Logistics for Ecommerce: Everything You Need to Know
Logistics is something that eCommerce sellers cannot afford to be uninformed about.
The topics in logistics are far reaching and technical, and can quickly get confusing, even a bit boring to read about.
Regardless, not understanding how logistics affects your eCommerce business can result in an inefficient business that burns more money than it should, and can create disasters for the flow of your business with consequences like products stuck at ports and hefty fines.
In this post we’re going to go over logistics primarily for starting and growing eCommerce sellers, only what you absolutely need to know about, and what your options are for each stage of logistics all while trying to keep the topics digestible and not overwhelming.
What is eCommerce Logistics?
Simply put, eCommerce logistics is anything and everything that has to do with the flow of products from being manufactured, to stored in a warehouse, all the way to final delivery to a customer’s doorstep.
That sounds like a lot, and it is, but we can break it down into smaller pieces so every step seems understandable and approachable, rather than mysterious.
Getting Your Products Made
The first step in the eCommerce logistics journey is getting your products manufactured.
How and where you have your products made will have a huge impact on your logistics chain, and this is mainly because products made overseas rather than within your own country require many more steps to getting the final product ready for sale to customers.
While this isn’t true in 100% of cases, if you’re getting a food or supplement product made, you’ll typically want to stick to domestic manufacturing, and if you’re selling a classic product, then getting it manufactured overseas is the likely way to go.
While there’s an endless number of ways to find a manufacturer, many merchants to this day can browse a large number of overseas manufacturers on Alibaba, which is a directory of manufacturers in countries all over the world.
In the less-competitive past, merchants could buy bulk items off Alibaba, slap their brand’s label on it, and sell it on their website or Amazon FBA.
Nowadays, of course, this is not really possible, and a lot of people online will say “Alibaba is dead for eCommerce sellers” and this is patently untrue.
Alibaba still works, the only difference being now is that you will use it to find manufacturers and have them make custom orders where you put your own innovative spin on a product. It’s more challenging, but it’s still the best place to find a manufacturer for most sellers.
Getting something produced domestically is by no means easier than finding an overseas manufacturer.
Domestic manufacturers are typically always operating at full capacity, and won’t even entertain taking on new clients or smaller clients.
Sourcing is one of the biggest challenges of logistics and eCommerce, don’t be afraid to even take on a consultant on a place like Upwork to help bring your product to life.
Less talked about: Product Inspection
If you’re getting a product made overseas, one essential thing experienced sellers do is get their finished products inspected by a 3rd party.
It doesn’t matter how good your manufacturer is, or even if they’re overseas or domestic, there are times where they will slip up and put out a lower quality product than you expect, or will make a glaring error that slips through the cracks.
Sadly, it’s your responsibility as the owner of these products to ensure that they are quality and properly made every single time.
Your best tactic here is getting a 3rd party inspection company to look over a finished product to make sure nothing too obvious is wrong.
Inspection companies can be affordable and will even help keep everyone in the manufacturing process honest when it comes time to create your batch of products.
Three big inspection companies are CCIC, SGS, and Bureau Veritas. There are others but these 3 should be able to find a small company near your manufacturer’s warehouse to inspect every single time you get products made (and yes, many recommend you inspect every single time).
Getting Products to Their Destination Country
So you’ve got your products made and now you have to get them to their destination country.
There’s some vital information you have to know so you’re not caught off guard and blindsided by a sudden problem that can cost you a lot of time and money.
Ways to Ship Products Overseas
There are 3 main ways to get your products over to your country:
Air Shipping Your Products
Air shipping is a very fast, and very expensive way to get your products shipped to their destination country.
Prices for air shipping have risen dramatically since COVID-19 happened, and it is effectively unfeasible to run any kind of eCommerce business using air shipping for getting products from their source country.
Air shipping should only be for obtaining samples or for testing a tiny batch of products to explore market viability.
Beyond that, air shipping will destroy your margins and cost a fortune.
LCL Sea Freight
LCL stands for Less-than Container Load, so if you can’t fill an entire container with your order (which is typically 10 or 20 pallets worth of product), then your products will share space on a container with other sellers’ products while being shipped overseas.
While LCL costs more per-product than filling up an entire container, it’s the only option for smaller sellers and newer sellers, and it’s a good thing that the option is available at all.
If you’re new or still ramping up your product line, LCL makes a lot of sense.
FCL Sea Freight
In contrast to LCL, FCL stands for “Full Container Load” and it’s when you book an entire container on a ship and fill it up with product.
There are many benefits to FCL over LCL if you can manage to fill up a container, including:
- Lower price per unit
- Container is sealed
- Faster processing once it hits the port
How to Obtain Sea Freight Services
There are countless freight forwarders, shipping agents, and other options to get your products sent overseas, but I will be the first to say that the vast majority of services are not user-friendly, intuitive, or even helpful.
I’ll break down my 3 personal favorite ways to get products shipped overseas.
Sea Freight Method 1: Freightos
Freightos is an online marketplace to get rates for sea freight from freight forwarders based on your specific product and destination needs.
You can quickly create an account, input the parameters of your shipment (how much product, origin location, destination location, and all kinds of variables in between), and it’ll give you instant quotes from a variety of freight forwarders on how much it would cost to ship.
They are in a class of their own when it comes to a customer centric, easy-to-use interface on their site. No other website can give you real-time quotes like Freightos can.
Freightos is the only place you can make an account in seconds, and then instantly see fairly accurate quotes without having to talk to someone or be onboarded to some service.
Freightos might not be the best option for you every single time, but you can always cross-reference any quote you get somewhere else with Freightos to see if you’re being overcharged.
Another benefit of Freightos is they will handle a lot of the backend work, things like customs, ISF documents, Bill of Lading, and more with very little input and requirements from you.
Sea Freight Method 2: Agent and Freight Forwarding Services
There are a plethora of freight forwarding services and shipping agents out there.
You can find an agent for your shipments through online labor marketplaces like Upwork, and you can find freight forwarding services through simple Google searches.
Using an agent or a freight forwarding company is good because they will do all the confusing work for you, and it’s their job to make sure your shipment doesn’t get held up anywhere and that you’re not missing any important paperwork.
Sea Freight Method 3: Using Your Manufacturer’s Preferred Agent
This is very similar to Method 2. Your manufacturer will typically have an in-house shipping agent or a preferred freight forwarding company they usually work with, and can
The biggest benefit to going with your manufacturer’s inhouse agent is that a lot of the communication getting things handled from factory to port is a lot more seamless.
If you decide to go with whatever shipping your factory is offering, always cross reference their quote with Freightos to make sure you’re getting a good deal.
While Your Product Sails: Very Important Things to Know
There are quite a few things that can catch you off guard and hold up your shipment if you’re doing sea freight.
You can get surprising fees, if you’re missing certain documents your shipment can get held up, and general knowledge you need to be aware of so you don’t get blindsided.
Let’s briefly go over some vital things you should know so you’re not caught unawares.
Harmonized Tariff Codes
If you’re shipping from China, there’s a very strong likelihood that your order will be subject to tariffs.
As your product enters the country, customs will bill you for a certain percentage of the amount you paid for your products if they are part of the tariff schedule.
Tariffs aren’t cheap, upwards of 25% of what you paid for your goods, and can shock you if you are getting your first order from overseas when you suddenly get an invoice from Customs saying you owe thousands of dollars.
Every product you get made overseas has an accompanying code that identifies what the product is, called the Harmonized Tariff Schedule (HTS or HS for short).
Simply put, if your product is getting made in China, there’s a strong likelihood it’s subject to a tariff.
How to find the Harmonized Tariff Code for your Products
The fastest way to figure what the tariff code for your products are is by going on the government’s Harmonized Tariff Schedule Search and start putting keywords in the box that match your products and start looking for the code that most closely matches your products.
Also, your manufacturer likely can help steer you in the right direction for which code applies to your products, so you can ask them to get the answer or at least a head start.
How to Get a 0% Tariff for Your Products (or at Least a Discount)
Don’t get too excited just yet, but in some cases your product type might have an exemption from tariffs.
It’s hard to know if your HS code is exempted from tariffs, so in my opinion the best way to find out is to have a professional who is knowledgeable in Harmonized Tariffs to look into your product mix and see if they can find any potential exemptions.
Like many things, it’s easiest to find someone for this job on freelance marketplaces like Fiverr and Upwork.
If successful, they can find Harmonized Tariff Codes that match some (or all) of your products to allow you to bypass a tariff, but keep in mind that this is rare.
However, a benefit of doing something like this is that when they can’t find an exemption, it’s possible they can find a lower tier tariff to drop the amount you owe customs by a few percentage points.
One more tip is you can ask your manufacturer to invoice you for the amount of cost for the products you’re buying and strip out any of the extra unrelated costs. Things like carton packaging, pallets, labeling, and other fees that would increase your price to be removed from your product invoice so that the amount you pay customs can be slightly reduced.
Important Documents To Know for Sea Freight
Being aware of certain documents will put your mind at ease and will not send you into a panic when your agent, or Customs, or your customs clearing agent, or anyone suddenly sends you an email saying “Hello, we need a critical document in 12 hours or else your container will be stuck at the port and you will be charged upwards of $16,000.”
So let’s go over some critical documents you can be aware of so you aren’t suddenly blindsided.
ISF – Import Security Filing
The ISF document is required early in the journey of your container, and must be submitted at least 24 hours before being loaded on the vessel destined toward the US.
It goes to customs, so your customs clearing agent will be the one to receive it and process it.
What’s on the ISF document:
- Booking party (Your company)
- Origin port
- Final place of delivery
- Ship to party
- Harmonized Tariff codes
Your agent typically handles this and will hand it to your customs clearing agent, but make sure you double check with whoever is responsible for submitting the ISF so you know it’s been properly submitted because the fee can be up to $5,000.
Bill of Lading
The all important bill of lading goes over critical information about your shipment, what’s inside, where it’s going, things of that nature.
If you’ve been in eCommerce long enough you should be familiar with a bill of lading, as all container-based shipping uses them.
Once again, your agent should be handling where the bill of lading should go, but it’s good to have a copy on your hands in case anyone has a sudden need for it.
The arrival notice is exactly what it sounds like, a document stating that your goods are about to hit the destination port. Customs needs this document to process your products, so make sure your agent or whoever is responsible for handling the Arrival Notice hands it to your customs clearing agent.
Again, a very straightforward document, it’s the invoice your manufacturer made for you to let you know how much you owe them to get products made.
This document is mostly important because you need to hand it over to Customs so that they know how much to charge you if your products are subject to a tariff.
Your agent should be the one to give this information to your customs clearing agent, but if they’re not in contact with your manufacturer, then you have to be the one to give it to your agent.
Power of Attorney
This document is for your agent, and it gives them the authorization to get your products cleared by customs.
When working with an agent or freight forwarder, they will typically reach out to you so you can sign a power of attorney document.
While there are other documents involved in the process of getting products shipped overseas, these stick out as the most crucial that can hold up your shipment if the right person doesn’t have them at the right time.
Warehousing and Customer Delivery
Depending on the type of eCommerce business you’re running, which platform you sell on, and how large your order is, there’s different options as to what’s best for your business.
We’re going to go over a few places to send your products and what stage and type of business would benefit most from this.
Storing and Sending Products to Customers Yourself
You can send products directly to your house, if you’ve got the space for it.
Whether you sell on Amazon or ship directly to your customers (or both!) then having your products sent straight to where you live can have quite a few benefits:
- It’s essentially free to store your product (if you have the space)
- You can check the quality of every single product
- Easily do “things that don’t scale” like leaving a hand-written thank you note in each box
- Get an Amazon shipment sent to an FBA warehouse fast because you can stay up all night prepping it if you want
Having your own products on hand is great when your eCommerce business is on the smaller side, and you get really familiar and intimate with what you’re selling as well.
The issue with housing your own products is that you can quickly run out of space if your business grows, and you’ll eventually spend so much time processing products and shipping them out that you’ll have very little time to actually run your business.
In the end, sending products directly to your house should be a temporary solution, not something to maintain indefinitely.
If you always want to be involved in the processing of products and managing your own logistics, you can upgrade from your house to a warehouse, where you manage everything yourself even as you scale.
If you’re fulfilling every single order on your own, you have to
Sending Products Directly to Amazon FBA Warehouses
This is (obviously) only an option for Amazon sellers.
When you create a shipment plan within Amazon to send a batch of products to an FBA warehouse, you can actually choose your manufacturer’s factory as the ship-from address within Seller Central.
From there, you would set it up like a typical shipment, and give the pallet labels to your manufacturer to prep for Amazon.
This method can be good for some, but not all sellers.
An example of when this wouldn’t work is your products are very heavy, and you hit Amazon FBA’s pallet weight limit, but barely fill up a container, so your price per product shipped becomes very inefficient.
Examine your product mix, type, size, and weight to see if it makes sense to go with this option.
Using Third Party Logistics for Storage and Fulfillment
This option makes a lot of sense for sellers that are growing fast and have product catalogs too large to store personally, but also don’t want to go through the hassle of renting warehouse space and spending huge amounts of time fulfilling individual orders every day.
Using a 3PL if you sell on Amazon
When it comes to getting a 3PL to strictly send product to Amazon FBA warehouses, you should look for a couple of things:
- Make sure their storage fees are lower than Amazon’s storage fees
- See how much their carton forwarding price is. A lot of 3PLs make most of their money individually labeling each of your products, so if you have your products pre-labeled at the factory, a lot of 3PL companies will charge a very high amount just to slap a label on your box and put it on a pallet since you’ve removed their main money making task.
- If you’re interested in branching off of Amazon, see if they can ship out individual products directly to customers as well.
Using a 3PL for your Shopify / Standalone eCommerce Store
If you don’t sell on Amazon, then you send products directly to customers.
While a lot of 3PL companies will ship directly to customers, you must remember that the United States is big, and sending products from one coast to another can get very pricey, and it can also be slow.
While that’s not too big of a problem for some, there do exist third party logistics companies that mimic Amazon FBA, and will disburse your products to various warehouses across the country to offer fast shipping that is similar speed to Amazon (companies like ShipBob, for example).
When you don’t want to limit your selling channels, finding a 3PL that can ship to multiple marketplaces and also directly to customers will be your best bet.
While there are dozens (maybe even hundreds) out there online, a quick example would be Xcel Fulfillment, who can send your products to marketplaces like Amazon and Walmart, but can also fulfill individual orders that come in from places like eBay, Etsy, and your Shopify store.
Once again, depending on your business size, stage in growth, how you want to sell and where you sell will all help steer you in the right direction as to where to send your products and get them eventually fulfilled.
Based on how you sell, whether you use marketplaces that do final customer delivery, ship directly to customers yourself, or a mixture of both, managing your inventory properly can be as simple as using a simple spreadsheet to having to use multi-channel inventory management software to make sure you stay in stock on every platform you sell.
With Amazon Inventory Management, you have to manage inventory you store off of Amazon as well as Inventory you store in Amazon FBA warehouses, which adds a layer of complexity.
Also, inventory that is in a marketplace warehouse like Amazon or Walmart doesn’t count toward inventory you fulfill and send to a customer yourself.
Once again, look at the complexity of your selling channels to determine if you need inventory management software or not.
Last Mile (Final Delivery of Products)
We went over how to get your products into your country, but equally as important getting your products is how you choose to deliver them to your customer.
Last Mile shipping is the last shipment a product takes on its journey to the end-customer.
That means shipping carriers like USPS, UPS, and FedEx.
Last Mile through Fulfillment Services
If you’re selling on a fulfillment marketplace like Amazon FBA or Walmart Marketplace, then last mile delivery is handled for you.
Amazon/Walmart will pick, pack, and ship your product to the customer, you as a seller don’t physically do anything at this point.
If you’re using a 3PL that ships out to individual customers, then they will know the best way to ship things out and can do this process without you having to do anything.
Last Mile Self Fulfilled
If you’re shipping out each product yourself, then you have to look at your product mix and find out the best shipping service for your products.
The most common shipping services used:
- USPS First Class Package. This is the cheapest option for packages under 1 lb. that have tracking.
- Priority Mail. Weight based shipping from USPS that allows you to use your own packaging.
- UPS Ground. Weight/Volume based shipping from UPS that can sometimes be cheaper than Priority Mail.
- FedEx Ground Shipping. Similar to UPS Ground shipping.
If you’re having trouble deciding on a carrier and service, you can use modern shipping software like Shipstation and ShippingEasy that will look at your order size/weight/volume, look at the distance it needs to travel, and then determine what the cheapest shipping method will be.
Another benefit of these types of shipping softwares is they typically have access to discounted rates that you wouldn’t normally get on your own.
While logistics is extremely broad and each topic can be dived deep into a dizzying amount of detail, you only need to understand and be aware of each step in the process more than having expert knowledge.
The beauty of eCommerce today is that virtually every facet of your business can be delegated to an agency or contractor of some sort, and any time you need expert advice there are expert consultants that can guide you in the right direction.
Choose how much of your business you want to fully manage yourself and what you want to leave to the experts, and with the proper parameters in place you can use logistics to your advantage to scale your business to the moon!