-term cost reduction", you will learn practical techniques and best practices to optimize your logistics processes and permanently reduce your expenses. We will show you how to optimize your carrier and CEP conditions, reduce pick & pack costs and increase your efficiency through efficient shipping packaging and IT systems. Benefit from our expert knowledge and implement the strategies you learn in your company immediately. Send us an e-mail - register now and become an expert in cost reduction in e-commerce logistics!