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zKokosu logistics: Emphasis on quality and individual approach [case study]

Handling a specific and fragile product made of natural material. Emphasis on packaging and ecology. Individual approach in logistics or maintaining a high customer experience…

This is just a fraction of the concerns that owners of the zKokosu company faced when deciding to outsource their logistics. How did it all work out and why did they choose Skladon? Read the story with a client who always upholds the motto „client first“ in all circumstances.

ABOUT ZKOKOSU

Sustainable and ethical coconut shell products, made with love and respect for nature and animals. That's the shortest way to describe the product of zKokosu, our next client.

For founders, the alpha and omega is a strongly positive attitude towards the planet and the environmental situation, which is also evident in the company's mission: to breathe new life into coconut shells. After all, the business pillars speak clearly:

  • Natural products instead of plastic.
  • Supporting local producers and farmers in Vietnam.
  • Recycling instead of burning and throwing away.
  • Honest handmade work made with love instead of mass production.
  • Raising awareness of the current environmental situation.

This is zKokosu – a project that has been created from the beginning with children's enthusiasm.

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Skladon is ranked 20th in the Deloitte Technology Fast50 ranking

Prague, November 25, 2022Skladon, one of the largest fulfillment providers in the Czech Republic, has again succeeded in Deloitte's international Technology Fast50 ranking this year. The competition annually recognizes the fifty fastest growing technology companies in the Central European region. This is the third time in a row that the Czech company has managed to rank in the list, but this time a few dozen positions higher than in 2021.

Almost 500 technology companies from 18 Central European countries have entered the 23rd edition of the competition. In addition to the main Technology Fast50 award, where Skladon took 20th place, there was also a purely Czech ranking, in which the company jumped to 6th position. The company's success proves once again that logistics outsourcing is an increasingly popular service not only in the world, but also in the Czech Republic. Gradually, it is also being used by larger players, which fulfillment often helps them to increase their logistics capacities during the busiest times of the year, such as the Christmas season.

"We perceive the renewed placement in an international competition of this format and cast as a huge success and a reward for what we work on every day. This year has been a great challenge not only for the logistics industry and I am proud of our entire team for overcoming it with honour and, moreover, with great plans for the future," comments Konstantin Margaretis, CEO and co-founder of Skladon.

The award ceremony took place at the Archa Theatre in Prague, just like last year. It was attended on behalf of Skladon by marketing assistant Monika Dobiasova and marketing manager Tomas Kohut, who accepted the award on stage. "Thanks to personal participation directly at the venue, surrounded by many other innovative and successful companies, one realizes the importance of such an award and the size of the whole event even more intensely. We see our placement in the competition primarily as a commitment towards our clients, with the aim of further individualizing our service to their needs," commented Kohut on his participation in the award ceremony.

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To be nominated for the main Technology Fast50 ranking each year, companies must meet several criteria. The conditions for this year's edition have remained unchanged from the last, so companies must have reported operating revenues of at least EUR 50,000 in the last three years and operating revenues of at least EUR 100,000 in the current year. Skladon, which has managed to grow by 1,484% over the last four years, has thus easily met these requirements. The company plans to grow further in 2022, helped by its planned international expansion.

The full results of the Deloitte Technology Fast50 CE are available here and a recording of the ceremony, from media partner Seznam Zprávy, is available here.

Skladon has grown by another 6,000 sqm and shows that fulfillment is on the move

Mosnov, August 1, 2022Skladon, the logistics outsourcing company, has officially expanded its premises by an additional six thousand sqm to a total of 16,000 sqm. This follows on from last year, when it doubled its capacity in the Mosnov industrial zone, near Ostrava, Czech republic. With its further growth, Skladon is responding to the increasing demand from e-shops and retailers, for whom fulfilment is an increasingly common choice. The fact that the newly created space has been occupied since the first day of its operation is an indication of this. However, despite the growing interest in its services, the company is not running up against its capacity limits. It owes this primarily to the Mosnov site, which, thanks to its layout, offers almost unlimited growth opportunities. A vertical expansion of the warehouse is also planned.

The Mosnov distribution center has a very strategic location, with the Leos Janacek International Airport just one kilometer away. It is from this location that cargo planes depart every day directly to the central hubs in Germany, and the construction of a combined transport container terminal with a direct connection to the port in Antwerp, Belgium, will also be completed in early autumn. The facility also has direct access to both motorway and rail, allowing Skladon to offer its clients delivery to four countries within the next day by economic ground transport.

Skladon last expanded its premises at the beginning of last year, but even then it was clear that it would need to increase its warehouse space again over the next few years. The current market situation for industrial premises, i.e. the lack of storage space and rising prices, is leading to more and more retailers moving into fulfilment. During the first quarter of this year alone, the company recorded a fivefold increase in demand compared to 2021. This trend is also demonstrated by the fact that the new space was contracted from the very first day of its completion.

"The trend of outsourcing logistics has been common in other parts of the world for a couple of decades. For example in the USA around 80% of companies use it. Czech retailers are more conservative in this respect, but they are gradually realising that fulfilment can relieve them of unnecessary worries and also significantly affect their costs. In addition, the current high prices of industrial space and its poor availability are coming into play, which is accelerating the process of switching to outsourcing logistics. At the same time, many retailers are looking for the most efficient way to cope with ever-changing demand. Therefore, they approach fulfillment also for the possibility to pay monthly only for the space that they can actually use for their goods, whether their volumes are falling or rising," comments Konstantin Margaretis, co-founder and CEO of Skladon, on the reasons for the distribution center expansion.

Moreover, the redevelopment of the center does not only mean an expansion of the existing area, but also a lot of additional work, for example to ensure sufficient fire protection or safety at work for the employees. During construction, occupational hygiene rules also had to be strictly followed, which is why the distribution center had to be completely reconfigured in terms of lighting infrastructure and emergency lights. At the same time, Skladon tried to reflect its specific internal needs in the space. In order to save electricity, for example, it reconfigured its switchgear to light efficiently, i.e. where it was actually needed.

"There is a huge amount of work and time behind each new area built, with some of the equipment taking up to forty weeks just to produce the necessary handling equipment. Moreover, from the outset, every meter of space had to be designed to make our day-to-day operations as efficient as possible, while allowing us to follow the goals we have set for the future. At the same time, we are always trying to prepare the distribution center for possible crisis situations, which is why we have, among other things, modified the sprinkler systems, created escape routes across the pallet racks and subjected all systems to the tests required by legislation," adds Maxim Kovar, Skladon's logistics director, about the reconstruction.

The company currently handles fulfillment for more than 70 e-shops, to which it delivers goods worldwide, by cooperating with more than 20 global and local carriers. Thanks to its experience in logistics within foreign markets, Skladon also has the necessary know-how about how to operate in individual countries, which is one of the reasons why more and more e-shops are choosing it for their successful expansion into the world. In addition, Skladon has plans to expand its warehouse capacity by thousands of square meters in the future, using vertical stackers and combining them with conveyor systems or building a mezzanine in case of a further increase in demand. With these methods, the company is able to increase its space up to several times the current area.

eCommerce BEERS: Informal event not only with beer [event]

Naturalness, experience sharing, friendly atmosphere and e-commerce. This is how one could sum up the eCommerce BEERS community event, which brings together the Czech e-commerce scene every month.

How did the idea come about, who is behind it and what direction has the event taken over the course of almost a year? Or what is its goal, what are the rules of participation and what is the added value? Read on from the founders themselves.

LOOK FOR BEER BEHIND EVERYTHING

The eCommerce BEERS event was created, as the name suggests, over beer. Later co-founders Alena Barnova from MARIELI and organizer of the Women in Business conference, Marek Duda from Retino and Patrik Babinec from Skladon met at the same table. "The guys and I agreed at the time that in our Czech e-commerce scene, which is very diverse, there was no regular networking event where one could casually and directly educate and inspire each other with colleagues from similar businesses or industry specialists," Alena outlines the initial idea for the project. "I have been in e-commerce for over 7 years and I like to keep myself up to date, learn about new trends and innovative solutions. Ideally in the form of a dialogue and in a pleasant atmosphere. That is why we decided to organize an event in a similar spirit. An event with relevant people with whom we can exchange our experiences casually and mutually."

"The word is the word and in November 2021 we sat together at the first eCommerce BEERS event, where we were joined by the guys from mujkoberec.cz," continues Marek. "During the event, we had an informal chat over a beer about what someone is doing, what they are facing, what they are happy about and vice versa. And on this occasion we wanted to help each other," Patrik recalls. "I remember that during the afternoon, the idea came up that when e-shops don't go to networking events, they keep themselves in a kind of internal bubble. A bubble that prevents the business from moving forward," continues Alena. "This led us into a discussion about what format to give the event and in what direction to develop it further," adds Marek. "The result of our brainstorming was a mutual agreement to hold the event regularly on the first Thursday of the month and to expand the community with more interesting members. The next event in our Prague office, which was held in a Christmas atmosphere, already attracted more visitors, and since then the number has been growing organically," adds Patrik.

FROM PUBS TO COMPANIES INTERIORS

Gradually, the places also began to change. Initially it was intended to hold the events in local pubs, however, based on feedback and general interest from visitors, the venue began to move to the premises of participating companies. "In addition to the Ukrainian pub, where we wanted to make at least a symbolic contribution to the situation, eCommerce BEERS was gradually held at Ecomail and Legitas, at Grizly's warehouse, at Retino and at Skladon's distribution center," says Marek. The Retino event in particular was exceptional in terms of the number of participants. More than 150 e-commerce personalities attended, including the absolute top of the industry. André Kohout, a visitor to the event, also described it in his own words on his blog. "I went from a small eCommerce BEERS community event for about 30 people to an event where about 150 people came. For that I give a big up to all the organizers!"

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"We still try to keep the individual meetings in the "pleasant with useful" mode. Each of the currently organising companies, when we manage to acquire their premises organically, has its own program. At our events, visitors can look forward to various case studies, panel discussions, warehouse tours, tastings of local products, etc. However, everything is limited so that the core of the event remains unchanged – casual and relaxed networking with good food and drink," emphasises Alena. "We are also planning purely leisure activities, where, for example, the August edition will take place on rafts while rafting down the Vltava River. Compared to other events, we are not afraid to go outside the Prague region, as evidenced by the events held in Olomouc or Ostrava."

WHAT'S NEXT?

"The future direction of the event is still evolving quite agilely, we are gathering feedback from participants and adding our own perceptions. In any case, we want to continue inviting more experienced e-commerce professionals from a variety of industries and company sizes, as everyone can contribute their own perspective. We want to continue to maintain the balance between e-commerce representatives and service providers, the monthly regularity and the variability of the program and venue. Only in this way are we able to maintain its added value and exclusivity," outlines the continuation of eCommerce BEERS Patrik. "In short, we don't want to turn the event into a massive marketplace," adds Alena. "And last but not least, to continue to build the community," adds Marek.

"As for the following events, there is a lot of interest in organizing and participating – we have already booked the space for 3 months in advance. As Alena said, we are planning to go down the Vltava River in August, and in September and October we will visit other e-commerce companies to follow up on previous events. Our concept is based on a professional program and networking, so we are adapting the venues and guests to it," says Marek.

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HOW TO BECOME PART OF THE ECOMMERCE BEERS COMMUNITY

Registration for the eCommerce BEERS community is available on the brief landing page at ecommercebeers.com. Once registered, an email is then sent to the candidate prior to the event to sign up for the following event. "Capacity varies from event to event, so we find a staggered ticket registration system to be the fairest," reveals Alena.

CONCLUSION…

"We believe in community. There is a bigger and more personal space to meet people with the same mindset. And these are the people we want to spend our days together with, during which we enrich each other naturally," Alena, Marek and Patrik agree.

How to easily calculate total logistics costs [calculator]

Looking for a comprehensive tool to easily calculate your total logistics costs in minutes? Do you perceive your logistics as costly and would you like to make it more financially efficient? Or are you thinking about the option of outsourcing your logistics but can't find a financial metric to compare with your current solution?

Find the answers to all these questions in our free online calculator.

THE WAY TO COST-EFFECTIVE LOGISTICS

We have prepared the calculator in cooperation with logistics auditors with many years of industry experience. You will find out, for example:

  • What are your monthly costs for warehouse logistics (so-called intralogistics)
  • What are your monthly costs for distributing shipments to your customers
  • How much it costs you on average to handle and deliver an order
  • How to handle one-off investments such as purchasing warehouse equipment or software
  • How to account for your time or your employees' time

INSTRUCTIONS FOR USE

In the calculator, you will gradually come across cost items related to storage, packaging materials, labour or transport. Once you have quantified these, you need to assign a logistics cost ratio* – what percentage of the item falls under logistics costs.

* Example 1: You pay rent for a building in which you have your warehouse, but also offices with employees that fall into other departments. In this case, you need to proportionally separate the pure logistics space and the related costs.

Example 2: your HR employee spends time each month processing payroll documents. Again, separate his time spent on logistics-related tasks from the rest.

TIP: Not sure how to calculate some of these cost items or need additional information? Feel free to contact our sales representatives or download our e-book for everything you need.

The end result for you will be the total cost of handling and delivering one shipment, which consists of both intralogistics and distribution items. We recommend that you monitor this cost systematically over the long term or use it to compare it with the quotation offered by the fulfillment specialist.

GET CONTROL OF YOUR LOGISTICS COSTS

With our tool, you can uncover up to 60% of the costs actually incurred that are (not)attributable to logistics. Avoid the mistakes that logistics auditors often encounter with their clients when working in the e-commerce.

Effectively managed logistics is the base for the success of your business.

DOWNLOAD THE CALCULATOR HERE

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Kilpi logistics: How we reduced complaints from 28 % to 0.21 % [case study]

Receiving and stocking complete inventory, connecting and adapting to client's ERP system or logistics process setup in 3 months…

The final result?

Logistics with a significant reduction in the number of complaints, effective adaptation to (un)expected seasonal fluctuations or better communication with clients and customers. Read the story we started writing at Skladon in the late Summer and early Autumn of 2019.

ABOUT KILPI

Kilpi, a brand of Ponature s.r.o., offers outdoor and sports fashion for the outdoors and the city, for sport and relaxation. By combining the name Kilpi (Finnish for ’Shield’) and the slogan ’Tested by North’, the company aims to provide customers with a true winter experience with its range. The winter products are complemented by summer gear, accessories and small items. 

The company currently employs 50 employees, has its own network of brick-and-mortar stores and an e-shop. Detailed information is available at www.kilpisports.com/en.

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Customer Lifetime Value (CLV): How to calculate, measure and increase it

It is well known that it is more financially advantageous to retain existing customers than to acquire new ones. That's why customer lifetime value (CLV) is an important metric and a great way to set company strategies, goals, budgets, improve processes, increase profits and ultimately the overall business growth of an e-commerce store.

Working with CLV is the hallmark of any modern e-commerce store. That's why it's crucial that your team has coded the concept and learned how to use it effectively.

Do you know the value of your customers?

A BIT OF STATISTICS AT THE BEGINNING

Peter Drucker, a well-known management consultant, once said: "What gets measured gets managed." With this statement, we will build on the first sentence of this article and contrast the values of existing and new customers.

According to YotPo, working with existing customers is undervalued. Yet their value represents a significant portion of e-commerce revenue. Therefore, a thorough work and analysis of their return rate is in order. The following figures underline all this:

  • Returning customers make up only 15% of all your online shoppers
  • However, returning customers account for 1/3 of all online shopping revenue
  • The value of a returning customer's purchase is on average 3 times higher than a one-off purchase

Unfortunately, allocating the cost of acquiring new customers is more exciting to a large portion of e-shops than the cost of nurturing and creating long-term relationships with existing customers. This customer flow setup can also be described in an abstract way: e-shops are obsessed with clogging the entrance while the exit remains free-flowing.

WHAT IS CUSTOMER LIFETIME VALUE (CLV)?

Customer Lifetime Value (CLV) is the total revenue you receive from a customer over the lifetime of their relationship with your e-shop.

TIP: Do you want to know the profitability of a specific type of customer or the growth potential of your e-shop in the long term? Subtract from CLV the complete average cost associated with that type of customer, such as the cost of acquiring them, order clearance, shipping, customer care, and more. Find out which customer segments are most profitable for your business and adjust your corporate strategies accordingly.

HOW TO CALCULATE CUSTOMER LIFETIME VALUE?

CLV is a popular financial metric due to the simplicity of its calculation. To calculate customer lifetime value, use the following formula:

CLV = average order price* x average number of orders** x average customer lifetime***

* when determining the average price of an order, we recommend working with a minimum of 3 months, ideally longer

** per 1 year

*** information about how long the customer has been shopping on your e-shop (in number of years)

Example of CLV calculation: Jimmy Gray shopped at your e-shop twice a month. The average price of his order was €20. He has been shopping on your e-shop for 5 years, but last month he switched to your competitor due to repeated errors in the content of shipments. What is his lifetime value?

CLV = €20 x 24 purchases per year x 5 years = €2 400

The lifetime value in the case of Jimmy Gray is €2 400.

To calculate your customers' CLV, use our customer service KPI calculator. The calculator can be downloaded here.

DOWNLOAD THE CUSTOMER SERVICE CALCULATOR HERE

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But how to work with this number?

TIP: Each variable in the formula acts as a lever. A change in one can significantly affect the other. For example, if you increase the price of your products, the average order price will increase. However, as a result, some of your customers will likely leave for cheaper competitors, reducing the average number of orders per year.

WHY WORKING WITH CUSTOMER LIFETIME VALUE IS IMPORTANT?

 

1. What you don't (re)measure, you don't improve

Once you start measuring the lifetime value of your customers and have a good understanding of the variables, you can start testing and finding more effective tactics around pricing, channel usage, marketing and more to continually reduce costs and increase profits for your target customer groups.

2. Easier acquisition cost decisions

When you know how much you make on average on your typical customer, you can adjust your customer acquisition costs to maximize profitability for the right customer segments.

3. Better planning

The more accurately you measure the lifetime value of your customers, the more accurate your future decisions about inventory, staffing, production capacity and other costs will be. For example, you will avoid problems associated with over-supplying your goods or, conversely, problems with selling out and keeping up with demand or competition.

BENEFITS OF MEASURING CUSTOMER LIFETIME VALUE

 

1. Extending customer retention

One of the main objectives of measuring CLV is to try to retain existing customers as much as possible and to minimize their defection to competitors. Tracking relevant data together with properly set customer segmentation usually leads to identifying the ideal customer profile and using effective tactics, not just marketing.

2. Increase the number of repeat purchases

By measuring CLV, you are determining the average number of visits your customers make to your e-shop. Be it annually or over its entire lifespan. You can then transform this data into building a strategy to increase your repeat purchase rate.

3. Increasing the value of sales

When pricing your products, working with their margins or analyzing competitor pricing is important. However, also look for a balance with the quality of the related service offered – customer care, delivery methods, quality of packaging, level of return logistics, etc. In any case, it is true that too rapid and significant price increases will discourage long-term customers.

4. Increasing profitability

You will only achieve higher CLV if you can build an e-shop that motivates existing customers to return and spend more per order. In general, higher CLV has a positive impact on your bottom line.

BARRIERS IN MEASURING CUSTOMER LIFETIME VALUE

 

1. Difficult to measure CLV

The deployment of appropriate software is essential for the measurability of CLV. Systems such as Enterprise Resource Planning (ERP) or Customer Relationship Management (CRM) offer automatic and detailed graphical reports to their users.

2. Generalisation of CLV

A generalized view of CLV cannot effectively identify room for improvement for individual customer segments. Therefore, a more thorough analysis and breakdown of data by customer size, loyalty and other variables is in order.

16 WAYS TO INCREASE CUSTOMER LIFETIME VALUE

There are plenty of tactics to increase lifetime value of your customers. We offer you 16 ideas to move towards higher CLV:

1. Loyalty or rewards programs

Incentivize and reward your customers for frequent purchases or when they reach a certain price per purchase. A good example would be sending a gift or discount on a popular product.

2. Customer experience

User-friendliness of your e-shop, multiple shipping or payment methods, fast and correct delivery of orders, pleasant real-time communication, but also, for example, an easy return process. Try to exceed your customers' expectations.

3. Guides and tutorials

Provide your customers with content for situations when they are unsure about a product they have purchased. This will improve the relationship with your customers. 

4. Engage your customers

Actively monitor all your customer interactions. This will improve the customer experience and increase customer loyalty. Take feedback into account in your advertising, customer care or sales itself.

5. Quality of customer care

Pay attention to the quality of your customer service. Try to find ways out of everyday situations. Up to 90% of customers take previous customer care experiences into account when making future purchasing decisions.

6. Customer Relationship Management (CRM)

Keep a history with your customers and build a relationship with them. ERP or CRM type systems automatically record a continuous flow of information across the entire customer lifecycle.

7. Customer feedback

Every negative customer experience or review should be addressed. Therefore, collect feedback regularly after purchase and improve your product and service based on them.

8. Invest in technology and software

Technology enables process automation and data centralization. Don't just rely on traditional tools like email, Excel spreadsheets, etc.

9. Up-selling and cross-selling

Try to convince your customers to buy a more expensive version of the product or to buy additional accessories.

10. Raising prices

Frequent or dramatic price increases cause customers to defect to competitors. Base your prices on those of your competitors or adjust your price depending on the quality of the service you provide.

11. Social networks

Reach customers where they spend their time. Consider your product offering and choose meaningful social networks for advertising. 

12. Quality of the shopping experience

Measure shopping cart abandonment rates and strive for higher conversion rates. A chaotic or cluttered e-commerce interface leads to lost customers. Use A/B testing to identify the most optimal solution.

13. Adhere to the delivery time

Clearly specify the delivery time in your terms and conditions and provide realistic delivery information. Do not try to match stronger competitors at any price. 

14. Overview of the current status of the shipment

Immediately after creating an order, send updates to customers with tracking information, contact information, etc., and keep him updated until the goods are delivered. In today's e-commerce world, this approach is an established standard. 

15. Easy returns

Try to make the process of returning and claiming goods as easy as possible. Define the procedures in detail in the terms and conditions.

16. Targeted content

Educate, engage and entertain your target customers. Use your blog, videos or practical online tools to do this.

LOGISTICS AS A TOOL FOR INCREASING CUSTOMER LIFETIME VALUE

As our recommendations already show, logistics play an important role in the dynamics and the amount of lifetime value of shoppers on your e-shop. Examples include a positive customer experience, transparent communication, speed of delivery, easy returns process and more. The quality of your logistics directly increases your business profit proportionally. Can you compete with the biggest and most technology-oriented online players?

Turn your logistics into a competitive advantage. At Skladon, we are logistically prepared and technologically equipped to exceed your customers' expectations. We are a professional and reliable logistics partner that offers you an easy and project-managed connection of your e-shop to our system, growth without high investments, conversion of fixed costs into variable costs, warehouse, staffing and process flexibility even for your seasonal peaks, personal approach of account managers, discounts on shipping and packaging material or a complete logistics overview in the client application MySkladon – in real time, online and 24/7.

Eliminate the daily hassle of operating and managing your own logistics. Get the space and the finances to increase your customers' lifetime value with us.

How to choose the ideal fulfillment partner [questionnaire]

Have you already decided to outsource logistics, such an important part of your business, to a fulfillment specialist? However, you find yourself in a new situation and you are faced with the question... "But how to choose one? What all should it meet to be the best option for my type of business?" Or do you just want to be sure that the questions you have in mind are relevant and complete?

Then we have prepared a questionnaire for you called "How to choose the ideal fulfillment partner". The material contains 50+ questions to ask a fulfillment service provider before the establishing of a mutual cooperation. Compare the options of each candidate and be confident in your final decision.

INSTRUCTIONS FOR USE

The questionnaire is designed in 3 logistics areas - reliability, safety and speed. Areas that are so important to your competitiveness and ultimately, the success of your business.

The individual questions are asked in such a way that they can be answered YES / NO. They are asked from your perspective, i.e. the perspective of an e-shop to a potential logistics partner. At the end of the questionnaire you will get a result about the suitability of the counterparty interviewed. By comparing the results of several logistics adepts, you will find out which one best fits your logistics-specific needs.

SAMPLE QUESTIONS FROM THE QUESTIONNAIRE

  • Are you able to increase storage capacity in case of my growth?
  • Is it possible to negotiate with you a binding service guarantee, the so-called SLA (Service Level Agreement)?
  • Do you adapt to the (un)expected season peaks to ensure contractually agreed order handling?
  • Do you offer premium services such as kitting, finishing, personalization, labeling, flyer insertion, etc.?
  • Will you take care of my complete customs clearance, including all documentation?
  • Do you offer discounts for shipping?
  • Do you use security systems in your warehouse?

Get access to other questions. Do everything you can from the start to ensure that the cooperation with the logistics expert is really good, long-term and without unnecessary misunderstandings or problems. Download the questionnaire here.

DOWNLOAD THE QUESTIONNAIRE HERE

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Building your own logistics or outsourcing logistics processes? [eBook]

Logistics is an integral part of every e-shop. The quality of its processes significantly contributes to the success of the business. Especially nowadays, when customers are placing more and more emphasis on accuracy and speed in the delivery of shipments or the originality of packaging. How can you turn your logistics into a strong competitive advantage?

IN-HOUSE VS. OUTSOURCING?

There are two possible ways. Either you decide to continue with your existing solution, which will require continuous optimization of individual fulfillment processes or adapt to your growth. For example, you will gradually encounter increased demands and costs related to labour, renting a warehouse with sufficient capacity or investing in a warehouse management system (WMS) and other physical warehouse equipment.

The second option is to switch to a fulfillment specialist, which is already adapted in its functioning to the current needs of the e-commerce world. This gives you a partner who is responsible for the quality of your logistics, so you can focus on other areas of your business.

HOW TO MAKE A DECICION?

The decision whether to continue to manage logistics completely in-house or to outsource it to an external partner is not an easy one. Our recommendation is: "Start by analysing your logistics costs." What to include in these costs? Read our e-book, which will guide you step by step to the most accurate result.

HOW TO COMPARE YOUR LOGISTICS COSTS WITH A FULFILLMENT PROVIDER?

At the moment of calculating your total logistics costs, you are also able to find out the price per shipment. That is the price you will pay for the handling and delivery of the order to the end customer. And this metric is the most ideal one to compare with the logistics outsourcing option. 

When comparing, also consider the other benefits that a fulfillment service offers. They are behind all the investment, time and other activities you would have to make to optimize your own solution. Add in discounts for shipping, packaging material or the fact that with a fulfillment specialist you only pay for the space needed for your goods and for the warehouse staff to work on your orders.

You can find more information, including practical examples, in our e-book, which can be downloaded here.

DOWNLOAD THE E-BOOK HERE

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E-commerce logistics: When to order goods from your supplier?

The optimal quantity of goods in stock is the result of efficient inventory management. It depends on a number of factors, including the size of the warehouse space, end customer demand or the reliability and speed of suppliers. Finding "the middle" between oversupplying and adequate stock level is a complex task for any logistics manager.

So how to determine the right time to place a new order with a supplier? A lot of online stores answer this question with "when the goods are out of stock". This answer may be generally correct but as you can probably guess – insufficient. In logistics is for this purpose used the term reorder point. How to calculate this point, which is unique for each product? What are the approaches and what all can affect it? Read on in our article from the inventory management series.

WHAT IS THE REORDER POINT?

The reorder point (ROP) is the quantity limit for a particular product at which it is necessary to reorder the goods from a supplier. The calculation takes into account the so-called extended lead time which starts with the notification of the need to order and ends with the delivery of the goods to the online store warehouse. By setting accurate reorder points, the risk of running out of stock of a given product is reduced. Even when the e-commerce business is already waiting for the delivery of new goods.

It is also important to note that reorder points need to be worked with over time. Their value depends on a number of factors such as current seasonality or planned marketing events.

Ideally, the reorder point of each product is defined in the warehouse management system (WMS) which will automatically alert you when the quantity of products falls to / below the set level or is able to automatically generate a new order with your supplier. The question of how many products to reorder also arises in connection with the reorder point. The answer can be found under the term optimal reorder quantity (ROQ).

The importance of the reorder point (ROP) in the replenishment system can be seen from the following simplified diagram.

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HOW TO CALCULATE THE REORDER POINT

There are several ways how to calculate the reorder point. For us, we recommend this simple formula:

Reorder point (pcs) = Demand during lead time (pcs) + Safety stock (pcs)

In order to add accurate numbers to the formula, two other variables need to be calculated – demand lead time and safety stock. 

Demand during the lead time

Lead time is the number of days from ordering products from your manufacturer / supplier to their physical delivery to the online store warehouse. To calculate the demand during the lead time, you need to multiply this number of days by the average daily sales of the specific product.

The formula for calculating the demand during the lead time is:

Demand during lead time = Lead time (days) * Average daily sales (pcs)

Safety stock

Imagine a situation where you have already sent a new order to your supplier but suddenly the sales of the ordered product have increased unpredictably or you are waiting longer than you are used to for the delivery of the goods. And you are at risk of running out of stock. This is exactly the kind of situation for which the so-called safety stock is also used when setting reorder point for goods. In short, these are "just in case" goods.

Safety stock = (Maximum daily orders * Maximum lead time) – (Average daily orders * Average lead time)

The maximum and average values you enter into the formula are obtained from sales records for certain time periods and from your own experience of working with the supplier.

WHY IS IT IMPORTANT TO WORK WITH REORDER POINTS?

By precisely setting the individual reorder points, you take the worry out of managing your own inventory. Specifically, you can achieve:

Reducing the risk of running out of stock

If you operate with low stock levels for individual products, you risk out of stock. Your customers' orders are delayed, cancelled or not fulfilled at all. In other words, they damage your brand, represent lost profits or lead to customers leaving your business to competitors. In any case, they negatively affect the customer experience with your online store.

Lower costs

Try to store your goods efficiently, i.e. at ideal stock levels. A faster and smoother physical flow of goods in your warehouse will always have a positive effect on your profitability, profit and cash flow.

Improving the supply chain

Correctly setting and working with reorder points has a positive impact on your complete supply chain. The quality of the flow of goods is not only reflected in the route "your warehouse – customer". Timely communication and delivery of goods to the warehouse is the dream of every supplier or online store.

DATA ACCURACY AS A BASIS FOR SUCCESSFUL BUSINESS

By setting your own reorder points you can answer the question of when to order goods from your suppliers and minimize the risk of selling out. Ensure your customers are assured of fast delivery of the goods they order.

The primary prerequisite for setting ideal reorder points is an accurate and up-to-date overview of your inventory management. For these needs we highly recommend working with a warehouse management system (WMS). What all should be included in this software? Download our free checklist.

Need advice on inventory management? Are you looking for other ways to streamline your logistics and give your business room to grow? Do not hesitate to contact us.

E-commerce logistics: How to receive goods

Receiving goods may seem like a simple process. You order the goods from your supplier, receive them at your warehouse gate and then put them on the shelves. Yes, in a nutshell, that is indeed the case. But receiving needs to be looked at in a more complex and detailed way because its quality affects the efficiency of next steps in the supply chain such as inventory management, picking, packing and shipping. The more your business grows the more important it will be to get the process right. In fact, it's not just the overview of stock that significantly reduces operating costs.

In the article you will gradually learn which steps the goods reception consists of, what are our recommendations for optimization and what benefits result from its correct setup.

WHAT IS RECEIVING GOODS

Receiving of the goods is the first step of the fulfillment process. It involves delivering the goods to the warehouse, unloading, checking and storing them in the warehouse for future customer orders.

GOODS RECEIVING – STEP BY STEP

The ideal result of receiving is to place the SKUs in the correct positions and in the required quantity. "Placing in the correct positions" means stocking and sequentially adding identical products in the smallest possible warehouse space and according to how often a particular product is ordered.

E-commerce businesses should have a detailed internal manual of the receipt process which includes checklists, Q&A to even less common situations. Ideally, every handling of goods should be recorded and managed by a warehouse management system (WMS). This is even more so as your business grows as this is the only way you will be able to eliminate inaccurate stock levels and other related complications and extra work. So what does the complete receiving process look like?

1. Cooperation with the supplier and sending the goods to the warehouse

The condition for a smooth reception starts with the supplier of the goods. Several rules need to be agreed and followed before they are sent to the warehouse. Based on its demand forecast the online store orders specific numbers of individual products in advance and agrees on their packaging and labelling (ideally so that each piece is marked with its EAN code). The online store can also communicate with the supplier the number and type of handling units (boxes, pallets, etc.), the number of boxes on a pallet, the ideal size and weight of filled boxes, etc.

If the e-commerce business cooperates with an external logistics company (a so-called 3PL), it is necessary to ensure that all conditions for further handling within the supply chain are met.

2. Delivery of goods

The receiving process begins when the goods are delivered to the warehouse. The warehouse staff takes the order at the receiving ramp and unloads the individual pallets / boxes into the designated marked areas. During this handling they visually check the condition of the delivery, or count the number of handling units (pallets and boxes; see below). If the staff notices damaged or missing packaging, they immediately addresses the situation with the driver or their supervisor, who contacts the supplier. In addition, it is advisable to follow two other rules when taking delivery of goods... To allow safe entry and movement of the driver in the designated warehouse area and to have a physical presence of the receiving officer at all times, e.g. in case of a damage incident during unloading.

It is advisable to use appropriate handling equipment for bulky and heavy unloading. If the driver is transporting goods for more than one company, these shipments should be placed in the truck according to the load schedule. This way can warehouse operator unload their cargo without wasting time with other people's shipments. 

The receipt of goods ends with the signing of documents (CMR, delivery note, warehouse receipt, etc.) or electronic approval of the receipt of goods and departure of the driver. In case of incorrect number of received handling units or damage to them, this event must be noted in the relevant document. If the goods are damaged, a damage report shall be filled.

3. Recounting and confirmation of goods received

The next step is to check the delivered goods. Depending on the nature of the goods the online store can decide to process quantity or quality checks.

Quantitative checks can be performed at the level of handling units (boxes, pallets) or products. Checking the number of all products can be time-consuming so some online retailers lean towards the option of randomly checking the contents of selected packages. After the recount it is important to compare the status of the quantity actually received with the quantity ordered. Any discrepancies should be communicated with the responsible party – manufacturer, supplier, etc. These differences should be recorded in the software used for future analysis, e.g. when determining the reliability of individual suppliers in both the quantity and quality of goods delivered.

How it works in Skladon: Our clients have access to the MySkladon application which provides a complete overview of their warehouse management in real time. The app also includes information on individual receipts where they can see the current status of each, the expected number of products from the supplier, the number of products actually counted, the final difference and the number of handling units (see image below).

Occasionally, a situation arises when goods are included in the receipt that were not originally announced. In this case there are two solutions according to the agreement with the client. We accept the goods directly or we "hold them on receipt" and agree with the client on the next steps.


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We highly recommend using a warehouse management system (WMS) for quantity checks. Scanning individual items will speed up the process and make it more accurate. The only requirement is that each item is marked with its EAN code. In the case of scanning boxes / pallets they need to be marked with a master label, the form of which is approved and software compatible for all parties involved. Once scanned, the system will register the contents of the specific box / pallet, i.e. the total number of SKUs.

How it works in Skladon: The presence of EAN codes is essential for the accurate management of our clients' inventories. Every product is scanned at least 4 times during its flow in the warehouse – at receipt, putting into shelve, picking and packing. Further scanning takes place at the point of palletisation but this is done at the order level, not the individual product. Only in this way we are able to ensure a minimal error rate in order handling (in the first quarter of 2021, we reached a level of 0.09%) and achieve the most accurate matching in the inventory of goods.

There is also the possibility of so-called quality checks. Unlike quantity the quality of the product is usually not systemically recognisable. It is therefore important to select specific products and check their quality from production, the condition of fragile goods, etc.

How it works in Skladon: We perform quality checks on several clients, an example is Skinners. The goods are sent to us directly from the manufacturer, so the client does not come into physical contact with their product. We have jointly defined an internal quality manual for the checks, which contains detailed checking instructions.

4. Goods storaging

The final step is to place the new goods in the storage area. This step can vary significantly from warehouse to warehouse. It depends on the type and size of the warehouse or the nature, size, quantity and weight of the received goods. This process is also more efficient in the case of system warehouse management. In practice, it looks like the warehouse staff is offered a storage position after scanning the EAN code of the product. There are usually two reasons for this: either the product is already stored in the position and the addition saves warehouse space or the warehouse position is evaluated as the most suitable according to the turnover rate of the product to be stocked. The second option aims to process incoming orders as quickly as possible.

How it works in Skladon: We stock new goods either on shelves for immediate picking or on pallet positions that serve as a long-term stock (buffer). Some of our clients' products need to be kitted before they can be stored on the shelves, i.e. we create the final product from the received semi-finished goods. All operations are of course managed and controlled by the warehouse management system (WMS). Furthermore, we do not mix identical products with different batches or expiry dates on individual positions.

HOW TO OPTIMISE THE RECEIVING PROCESS

There are a number of ways to improve the receiving process. Below are some of our recommendations.

Design your warehouse layout correctly

As mentioned earlier, receiving goods is the first step in the fulfillment process. Its location must correspond to the material flow of goods within your warehouse and should meet at least the following 4 basic conditions: continuity with the receiving ramp, sufficient handling space, direct barrier-free connection to all used warehouse positions and separation of the receiving ramp from the dispatch ramp. Proper placement of the receiving area also eliminates crossing routes with handling equipment and personnel from other workplaces.

Cooperate with a warehouse management system (WMS)

The warehouse management system makes it easy to manage your complete supply chain with its features and practical automation. By using it you can refine your warehouse management and achieve greater storage and picking efficiency. You know exactly where and how many products you currently have in stock or how many products are on their way to your warehouse. Among other things you can set up so-called reorder points in the system at the level of individual products. When the selected quantity is reached, you are automatically notified to order new goods at your supplier.

How it works in Skladon: Our clients can track the current status and quantity of their products in their MySkladon account. The application is connected to our WMS with a two-way data flow between the two systems. For each product they have information about the quantity that is:

  • Available for future orders
  • Reserved in unpacked orders
  • Ready to ship
  • Held by quality
  • On the way to warehouse / ready for stock

This information is also automatically linked to our clients' online stores so they always have an up-to-date quantity of their products available for new orders.


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Check selected goods

If you cooperate with multiple suppliers, time, your own experience and analysis will reveal those who are less responsible in the goods delivering or you will come across so-called problem products (e.g. fragile, with expiry dates, production-specific, etc.). In these cases, be more cautious at the reception as this step is often the last checkpoint. This will prevent claims for damaged, expired, partially missing or differently marked goods.

Documents double checking

Immediately check and compare the ordered quantity with the actual received quantity. This avoids corrections, rework and losses later in the fulfilment process. To streamline your checks, maintain your receipt and shipping record system.

ADVANTAGES OF A FINE-TUNED RECEIVING PROCESS

Investing in optimizing your receiving process will pay off in all subsequent stages of fulfillment. Properly set up receiving is an important prerequisite for smooth handling of future orders. You can therefore expect:

1. Accurate inventory overview

If you keep accurate stock counts, you are able to better plan orders with your suppliers, reduce unexplained stock-outs or set ideal margin levels in the longer term. You'll also avoid negative reviews from your customers who have ordered incorrectly kept goods "in stock" from you.

2. Ideal quantity of products in stock

Low inventory levels risk selling out and customers leaving for competitors while excessive inventories of rarely sold products do not bring a return on the purchase cost. Find out the causes of these problems at the beginning.

3. Efficient inventory storage

Optimising the receipt of goods also makes the warehousing process more efficient – both spatially and financially. The goal of every e-commerce business should be to have enough goods in the picking area and as close to the packing area as possible.

INVESTING IN WMS OR LOGISTICS OUTSOURCING?

As mentioned several times in the article, there are 2 conditions that need to be met for successful receipt of goods. A step by step detailed process and an accurate record of products received.

The products you receive into your warehouse are then (in)shipped to your customers which is reflected in the customer experience and ultimately the success of your business.

If you are at a stage where you are shipping higher hundreds to thousands of orders per month, sooner or later it will be time to purchase a matching WMS. Don't know what all such a WMS should meet? Download our warehouse management system guide. We have prepared it for you in cooperation with logistics auditor Mr. Rudolf Maly, ALog.

A quality WMS always represents a high upfront investment. In addition, every online business is unique so expect to customize it to your specific requirements which comes with additional costs related to time and energy.

Again, there is a choice. Entrust your logistics to an expert partner who has already fine-tuned their fulfillment service and is ready to help you grow further. Benefit from their expertise and compete with the big e-commerce players with your logistics "at the snap of a finger".

nanoSPACE logistics: Distribution of nano face masks from zero to one hundred [case study]

Annual increase of 4,648 % with a turnover of 128 million CZK, an increase in the daily number of orders from units to hundreds and thousands or the complete launch of logistics outsourcing in 14 days. This is also how the year 2020 could be defined – as a turning point in the functioning of our client nanoSPACE. Read the story that was started by the global pandemic COVID-19 and gradually led to our today’s strong partnership.

In our example, however, you will find that the logistics outsourcing is also suitable, in addition to medium and large online stores, for startups or small e-commerce companies that plan to grow rapidly. As in a case of Skinners, we have prepared the case study for you in two versions. You can download the infographic or text version here:

ABOUT NANOSPACE

nanoSPACE is the world’s first manufacturer of anti-mite pillows, blankets, sheets and nanofiber barrier sheets. Until January 2020, nanofiber protective aids, such as nano face masks, antiviral scarves, nanofiber respirators and more, were only complementary goods. Until now, nanoSPACE was more of a heart project, with operators believing in nanotechnologies and testing themselves as allergy sufferers that the products really work. The company is also a founding member of the Association of the Nanotechnology Industry of the Czech Republic and a member of the Czechia is nano project.

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