Retail Logistics

How Does Retail Logistics Work?

The goal of retail operations, whether online or at a physical store, is to keep products available for customers no matter when or where the customer is purchasing from. To make that happen, retailers rely on smooth operations to keep inventories fully stocked and product deliveries timely, to enhance customer satisfaction.

There are two parts to retail logistics: inbound and outbound logistics. Inbound logistics is the process of retailers sourcing materials or finished goods from a supplier or manufacturer. They then move them to an internal destination, such as a warehouse, a fulfillment center, or directly to the store.

Outbound logistics picks up where inbound logistics left off. Products are moved from the internal destination to the end consumer, the customer. This process includes physically purchasing items at the store or receiving their online order at their chosen location, whether that’s their front door, a pickup location (like Amazon Lockers), or at their business.

Retail logistics, at the outset, looks similar to any other type of shipping:

• Suppliers and manufacturers develop a product.
• Retailers order an estimated amount based on data analytics and key performance indicators (KPIs) between them and the supplier or manufacturer.
• Suppliers and manufacturers ship their products to a retailer via truck, air, rail, container ship, or a combination of these transportation methods.
• The products arrive at an internal warehouse, fulfillment center, distribution center, or directly on the store shelves.
• If the products are not going directly on the shelves, they are either categorized and stored in an internal storage area or warehouse.
• A customer either purchases a product from a physical store shelf or orders it online.
• If ordering online, the product is picked, packed by the warehouse (or sent to a fulfillment center for packing), labeled for tracking purposes, and shipped out via a transportation service.
• The product arrives at the customer’s selected destination.
• The retailer reviews post-shipment data to determine if all metrics were met and whether to work with a manufacturer or supplier again for future products.

Challenges of Shipping Retail

Retail logistics is a deceptive process. Retail shipping involves many moving parts, with each step in the process having a dedicated team strategizing how to get the product through their section efficiently without compromising its quality. There are also external and internal factors to consider, with challenges that impede progress along the way.

Here are just a few of the many issues that come with retail logistics, along with solutions logistics providers utilize:

Inventory Management and Visibility: Warehouses and fulfillment centers are high-traffic locations dealing with high volumes, meaning products can get lost in the shuffle. Inventory visibility is a real issue for retailers, as it can be difficult to locate and pick out products from the vast warehouse shelves without proper organization and natural inventory flow. This is why warehouses use Warehouse Management Systems (WMS) to track and find inventory when needed for order fulfillment.

Technology: While the logistics industry constantly evolves to improve efficiency, implementation can take time for logistics providers and retailers to adapt to their traditional methods. For example, warehouses implement automation to store and pick inventory, but workers may worry about the system’s accuracy and handling. Proper training and utilization are crucial to integrating new technology while keeping track of its usefulness for future analysis.

Supply Chain Disruptions: Many obstacles can interfere with retail shipping operations. These can be external barriers, such as severe weather, equipment malfunctions, and traffic slowdowns; or internal obstacles, such as improper organization or unexpected changes in the customer’s order. Logistics providers and retailers must plan their strategies thoroughly and have backup plans if something goes wrong with their current approach.

Steep Costs: Logistics is an expensive venture. While these costs can be attributed to internal operational expenses, there’s also the fact that retailing is a competitive industry, with rivals often lowering their prices via sales and discounts to draw in more customers. However, these discounts can sacrifice order efficiency since the low cost of a product won’t afford the high operational costs. If a sale is necessary, retailers must plan their expenses accordingly so they aren’t blind-sighted by the disparity between operational costs and revenue from sales.

Labor Shortages: The logistics industry, and retail by extension, has struggled to attract and retain new talent. This is not just due to younger prospective workers being put off by the industry’s reputation for high training requirements, physically demanding work and low pay at certain logistics companies. It is also because the older generation is retiring, leaving a high bar for new workers to meet. Proper employee training and regular follow-ups are essential for retaining new workers and retraining existing ones to assess their current capabilities.

Consumer Expectations: Thanks to Amazon’s fast shipping practices, customers have become accustomed to quick deliveries, but now other retailers must follow suit to keep their customer base intact. Retailers must adjust their strategies to comfortably meet these demands, using methods like automation in certain areas, establishing pop-up warehousing and distribution centers, and outsourcing parts of the fulfillment process to third-party providers.