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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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.

• Kilpi: Infographics
• Kilpi: Our story

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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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

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.

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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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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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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:

• nanoSPACE: Infographics
• nanoSPACE: Our story

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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Logistics from A to Z and a partnership based on open communication. This is a brief way to define our relationship with the Skinners brand, which has been going on since 2016. B2B and B2C logistics, product assembly, quality control of goods from production, delivery to 90+ countries, 10,000+ sockshoes shipped per month... Read the story about cooperation with a client who was among the first at our company and still uses our services.

Read in detail about our common history, how we've grown up and discover the client's best practices for working with a fulfillment expert. As in a case of nanoSPACE, we have prepared the case study for you in two versions. You can download the infographic or text version here:

• Skinners: Infographics
• Skinners: Our story

ABOUT SKINNERS

One shoe. Infinite possibilities. This is a short way to define a Skinners product. Thanks to the patented technology and design, it offers a combination of freedom and comfort of socks with basic shoe protection. Michaela Matějková and Petr Procházka from Brno are behind the birth of this idea. A purely Czech project successfully started on the American crowdfunding portal Kickstarter in 2016, recently has won a number of awards, including Red Dot Design, Good Design or A ’Design. The company currently employs 12 regular employees, outsourcing its production and logistics. Forbes, CzechCrunch, Lidovky.cz, E15 or MediaGuru have recently written about “sockshoes”.

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Is your business growing and you are starting to hit the limits of your current warehouse management system? Are you increasingly discovering tracking issues or differences in physical and system quantities? Then now is the time to abandon the pencil-and-paper, Excel or other inadequate system option. Switch to a comprehensive warehouse management system that covers all your logistics needs!

Quality warehouse management system is an integral part of efficient logistics. You may be housed in a super-modern warehouse space, but without a complete overview and optimized warehouse processes, your time and financial costs will continually increase as orders increase. How can you avoid them? And what does such a system need to do? Find out below!

WHAT IS A WAREHOUSE MANAGEMENT SYSTEM (WMS) 

A Warehouse Management System (WMS) is a software that monitors and manages the day-to-day operations of your warehouse. It is a basic prerequisite for a so-called managed warehouse, where the handling of each SKU is algorithmically optimized based on data.

WMS also reduces an amount of manual tasks and error rates of operating staff. The warehouse staff are controlled by the system and have minimal room for their own decision-making. Based on information from the WMS, logistics managers can, for example, identify weak points in the operation and adjust workflows. Generally speaking, they show them the big picture for day-to-day tasks and long-term strategic goals. 

WMS AND WAREHOUSE PROCESSES

The warehouse management system gives you a complete overview of individual warehouse processes such as receiving, picking, packing and other goods movements. It's a tool that makes it easy for you to optimize them and with which you are able to react flexibly to current situations.

1. Inventory monitoring

WMS informs you how many pieces of each product you have in stock, how many are on their way from the supplier to you or to the end customer. In addition to current quantities, it also provides data about used stock positions or, in combination with historical data, helps you manage your inventory.

2. Receiving and storing products

After counting the incoming goods, the quantity of product in each box is defined using WMS. The WMS also selects the most suitable location for storage and then also records the quantity stocked at specific positions.

3. Order picking and packing

The WMS optimizes and manages the picking and packing processes. The system guides the warehouseman through the shortest route when picking orders and checks the correctness and quantity of goods picked. The correctness of the products from the orders is also checked during packing, which is completed by automatic printing of an address label for the shipper.

4. Transportation of shipments

Once your shipments are handed over to the carrier, your WMS automatically sends information to your e-shop along with a tracking number so that customers are able to track their shipments online.

5. Reporting

Your WMS automatically generates reports about traffic and inventory throughout your warehouse. These reports should include, for example, data about the speed and quantity of orders picked in a selected time, the percentage accuracy of picking and packing, staff productivity, etc. The reports thus offer important information for inventory forecasting and also for planning warehouse staff shifts.

ADVANTAGES OF WMS IMPLEMENTATION

WMS is an essential tool for effective warehouse management. Implementing a suitable WMS will help you to achieve the following points:

1. More accurate stock counts

The quantity of each product is controlled by scanning the newly received or returned goods. This method also leads to a reduction in stock shrinkage.

2. More efficient order processing

A basic prerequisite is the proper integration of the WMS with the e-shop. This way, your e-shop will always show customers the current stock quantity, which means smoother and faster order processing for you.

3. Higher warehouse productivity

Multi-tasking like counting inventory or repacking orders is always an unnecessary, often high multi-cost task. Accurately recording orders, their quick processing and shipping are essential for increasing the productivity of your employees.

4. Cost reduction

The high upfront investment in the WMS is offset by the increased productivity of the warehouse staff. By implementing it, you eliminate a lot of costs for employees who spend time on non-systematic tasks such as double manual inventory control, "searching" for the right stock positions of each product, inefficient picking process, manual creation of address labels, etc.

5. More likely business growth

The higher the number of orders you record, the better quality WMS you need. The same is true if you decide to expand your product portfolio. The growth of your e-commerce store depends on optimal operations in your warehouse, which you can achieve by implementing an appropriate WMS.

3 KEY AREAS TO FOCUS ON WHEN CHOOSING A WMS

There are a number of WMSs on the market with varying depth and breadth of functionality. If you decide to choose your own software, make sure it meets all the requirements of your specific logistics business. We have identified 3 key areas to focus on when choosing a WMS.

1. Connectivity with your e-shop

Your WMS must be able to communicate with your e-shop. It is important that the transfer of all relevant information takes place bilaterally, meaning from the e-shop to the WMS and vice versa. Only in this way you are able, for example, to automatically keep your e-shop up-to-date with stock information or send your customers information about their shipments. 

To give you an idea, here is a simple example from practice. You receive an order on your e-shop and this information is paired with your WMS. This allows the warehouseman to have the order in his scanner, the WMS takes navigates him on the shortest route to pick it and pass it to the staff at the packing counter. Once packed, an address label is automatically printed and the shipment is handed over to the carrier. The generated tracking number is automatically transferred back to your e-shop. Of course, everything also works assuming that the stock and status of a particular order is updated.

Your WMS must also be able to recognize orders that are to be handled on a priority basis. Only in this way you are able to meet the promised delivery conditions.

2. Compatibility with your warehouse equipment

Make sure that the WMS you are purchasing is compatible with all the equipment in your warehouse. This usually includes scanners, terminals, printers, scales and other physical or hardware equipment. If your WMS does not communicate with any of these devices, factor in other related investments up front.

3. Demonstrable ROI

In addition to general positive references and recommendations from other companies, including those that are similar in size and product, try to determine the time and financial savings of the software you are acquiring. Try to get answers to the following questions:

• How much time do I save with WMS per hour?
• What is a percentage increase in picking accuracy?
• How much has the speed of complete order checkout increased?
• By how many percent has the accuracy of stock record keeping increased?
• On average, how much money is saved per month? (Note: Always compare total logistics costs with/without WMS).

Would you like to have a more comprehensive idea of what your WMS should meet? Download this list of essential features of any advanced WMS.

ENTRUST YOUR LOGISTICS TO SKLADON TODAY

Don't want to spend time selecting and implementing the right WMS? Thinking about outsourcing logistics to an external partner? Contact us!

In addition to other benefits of outsourcing, you will also get access to our client application MySkladon, where you will have a complete overview about your logistics. You will never have to worry about warehouse management or its optimization. We are a partner that saves time and energy for other areas of your business.

„The biggest added value I see in the MySkladon client app is accurate information about our inventory.“

Simona Malanová, Process Manager, Skinners Technologies s.r.o.

DOWNLOAD THE WMS CHECKLIST HERE

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