Cost optimisation in e-commerce - how to save on logistics?
Fulfillment
21 March 2023
Rising warehouse rents, the energy crisis, sky-rocketing electricity and gas costs, piling up burdens on the employer side - all of this makes running an e-business using its own warehouse increasingly problematic. For this reason, e-commerce is increasingly looking towards solutions that minimise fixed costs. The answer to these expectations can be fulfillment solutions.
The year 2022 ended with a gentle deceleration for e-commerce. This is a fairly natural occurrence, given that the previous two years were heavily heated by the pandemic and the accompanying restrictions on traditional trade. Additionally, the outbreak of war in Ukraine contributed to the cooling trend.
Inflation and uncertainty are not prompting consumers to buy more. E-tailers, on the one hand, are feeling the decrease in revenue and basket value , on the other hand experience an increase in the cost of doing business . All of these factors contribute to increased uncertainty in the running of an e-shop, especially in the area of logistics and warehousing, where a huge proportion of costs are fixed costs irrespective of turnover.
Logistics outsourcing comes to the rescue
E-commerce owners, especially those currently in an operational bind, should consider transferring logistics responsibility to an external operator to optimise costs. It is worth considering InPost Fulfillment, a comprehensive service offered by InPost, designed to provide an end-to-end logistics service and turn fixed costs into variable costs.
The InPost Fulfillment offer includes not only the storage and picking of parcels for dispatch, but also a range of complementary services and products - from the identification, polonisation and labelling of products on receipt at the warehouse, to the delivery of packaging, to the comprehensive last mile service of the InPost Courier and the InPost Paczkomat®.
It is also worth mentioning the improvement of the delivery process itself and its cost for e-commerce. A well-executed optimisation in logistics should minimise transport and storage costs while ensuring fast and efficient delivery to end customers. The last mile is often the most complex stage of the process, requiring the coordination of many factors simultaneously. However, thanks to the synergy of the logistics services of a large operator such as InPost (a dense network of Paczkomat® devices, efficient courier teams, thousands of parcel collection points), the optimisation of the last mile is part of the operator's core business, which is an important added value for the e-shop owner and significantly relieves the burden in terms of expenses.
The entire process is supported by modern IT systems, which not only manage the products within the warehouse, but also serve as a communication tool between the warehouse and the e-tailer systems. This makes the costs previously incurred for all these areas separate, can be enclosed in a single logistics service, a so-called one-stop shop for e-commerce . This will not only simplify operational processes, but also minimise the risk of incurring unnecessary costs with different suppliers.
What are the benefits of fulfilment?
Outsourcing logistics based on InPost's offer is more than just ceding the storage and picking of parcels to an external provider. It is also guaranteed storage of goods in modern A-class warehouses The warehouse is operated by a qualified team of trained warehouse employees. Goods are managed in close connection with a modern WMS (warehouse management system).
Joining InPost Fulfillment also means access to a wide portfolio of packaging and filling materials at the most competitive prices . Based on an established system of servicing hundreds of e-commerce customers nationwide, InPost provides a competitive cut-off time (the time by which placed orders are dispatched on the same day) of 20:00, which allows for a definite increase in effective transactions among customers and their growing satisfaction. This translates into customer loyalty and increasing e-commerce sales in the long term.
In addition, InPost Fulfillment offers inbound supply chain support, including cross-border transport arrangements and imports . Organising supply from the producer is often a requirement for knowledge of the market and price levels. Imports, especially imports from outside the EU, are even more challenging. Organising container freight, transshipment, customs clearance - all of this requires competence and an investment of time and labour. In cooperation with InPost, the customer can outsource the organisation of these demanding processes to a specialised entity.
In addition to the benefits mentioned, InPost Fulfillment also offers a team of unique competences and experience built up over years of last mile service and e-commerce consumer service. This package of competencies allows offering customer support on :
- assessing and assisting in the development of client-side IT systems,
- support in building a business development strategy,
- e-commerce training,
- support for performance analytics.
The ease of scaling the business within InPost Fulfillment is also an undeniable benefit. A logistics operator has incomparably more possibilities to increase the available storage space in a short period of time, or to allocate more employees to handle orders, than an e-business owner limited by the four walls of a warehouse with a specific area and with a crew whose recruitment and training take valuable time.
The 'pay as you go' model - real savings
Evaluating InPost Fulfillment's offering against the backdrop of the energy crisis, rising warehousing and staffing costs -. a key benefit is the possibility of converting fixed costs into variable costs and transferring the risks associated with market uncertainty to an experienced logistics operator.
By joining InPost Fulfillment, the online shop owner receives a clear price list, precisely defining what he or she will be billed for as part of the cooperation, as well as comprehensible billing statements in the form of specifications for cost invoices. The individual services and products, including shipping costs, are clearly and legibly catalogued in the contract:
- storage, together with the method of calculating it (per shelf per day, per pallet per day),
- completion (rate for completing an order),
- packaging (packaging prices),
- prices for additional services (e.g. labelling, repacking, kit creation),
- price list for shipments,
- return handling prices.
The above cost model is based entirely on a simple multiplier of the number of operations and their prices, which fully offsets the monthly costs from the fixed charges associated with maintaining your own warehouse . The cost of maintaining the space, its heating and lighting, the cost of maintaining a team of employees - all these risks are transferred to the logistics operator, and the client benefits from a matrix of variable costs that allow him to predictably assess the profitability of the business. When comparing such a cost model with an in-house warehouse, it is important to bear in mind that the space rented and the staff employed is a cost that is essentially fixed and disconnected from the volume of orders and sales.
The importance of cost differences when juxtaposing self-storage with fulfilment services can be demonstrated by an example calculation:
- an A-class warehouse with an area of 2,000 m2 has a monthly cost of approximately PLN 52,000
- its heating and lighting is estimated at around PLN 30 000
- children of employees at an average cost of PLN 54,000 (employer's cost) [1]
- total fixed costs of around PLN 136 000
The e-business owner will then bear the total cost irrespective of whether the warehouse is 100 per cent or only partially filled, and irrespective of the number of orders shipped at any given time.
Model „pay as you go” ensures flexibility and dependence of the logistics service costs on the actual occupied warehouse space and on the actual number of orders delivered . Importantly, in such a model, the logistics operator becomes responsible for the transport, storage and distribution of the customer's products, so along with these services it also takes on the risk of price fluctuations occurring in these areas. With fulfilment, the customer does not have to include such risks in the cost of running its own logistics and can concentrate on growing its business.
Additional services at InPost Fulfillment
The logistical handling of modern e-commerce is not just about simple storage, packaging and shipping, but also about a number of additional activities that enhance the usability of the offer for both the e-store and its audience - the consumers.
Among the many elements on offer InPost Fulfillment enhancing attractiveness and usability for e-tailers , to name but a few:
- assistance in importing products (from transport and customs handling to polonisation and labelling),
- creating product kits,
- product repackaging,
- provision of packaging (including customised packaging) tailored to the needs and requirements of the products to be dispatched,
- comprehensive handling of returns, including assessment of the condition and quality of returned products.
From the consumer's point of view, however, the following are of considerable importance:
- a wide range of delivery methods, including the successful Saturday deliveries to Paczkomat® InPost and the Economy Parcel,
- additional services such as 'gift-wrapping',
- inserting small gifts or free items in parcels.
The comprehensive and flexible nature of the InPost Fulfillment offer is a decisive addressing the problems faced by e-commerce business owners in times of high inflation , the energy crisis, rising operating costs and uncertainty in sales planning. It also answers the question of how to run an e-commerce business to effectively optimise both operations and the associated costs.
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