Ecommerce logistics refers to the network of processes involved in storing and transporting inventory for an online store or marketplace, including customer order fulfillment, shipping, and delivery. 

Broadly, it covers the movement and management of products sold online, including: sourcing and purchasing materials; manufacturing and transporting goods; receiving, storing, and tracking inventory; processing customer orders; picking and packing orders; shipping parcels through a carrier network (such as USPS); Last-Mile Delivery to the customer’s doorstep; returns management and reverse logistics, and so on. 

If the supply chain is a body, then logistics is the nervous system: a vast, complex network that carries information and communications, allows for coordinated movement, and supports all vital functions. Effective logistics management is the key to ecommerce success.

But what exactly goes into ecommerce logistics and management? Let’s break it down.

5 essentials of ecommerce logistics

Manufacturing	Warehousing	Fulfillment	Transport	Distribution
Suppliers or manufacturers make the product and ship inventory to the warehouse.	The warehouse or fulfillment center receives, stores, and manages shipments of inventory.	Online orders are sent to the warehouse or fulfillment center, where the items are picked, packed, and shipped.	Goods are transported through the supply chain via land, air, and sea. Parcels are shipped via carrier networks.	Finished goods are delivered to a distributor (such as a retailer) or directly to the customer.

Manufacturing

Suppliers or manufacturers make the product and ship inventory to the warehouse.

Warehousing

The warehouse or fulfillment center receives, stores, and manages shipments of inventory.

Fulfillment

Online orders are sent to the warehouse or fulfillment center, where the items are picked, packed, and shipped.

Transport

Goods are transported through the supply chain via land, air, and sea. Parcels are shipped via carrier networks.

Distribution

Finished goods are delivered to a distributor (such as a retailer) or directly to the customer.

Types of logistics management

There are 3 main types of ecommerce logistics management. Which one(s) you use depends on your business and supply chain, storage and shipping requirements, budget, and so on.

3 types of ecommerce logistics management

In-house	Dropship	3PL
In-house means you manage your own logistics and supply chain network, including sourcing freight and parcel transport, tracking orders and inventory, generating and applying data analytics, etc.	Dropshipping means products are shipped directly from the manufacturer to customers, cutting out the middlemen of warehouses and fulfillment/distribution centers.	3PL (third-party logistics) providers manage your logistics and fulfillment for you, including storage and warehousing, pick-pack-ship services, order and inventory tracking, data analytics, etc.
In-house logistics management is mostly only viable for very small businesses—as your logistics network expands, it gets a lot harder and more expensive to manage everything yourself.	A dropship model is often used in combination with third-party services—as with in-house management, handling your own dropshipping can quickly become complicated and costly.	Outsourcing is by far the easiest method—the only downside is the higher upfront cost. However, the accuracy, efficiency, and built-in carrier discounts offered by reputable 3PLs lead to reduced spending in the long-term—especially as your brand grows.

In-house

In-house means you manage your own logistics and supply chain network, including sourcing freight and parcel transport, tracking orders and inventory, generating and applying data analytics, etc.

IIn-house logistics management is mostly only viable for very small businesses—as your logistics network expands, it gets a lot harder and more expensive to manage everything yourself.

Dropship

Dropshipping means products are shipped directly from the manufacturer to customers, cutting out the middlemen of warehouses and fulfillment/distribution centers.

A dropship model is often used in combination with third-party services—as with in-house management, handling your own dropshipping can quickly become complicated and costly.

3PL

3PL (third-party logistics) providers manage your logistics and fulfillment for you, including storage and warehousing, pick-pack-ship services, order and inventory tracking, data analytics, etc.

Outsourcing is by far the easiest method—the only downside is the higher upfront cost. However, the accuracy, efficiency, and built-in carrier discounts offered by reputable 3PLs lead to reduced spending in the long-term—especially as your brand grows.

“Logistics” is as broad as the global network itself. No two supply chains are the same, and the complexity of a logistics network depends on countless factors such as business size and scope, brand and product type, warehousing and shipping requirements, typical order volume, geographic location(s), and so on. 

(For example, a handcrafted candle business owned and operated by one person with one online storefront has vastly different logistics needs than a massive online retailer.) 

So, keep in mind that logistics is never one-size-fits-all. The nature of logistics is that it must be tailored to the individual brand or business. 
There are a few main types of ecommerce logistics: inbound and outbound logistics, reverse logistics, and fulfillment logistics. Effective logistics management requires all these types working together in one unified system.

Inbound logistics

Inbound logistics refers to the processes involved in moving goods or materials into a company. It covers the sourcing, transport, and storage of incoming finished or unfinished goods, materials, or supplies. Inbound logistics management focuses on receiving incoming shipments to the warehouse or distribution/fulfillment center.
Receiving is the process of accepting, unloading, inspecting, storing, and recording a shipment of goods (i.e., everything that happens after a truckload of inventory arrives at the warehouse.)

Inbound logistics

Outbound logistics

Outbound logistics refers to the processes involved in moving goods or materials out of a company. It covers order fulfillment, inventory tracking and management, and the shipping and transport of finished goods to the customer or distributor (such as a retailer). Outbound logistics management focuses on order fulfillment and delivery of goods.

Outbound logistics

Together, inbound and outbound logistics make up the flow of goods in and out of a company. 
With ecommerce, the company handling the flow of goods is often a 3PL provider, rather than the merchant or seller. The 3PL is responsible for inventory receipt and management, order processing and fulfillment, and shipping, transport, and delivery of finished goods to the customer or distributor.

Inbound and outbound logistics

To sum it up:

Inbound logistics vs. outbound logistics

In-house	3PL
Goods flow inward (i.e., into warehouse)	Goods flow outward
Focuses on supply	Focuses on demand
Receiving goods or materials from a supplier or manufacturer	Delivering finished goods to a distributor or customer
Processes include receiving, inspecting, storing, and managing goods	Processes include managing inventory, fulfilling orders, and shipping/delivering goods

In-house

In-house means you manage your own logistics and supply chain network, including sourcing freight and parcel transport, tracking orders and inventory, generating and applying data analytics, etc.

IIn-house logistics management is mostly only viable for very small businesses—as your logistics network expands, it gets a lot harder and more expensive to manage everything yourself.

Inbound logistics

Goods flow inward (i.e., into warehouse)

Focuses on supply

Receiving goods or materials from a supplier or manufacturer

Processes include receiving, inspecting, storing, and managing goods

Outbound logistics

Goods flow outward

Focuses on demand

Delivering finished goods to a distributor or customer

Processes include managing inventory, fulfilling orders, and shipping/delivering goods

Reverse logistics

Returns are a reality of business. Reverse logistics refers to the return of goods from the customer back through the supply chain to the merchant, retailer, or manufacturer. It can also refer to the return of surplus/unsold/damaged goods from the distributor back to the merchant or manufacturer.

Reverse logistics

Full-service reverse logistics is more than just handling customer returns. For an ecommerce business, it means being able to handle the Five Rs.

The Five Rs of ecommerce reverse logistics

KPI = Key Performance Indicator, or how a business measures success in a certain area.

Returns	Reselling	Repairs	Replacement	Recycling
Item is returned for any reason (damaged, defective, wrong item, customer changed mind)	Returned item is repackaged and resold	Damaged or defective item is repaired and sent back to customer	Returned item is replaced or exchanged for another item	Unsellable item is recycled or disposed of responsibly
KPI: Rate of Returns	KPI: # or % of products resold	KPI: total cost of repairs	KPI: # or % of products/parts replaced	KPI: % of materials recycled

Returns

Item is returned for any reason (damaged, defective, wrong item, customer changed mind)

KPI: Rate of Returns

Reselling

Returned item is repackaged and resold

KPI: # or % of products resold

Repairs

Damaged or defective item is repaired and sent back to customer

KPI: total cost of repairs

Returns

Returned item is replaced or exchanged for another item

KPI: # or % of products/parts replaced

Recycling

Unsellable item is recycled or disposed of responsibly

KPI: % of materials recycled

Fulfillment logistics

Fulfillment logistics refers to the processes involved with satisfying customer orders. The process starts when a customer places an order and ends when they receive their order, and covers all steps in between: order processing, picking/packing/shipping, carrier transport, and delivery. 

Order fulfillment is vital to ecommerce—not just in the obvious sense of fulfilling online orders, but also in the sense of providing a seamless, memorable customer experience remotely, without the immersion of in-store shopping. 

It’s more than fast, accurate shipping (though that’s very important). It’s about the whole customer journey: from browsing a website, to placing an order, to receiving and unboxing the order. In lieu of an in-person experience, this process is how customers get to know your brand. This process is your brand. 

A simplified version of the ecommerce fulfillment logistics process might look like this:

Ecommerce fulfillment logistics

Broken down, the process involves a few more steps.

Ecommerce fulfillment logistics

This is still a highly simplified representation of a vast network of people, places, and processes, digital and physical. Most ecommerce businesses are multichannel, meaning they sell products via more than one sales channel—i.e., a brand website, online retailers, and ecommerce marketplaces such as Amazon. 

Selling on multiple platforms is increasingly necessary in today’s ecommerce landscape. But without proper logistics management, a multichannel model can easily become bloated, overcomplicated, and overwhelming—especially for smaller businesses.

Key Challenges in eCommerce Logistics

There are a few key challenges to be aware of as an ecommerce brand—whether you’re handling logistics in-house or outsourcing to a 3PL provider.

Managing inventory

This is the big one. Inventory management becomes exponentially more complicated when you factor in multiple sales channels and platforms, multiple warehouses, products listed with multiple sizes and colors… and with online orders, where customers are purchasing from a digital shelf rather than a physical one, proper inventory management and tracking requires data integration and synchronization between fulfillment centers.

If you’re unable to track inventory levels accurately—with real-time data visibility for everyone involved in managing your orders and inventory—you run the risk of overselling, over- or understocking, double-counting or not counting units of product, and so on. Maintaining accurate, up-to-date inventory records is absolutely vital.

Optimizing shipping costs

Customers love free shipping. But the reality is that shipping and transport is expensive, and often it’s just not viable for an ecommerce brand to offer free shipping on all orders—especially small and midsize businesses without the resources of a major retailer. 

If you’re unable to offer free shipping, that’s completely understandable. In that case, your best bet is to optimize your own shipping costs—i.e., streamline your logistics operations in order to find the most efficient, cost-effective transportation methods, so you can pass those savings on to your customers. 

Optimizing your logistics is easier with outside help—a good 3PL provider will have a built-in network of optimized transportation routes and strategically located warehouses, so your product never has to travel further than half the US. 

On your own? You can start by analyzing your current logistics network. Look for areas of high spending, slow or inefficient freight transport, slow communication or data exchange, and other snags. Most carriers offer bulk discounts for high-volume parcel shipping. You can also try offsetting shipping costs for your customers by offering free or discounted shipping on orders over a certain dollar amount. 

Providing excellent customer service

Today’s online shoppers have higher expectations than ever. They want fast shipping, same-day order processing, real-time parcel tracking, and hassle-free returns. Without the necessary physical and digital infrastructure, it can be hard for ecommerce brands to meet customer expectations and deliver a stellar experience.

Handling returns and exchanges

Returns rates are largely dependent on industry—but on average, the ecommerce returns rate hovers around 20%. (In 2021, the National Retail Federation reported the average ecommerce returns rate was 20.8%. The total retail returns rate was 16%, indicating higher returns rates for online purchases.) 

A 2021 Pitney Bowes study found that 3 in 4 consumers (76%) have returned at least one item from their last few online purchases. Of those who returned an item, 78% said the returns process was inconvenient. Only 22% said the process was easy. 

Top 5 reasons consumers found the returns process inconvenient:

• Return label not included in the shipping box (22% of respondents)
• Return shipping not free (20%)
• Refund took too long (19%) 
• Lack of communication from merchant on return status (16%) 
• Time and effort of dropping off returns with a mail carrier (13%)

As ecommerce returns rates continue to grow (especially in industries such as clothing and home goods), it’s clear that ecommerce brands can’t just focus on getting a product to the customer—reverse logistics are an equally important part of the customer experience. 

Similar to providing excellent customer service, a lack of physical and digital infrastructure can hurt a brand’s ability to seamlessly process returns.

Dealing with unexpected issues

We all saw how the COVID-19 pandemic disrupted global supply chains, leading to months of shortages worldwide. The worst of the COVID disruptions may be behind us, but supply chain networks are never safe from unpredictable disruptions such as geopolitical conflict, natural disasters, weather events, and more. Even the most resilient 3PL can’t avoid every disruption, but they’re likely to have safety nets and emergency plans in place for when disaster strikes. 
Supply chain integration technology, such as cloud-based platforms and centralized database software, is known to improve business agility. Improved agility means a business can adapt quickly to market fluctuations and unexpected issues.

Best Practices for Effective eCommerce Logistics

There’s no one way to master ecommerce logistics, especially considering the unpredictable nature of the supply chain. The way forward? Strong partnerships, adaptability, and technology.

Choose the right shipping partners

Supply chain disruptions are inevitable. But the right shipping partner can mean the difference between months of lost sales vs. a quick pivot to another solution. 

Cleo’s 2023 Supply Chain Executive Report found that 74% of surveyed executives said their business was disrupted for more than a week due to partner issues. 

What caused the partner-related disruptions?

• Supply chain issues (50% of respondents)
• Infrastructure (49%)
• People (41%)
• Lack of communication (33%)
• Technology failure (31%)

These responses show how important it is to choose the right logistics partners—plus investing in reliable technology to avoid system downtime and disruptions. 

Your partners make your brand—especially in ecommerce, where fulfillment and shipping are the foundation of your business. If you’re outsourcing to a third-party company, make sure it’s the right one. 

The ideal 3PL partner should be able to provide:

• Optimized logistics to reduce transport spending
• Same-day order processing and fast, efficient shipping
• Centralized order and inventory management on a cloud-based platform
• Real-time visibility of orders and inventory data
• Automated analytics to inform data-driven decisions 
• Flexible fulfillment that scales with your brand  
• Prebuilt EDI/API and digital infrastructure to support omnichannel fulfillment
• Highly responsive, open, communicative customer service

(Yes—we’re a 3PL provider and we’d love to work with you. That said, every brand has different needs—and we’re not always the perfect fit. So, if you connect with an EcomHalo Guardian and we realize during the free phone consultation that we’re not the absolute best fit for you, we’ll provide referrals to other 3PLs. Choosing a 3PL is hard. We try to make it easier.)

Utilize warehouse management systems (WMS)

A warehouse management system (WMS) is a software solution that helps manage and execute the processes and operations of a warehouse or fulfillment/distribution center. WMS optimizes processes such as inventory counting and tracking, order processing and management, fulfillment speed and accuracy, and so on. A WMS can automate certain processes to streamline your warehouse operations and maintain accurate, up-to-date records, helping to reduce manual workloads and improve overall efficiency. 
Tech company Extensiv’s 2022 survey of 200+ logistics leaders found that WMS ranked as the most-implemented technology for 3PLs (87%). This was followed by order management systems (OMS) (52%) and mobile barcode scanning (51%).

Use automation technology

Automation technology is the future of logistics—not as a replacement for human workers, but as a coworker optimizing operations and workflows, reducing manual workloads, and end-to-end data visibility in the supply chain.

Ecommerce logistics objectives + automated solutions

Objective	Solution
Increased delivery speed and volume	Automated route optimization—using software/algorithms to find the most mile-, fuel-, and cost-efficient transport route, allowing for faster delivery and higher volumes of deliveries per day
Last-Mile Delivery cost reduction	Last-Mile Delivery is expensive and time-consuming due to low drop sizes (delivering individual parcels rather than bulk shipments). Real-time location data helps drivers avoid weather, traffic, etc.
Optimized workflows during demand peaks (holiday season, Black Friday, etc.)	Automated processes to predict and prepare for sales peaks, estimating how much excess stock is needed, when to have it ready, etc.
Monitoring KPIs and other performance metrics	Automated processes to measure and track KPIs such as # of completed deliveries, picking speed and accuracy, etc.
Improved customer relationship management	Automated services such as email or text updates, real-time parcel tracking, and 24/7 customer support
Improved inventory management	Automated systems to track inventory levels, update the ecommerce website, refill stock when a customer places an order, etc.

Automation technology can take time-consuming, repetitive processes off your hands—and automated data-sharing between all links in your supply chain makes it much easier to adapt and adjust to sudden changes.

Streamline your order fulfillment process

As more and more customers expect same- and next-day delivery options, ecommerce brands and 3PL providers face pressure to pick, pack, and ship orders even faster. According to Extensiv’s report, 53% of surveyed 3PLs fulfill orders in less than 1 hour. 29% fulfill orders within 30 minutes. 

That kind of timing often isn’t possible for businesses relying on in-house fulfillment or dropshipping, but there are always ways to make your fulfillment operations more efficient. Perform a self-audit—where are the inefficiencies? Where are you losing time and money?

Offer multiple shipping options

Customers appreciate flexibility, especially when it leads to cheaper, faster shipping. Offering multiple shipping options, such as pricing tiers based on delivery speed (i.e., 2-day shipping for $10, 7-day shipping for $5), can help satisfy customer demands without leading to profit losses.

Focus on packaging and presentation

Unboxing is a big part of the customer experience—whether or not they’re filming it for a TikTok. Offset the “negative” of slower or paid shipping with the positive of an aesthetically pleasing, memorable brand experience. Invest in beautifully designed packaging consistent with your brand’s messaging and aesthetic, and consider including value-adds such as coupons, multi-product kits, and other little extras. 

Leverage data and analytics for insights

Remember the Seven Rs? Hitting those KPIs means using data and advanced analytics to measure performance metrics, identify weak spots, and encourage continuous growth. 

Omnichannel integration is playing an increasingly large role in logistics and supply chain analytics. Most ecommerce brands are multichannel, and many are transitioning to an omnichannel model. 
With a multichannel model, data is siloed to individual sales/distribution channels (i.e., if you’re selling products on your website and a retailer website, those channels don’t communicate and share data). With an omnichannel model, data is shared between sales/distribution channels—all data flows into a centralized database, so you can see the full scope of your business at a glance. Because all your data is stored in one place, it’s much easier to apply analytics and make decisions based on what you’re seeing.

Future Trends in eCommerce Logistics

Each year, Penske Logistics surveys over 400 industry leaders about emerging logistics trends. 2022’s study found that 96% of 3PL providers and 92% of 3PL users agree that supply chains are evolving from linear chains to complex networks. 

These changes are due to factors such as the globalization and digitization of the supply chain. The world is growing more and more connected, supply chains are becoming supply webs, and that means ecommerce logistics will have to evolve as well. 

A 2022 Cleo survey of integration experts found that 81% of companies planned to begin migrating their digital ecosystems and solutions to the cloud—largely as a response to supply chain disruptions, market changes, consumer demands, and the threat of cyberattacks. 

Cloud-based logistics are already on the horizon. We’re looking further.

Increased use of AI and machine learning

As with automation technology, AI (artificial intelligence) and machine learning are seeing increasing use in the supply chain.

Examples include:

• Algorithms that help logistics and fulfillment operators track performance metrics, identify consumer patterns and trends, and use that data to make operating decisions—often using machine learning to improve data application and decision-making over time
• Systems that integrate data analytics, performance reporting, and forecasting tools, allowing managers greater visibility over warehouses and fulfillment centers 
• Storage solutions that use advanced analytics to determine optimal item placement and the most efficient way to retrieve items
• Autonomous drones that can scan or photograph pallets, use AI to determine what’s there, and upload that inventory data to a digital dashboard—much faster than manual barcode scanning

Augmented reality in logistics

Augmented reality refers to a technology that superimposes a computer-generated image over a person’s view of the real world. An example is augmented reality glasses, already in use in some warehouses, that display directions to storage locations within the warehouse—helping the wearer quickly find the item.

More emphasis on sustainability and eco-friendly practices

Penske’s 2022 Annual Third-Party Logistics study found that 3PL providers and users are including ESG priorities in their logistics and growth strategies. 

ESG (Environmental, Social, and Governance) is a framework for considering environmental and social impact in the context of corporate governance. Among 3PL service users, 59% said their business or organization had an ESG program with defined goals and objectives. 45% of 3PL providers said they had an ESG program. 

In a 2023 survey of 500 consumers by logistics vendor Sifted, 79% of respondents said they would wait at least one day for their online order if it meant more sustainable shipping. 69% said sustainable shipping has influenced their past purchases. 76% said they would pay an extra 5% for more sustainable shipping. And 56% said sustainable packaging and shipping was important or very important when shopping online. 

Currently, UPS has more than 13,000 alternative fuel vehicles worldwide, and has pledged to fuel 40% of ground operations with alternative fuels by 2025. DHL has pledged to using 30% sustainable aviation fuel for all air transportation by 2030. 
Consumers want it, global leaders are committed to it—and most importantly, the Earth needs it. Sustainable shipping, eco-friendly packaging, and other green logistics practices should be a top priority for any forward-thinking company.

Expansion of same-day and next-day delivery options

As ecommerce demand grows, retailers are expanding and redesigning their distribution networks to give customers more options for order pickup and delivery. You’re probably familiar with BOPIS (Buy Online, Pickup In-Store), but that’s not the only new channel emerging. 

By using flexible systems of distribution hubs such as customer lockers and drop boxes, hyper localized fulfillment centers, dark stores (brick-and-mortar stores now used only for click-and-collect distribution), and strategically located warehouses, agile businesses are finding new ways to provide faster and faster delivery.

Conclusion

In this guide, we covered:

• Types of logistics management
• Types of ecommerce logistics
• Key challenges and best practices of ecommerce logistics
• Future trends and technology solutions to watch

We hope you found this guide helpful. Ecommerce logistics can seem daunting, but with the right tools and the right partners, it can be your brand’s key to success.

Book a demo with EcomHalo

We’re EcomHalo: a retail accelerator and ecommerce fulfillment provider redefining what it means to be a partner.

We don’t just handle your end-to-end, purchase-to-porch, pick-pack-ship fulfillment needs.

We also leverage our partnership network of 25+ top retailers to help you expand your brand, enter new revenue channels, and reach millions of customers on the world’s largest ecommerce hubs. Ready to grow? Request your free 15-minute consultation to receive:

• A rundown of our ecommerce logistics and fulfillment services
• Pricing options and a free quote
• Referrals to other services if we’re not the right fit

Still have questions about ecommerce logistics? Connect with an EcomHalo Guardian—we’re here to help.