Key Logistics Parameters to build eCommerce Logistics Business Case (Outbound) 1

Key Logistics Parameters 2

In this session we continue analysing the most important Logistics Parameters to be considered during the development of an eCommerce Logistics Business Case.

In order to reduce the complexity, we have identified 12 Key Logistics Parameters.

These 12 Logistics Parameters are always present in any eCommerce Logistics project, but there are others that are strictly related to the specific project to be aside analysed.

Anyway, once you have identified these 12 parameters and you have understood how to measure and control them, you can consider your project well started!

In the previous session we have analysed the first three Key Logistics Parameters:

  • Production Through
  • Peak Quantity
  • Number of SKU’s

The above Logistics Parameters are strictly related to the configuration of the processes of Inbound and Storage.

In this session we introduce other 3 Key Logistics Parameters that are more related to the Outbound flow.


These three Key Logistics Parameters refer to the shipment process.

 

 Logistics Parameters 2:4

 

4. Average Order Quantity

This number is really the Key Number of every eCommerce Logistics project.

It represents the expected average quantity ordered by your eCommerce clients.

Obviously the minimum is 1, but is very challenging to understand before starting, how much could be the average.

The definition of the Average Order Quantity does not impact only the Warehousing (e.g.: Pick&Pack) and Transportation costs, but first of all the Cost of the Inventory.

For this reason I recommend to be very conservative when you define this parameter. The higher the order quantity is, the higher is the risk to underestimate all the related costs.

In our exercise we will assign a lower Average Order Quantity to Luxury Brand, because the average price is higher and to be conservative as explained above.

  • LUXURY FASHION – AVERAGE ORDER QUANTITY = 1,35
  • REGULAR FASHION – AVERAGE ORDER QUANTITY = 1,75

 

5. Max Package Gross Weight

This Key Logistic Parameter is a driver for estimating the Forwarding costs.

Almost all eCommerce forwarders have the gross weight as a key parameter for their rating system.

Apparently it is very easy to define this parameter. It is sufficient to ask to your Production Department the weights. Unfortunately information coming from Production is always misleading.

In fact Production can tell you how much is the weight of a pair of shoes, but they cannot know how these shoes will be packed.

So packaging is strongly impacting the final weight of your deliveries. We will analyse in detail Packaging matters during the next session.

Based on my experience when you develop this kind of Business Case you cannot have any detailed information about how your Brand Image would set the packaging methods.

For this reason, my recommendation is always the same: be conservative!

In our exercise we will assign to both Luxury and Regular Brands 5 Kg as Max Package Gross Weight.

It is a very conservative definition, but the alternative option was to assign 3Kg, as these are the levels proposed by most popular eCommerce forwarders. But 3 Kg looks a bit aggressive and risky.

  • LUXURY FASHION – MAX PACKAGE GROSS WEIGHT = 5 Kg
  • REGULAR FASHION – MAX PACKAGE GROSS WEIGHT = 5 Kg

 

6. Max Package Dimension

In B2B shipments package volume is a driver for estimating Transportation costs together with gross weight. Using these values forwarders calculate Chargeable weight on which is generally based their rating system.

In case of eCommerce, rarely Volume or Chargeable weight are used for calculating transportation costs.

Anyway I recomend to estimate this parameter as it impacts other aspects of your outbound flow, for instance the space to be reserved for your on holding deliveries.

Cubic meter volume is calculated as Length x Height x Depth. For example a package with Length = 50 cm Height = 40 cm and Depth = 30 cm will measure 0,06 cbm.

In our exercise we will have the following Max package Dimension parameters, as

  • LUXURY FASHION – MAX PACKAGE DIMENSION = 0,07 cbm
  • REGULAR FASHION – MAX PACKAGE DIMENSION = 0,08 cbm

In this session we have analysed the 3 Key Logistics Parameters strictly connected to the configuration of the processes of Outbound.

In the next session we will continue exploring other Key Logistics Parameters related to the Outbound/Delivery process.


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