Integrated Distribution Services, Inc., parent company to IDS Transportation Services, LLC, has differentiated and distinguishing itself in the area of direct to consumer shipments by taking a holistic approach to ecommerce fulfillment based on our belief that the future competitiveness of companies engaged in ecommerce will be won in the logistics trenches. With that said, we see companies underestimate the significant impact an ecommerce strategy will have on their business, along with overestimating how quickly they can make the switch without outside help and that is where IDS fits.
Many times our new clients come from companies that entered the ecommerce space and could not get their solution to deliver through their normal course of business. There is a tremendous difference in shipping 15,000 SLSU (single line single unit) orders versus shipping 15,000 units on fifty orders. The technology, systems, network analysis, product flow and transportation implications are massive as shippers work to move their product from suppliers, converting into finished goods, then delivering it competitively to their ultimate customer.
Up to this point, most of the conversations we have put out on the topic of ecommerce solutions has been around taking care of business within the four walls of the distribution center, which is great, but for the most impactful solution the discussion has to include inbound and outbound transportation. After all, the greatest single cost and ability for quick delivery are around solving transportation equations.
To start the conversation, a transportation solution that solves the cost and delivery equation is all about location, location and location. Proximity to the ultimate customer will improve transits and cut freight costs. While inbound costs are important, there are minor in comparison to the outbound transportation costs. Shipping a small parcel is significantly more expensive than bulk inbound shipments to a fulfillment DC.
Ten times out of ten, the small parcel cost for the home delivery will be more costly than the costs associated with the fulfillment center itself, so to minimize the parcel shipping costs it is best to position the fulfillment DC as close to the customer as possible. Since it is not feasible to have a DC next to every customer, it is important to line up with a fulfillment center that will do a free analysis (no reason to pay for consultants) of the customer distribution pattern and optimize the DC location based on that information. For a low volume ecommerce shipper this will be a single DC model, while larger shippers, with 1,000’s of orders a day, would optimize the efficiency of their supply chain transit and cost by having multiple fulfillment DC’s across the country. The one caveat on the multiple DC strategy for shippers is the carrying cost of having the same sku mix across the USA may not be effective use of corporate cash. That is a decision the money people within the organization need to balance. It sounds easy, but the equation requires a high powered piece of software to run through all the what-if analysis. For start-ups that do not know the distribution pattern of their customer base, they are best suited to go with a location that has been discussed in many articles, which is Indianapolis, Indiana. Time and again, third party companies have found there is a reason Indianapolis is considered the Cross Roads of America. Seventy percent of the population is within 2 day ground transit of Indianapolis.
As for inbound management of the freight for the full supply chain solution, we suggest looking for an ecommerce fulfillment partner that offers freight consolidation opportunities with their client base. Earlier in this blog, we mentioned bulk shipments are cheaper than small parcel. The concept of consolidations is to increase the bulk say from LTL to a full truckload. The cost per piece decrease as the mode changes, so in the transportation world small parcel is more expensive per piece than LTL (less-than-truckload) and LTL is more expensive than truckload and truckload is more expansive than intermodal. The more opportunities the fulfillment center has to consolidate all its customers in consolidation programs the more the ecommerce B2C shipper wins.
In the late 2000’s, IDS acquired a transportation company for the sole purpose of differentiating its efulfillment offering to offer the full supply chain solution. With a transportation offering, efulfillment customers would now have a one-stop shop for all their logistics needs. As we assembled our service offering, we saw most fulfillment centers could receive product into their facility, pick the orders and manifest them for shipping to the end consumer. We thought the DC quality functionality is the table stake to be an ecommerce fulfillment provider and felt what separates the table stake providers from the full supply chain solutions ecommerce fulfillment provider is their ability to wrap a transportation solution around their DC offering to deliver the orders to the end consumer at the least cost and quickest transit. This makes the solution become a true competitive advantage.