Expansion Guide VI: Logistics, Reverse Logistics and Inventory Management

Published
7/27/2022
Author
Expandeco
Reading in
14 minute

A broad topic with a significant impact on sales and customer satisfaction. The Achilles heel of many e-commerce stores, but also a major opportunity to set up services that literally produce conversions. Let's have a look together at the first steps before expansion, the analysis, the export and reverse logistics alternatives and the options for optimally setting them up. What are the things we recommend thinking about, what should we invest maximum effort into and why? 

Even before expansion

You will already know that before entering a new market, you need to be familiar your own capabilities, have your processes in place, as well as be staffed and technically prepared for the onslaught of new responsibilities. The most difficult challenge for online shop owners is the overall analysis and subsequent integration into the new environment. Logistics is key in the sales process and must not hinder expansion. So we recommend that online shop owners address the few basic points of a new market entry strategy:

1. A Comprehensive Analysis of Their Own Processes 

Reviewing and replenishing your current infrastructure – warehouse space and related inventory, managing customer support, partners and suppliers, and preparing to allocate additional related time and necessary finances. 

2. Technical Layout 

A particularly important point that ideally manages the smooth flow of orders – the systems used, their connection options to logistics networks and systems (API, CRM), customer service, order status monitoring options, returns and claims process and reporting. 

3. Market Research 

Before entering a new market, it is naturally necessary to know its specifics. Identify opportunities, conduct the independent monitoring of competitors with data analysis to create a successful marketing, sales and logistics strategy. Market research gives you certainty in your decision-making, a wealth of know-how in a short time and thus long-term time and money savings.

4. Speed of Order Processing 

Logistics specifics of countries, delivery to islands, normally guaranteed delivery times, new shipping routes (also for express parcels), public holidays and events impacting logistics operations. 

5. Your Own Transport Options 

What to outsource and what not to outsource? What are the options for self-transport and storage of goods in that country? And don’t forget reverse logistics, a particularly important part of the purchasing decision-making process for your (returning) customers across borders.

6. Scalability 

You expect growth with expansion – are you prepared to handle the onslaught of orders (especially in peak season) and can you provide sufficient quantities of both goods and consumables? Do you have sufficient staff capacity or can you deal with orders on a surge basis?  

Export Logistics

Every business is unique, requiring a different setup. With market analysis, you gain all the important data you need to build a successful delivery strategy. Today, there are a number of delivery services that focus their efforts on the European market and build a tailor-made service for you.  

There are many to choose from, but you need to consider the following before you choose: 

  • transit time within countries 
  • speed of delivery 
  • number of attempts to redeliver the goods 
  • the rate of return for uncollected packages (so-called "No Show"), which are potentially linked to cashflow 
  • the method of paying by cash-on-delivery or the time of payment 
  • express delivery options 
  • extra services and charges 

There is no clear-cut path to selecting a carrier, but there are metrics to work with in the selection process: volume, weight, package sizes, daily counts, information on atypical dimensions. In addition to the price itself, it is important that the courier service have experience with the commodity in question, especially relating to more sensitive equipment or large packages. Initial information can be provided by Greath Path, for example, which offers a high-end service tailored to each business.  

You can also focus on delivery service satisfaction surveys, data and statistics on Cash-on-Delivery (COD), numbers of delivered, undelivered, No Show (No Show) packages, etc.  

General statistics from couriers (data from autumn 2021), Peter Árva, Greath Path: 

  • Slovak Post: 64.5% COD, no show 5.0% 
  • Speedy Bulgaria: 79.0% COD, no show 11.0% 
  • Fan Courier Romania: 86.2% COD, no show 11.4%  
  • GLS HR: 65.0% COD, no show 3.4% 
  • OEX HR (overseas): 73.0%, no show 5.7% 
  • DHL express: 0.0% COD, no show 1.2% 

Our tips and recommendation 

It is also necessary to pay attention to the specifics of the regions – in the Balkan countries, for example, it is a common option that the courier waits until the customer opens the package, even trying out the goods with the possibility of direct return.  

Compared to our country, there is a high percentage of packages paid on acceptance. Also watch out for public holidays and exceptional events in countries to make certain you get all the paperwork done within the declared or legal deadline. You may also encounter identical place names within a country, with Cyrillic being a common source of problems in international deliveries. When delivering to islands, it is often the norm that a ferry only goes there once a week.  

In the context of foreign delivery, be prepared for a significantly higher percentage of undelivered parcels (compared to the Czech Republic and Slovakia, we are talking about tens of percent). In this case, we recommend, for example, an "SMS delivery notifications" service that informs you in advance of delivery. The service is paid, but there are far greater costs associated with an unclaimed parcel. 

Don't forget that the delivery person is your company’s face, so you need to pay attention to them – also focus on reports, statistics and the control system. They will help you to identify any shortcomings and find a way to correct them as well as optimize your processes.  

Reverse Logistics

"The main focus of reverse logistics is the collection, sorting and processing of complained-about, unclaimed, returned or deteriorated goods to ensure their reuse in an economically interesting way." - Tomáš Růžička, Country Manager Czech Republic, Expandeco 

While the process options for exporting goods are fairly straightforward, reverse logistics, i.e. returning goods to the online shop, involves a number of interrelated actions. The advantage of a foreign online shop over a domestic one lies in the speed, systematic process and simplicity of the solution.  

So what is everything that plays an important role?  

  • speed of processing individual cases 
  • transit time for returns, claims and unclaimed goods 
  • Costs (unless reverse logistics are paid for by the customer) 
  • internal processes and systems related to the reimbursement of goods  
  • extra service  

What are the most common ways of handling returns and what to look out for?  

Collection points of the logistics partner 

Since you don't control the process and can't directly influence it, it's important to keep the customer informed of delivery timeframes, package location and the status of the solution. Otherwise, the customer puts a burden on your customer service. 

Your own warehouse

A practical solution for an online shop, but one that requires increased staffing and operating costs. 

Retention of goods by the customer 

Suitable for smaller and cheaper products, especially if their value does not exceed the return cost. However, individual cases need to be monitored and checked on an ongoing basis to ensure you do not fall victim to fraudsters.  

Local B2B partner 

The advantage is your direct contact, however, it is necessary to handle communication in a systematic way and to be careful of substitutability in case of holidays or health complications. It depends on the type and size of the business.  

Local collection points and addresses 

An efficient alternative that optimizes time and cost efficiency. The collection points provide a complete service and speed up the entire refund and case assessment process. The returned package is processed, registered and photographed as necessary. The information is then entered in real time into a clear CRM, which can be accessed directly by the online shop. This gives the online shop the opportunity to resolve the case sooner (e.g. refund, send new goods). The packages are then consolidated and sent by a pre-arranged logistics service to the country of destination.  

Why are collection points the most efficient choice?  

  • cost optimisation 
  • direct impact on conversions 
  • speeding up the claims and refund process 
  • freeing up customer service capacities 
  • increase the credibility of the online shop 
  • competitive advantage in building a positive customer experience 
  • service at a high level that generates positive reviews 
  • clear CRM system (in addition, it is possible to enter translations, deal with customer support or process returns in real time and in one place) 

"A local collection point becomes more important when you are a foreign online shop in a given country and you do not have your own physical representation in the form of a store, warehouse or office." - Tomáš Vrtík, CEO, Expandeco 

Positive results of the case study  

We draw your attention to the case study of our client Bibloo, which uses the service of Expandeco's collection points. Case resolution has been accelerated by 6 days, returns have held steady below 15%, and refunds and claims are processed within 24 hours. 

Inventory management   

It is necessary to maintain an accurate overview of the quantity of goods before the actual dispatch. The products must also meet formal requirements or be accurately coded so that they can be implemented in other systems, for example in logistics services. The steps below will help you navigate and set up a system that will make shipping easier and smoother.  

Step 1 – Inventory Analysis 

Step 2 – Analysis of Sales Channels (what you want or need to sell abroad, possible B2B sales) 

Step 3 – Selection of Logistics Routes (the status of goods should be based on one database for all channels) 

Step 4 – the previous steps should produce accurate data, the so-called "IMPORT FEED" (in simple terms: "tables" containing the exact data for each selected sales channel)

Step 5 – Pairing with External Systems 

Step 6 – Managing Inventory, branches, sales channels, setting minimum and maximum sales quantities, preparing for the season, including packaging and other export materials  

Step 7 – The creation of a database of goods for export, so-called "EXPORT FEED" (i.e. "sales packages" such as goods you want or don't want to sell and under what conditions) 

Step 8 – Sale or Reservation of Goods, Subsequent Consolidation and Actual Dispatch 

Nowadays, it is possible to find warehouse and material flow management software and platforms on the market with advanced features that not only facilitate logistics processes, but also optimize costs and provide analyses, reports, as well as the basis for planning. 

Don't forget the formalities – rules for cross-border transport and sales, customs duties, HS codes, and VAT payment rules. For example, DHL and its free tool, which you can find at https://tas.dhl.com, can help you with everything . Use it to calculate customs duty, tax and to obtain an estimate of the initial shipping costs or various import and brokerage fees, including insurance. You can also find the latest and always up-to-date import and export regulations. 

expandeco tip

But don't forget about a good localisation, which also plays an important role in logistics. Good customer service inherently includes a local phone number, bank account or the aforementioned local return address. We also recommend using local couriers that your customers are familiar with for last mile delivery.  

"Without good localization it is a marginal business." – Peter Árva, Greath Path 

Put yourself in the hands of professionals 

We know that holding all the processes in your hands is a challenging and very complex task. Therefore, at least for the first steps on the new market, we recommend entrusting yourself to professionals who know the environment, have partners in the countries and an established, fully automated and calibrated system that you can connect to practically within a few days. This saves you many unexpected complications on your journey abroad, but as well valuable time and money, which can also pay you back faster than your investment. Last but not least, you will ensure a good first impression with the customers themselves, who will be happy to come back to your online shop and recommend you further.

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