What is On-Demand Logistics & How it Impacts Scalability
June 1, 2021
Need essentials? You can shop online at Target, Walmart, or Costco.
Need groceries? Turn to Instacart or Amazon Fresh.
Don’t feel like cooking? Order delivery from Grubhub, DoorDash, or Uber Eats.
These days, you can practically get anything delivered to your door — sometimes in a matter of hours.
What makes it all possible is on-demand logistics — getting products delivered to customers when they need them. The ability to fulfill and ship orders to the customer’s door quickly has led to the term “convenience economy,” as convenience has become the leading driver of buying behavior.
In this article, learn how on-demand logistics work, why it’s important, and how you can meet customer expectations.
What is on-demand logistics?
On-demand logistics is much more than just an industry buzzword. It refers to a modern logistics strategy that enables online brands to expand customer reach geographically and fulfill orders as soon as they are placed.
In many cases, on-demand logistics can support multichannel retailing, which streamlines and automates the fulfillment process for orders that come in through multiple sales channels.
On-demand logistics require a robust distribution network, flexible fulfillment solutions, and the latest technology and automation tools that enable speed and accuracy.
How COVID-19 has increased the need for on-demand logistics
For online retailers, meeting customer expectations is a top priority and it starts with creating a strong ecommerce fulfillment strategy.
Ecommerce was already growing fast year over year, but when the COVID-19 pandemic hit, online shopping skyrocketed and changed how people shop for the long term.
But even before the pandemic, the traditional retail supply chain was on a decline. For instance, as more customers shifted to online shopping, many physical retailers chose to turn their brick-and-mortar locations into dark stores or micro-fulfillment centers to offer not only in-store and curbside pickup, but also delivery for all customers, near or far.
This was just one example of how retailers have recently adapted to the rapid change. But the biggest lesson taught during the pandemic in the realm of commerce is the importance of supply chain planning.
With high standards set around the ability to ship and delivery quickly, retailers need to prepare for unexpected events throughout the supply chain, whether it’s a manufacturing delay, transportation disruptions, or warehouse closure.
Ultimately, online brands must establish supply chain resilience, and it can be achieved in many ways, including:
- The ability to split inventory across logistics centers
- Partnering with multiple suppliers and shipping carriers
- Using aggregated data to forecast demand and optimize stock control
How on-demand logistics is changing the delivery experience
Customers expect fast, consistent, and reliable shipping. So it’s no wonder that on-demand logistics is the key to driving more sales and keeping customers coming back for more.
Marketplaces like Amazon and Walmart have set the delivery standard around 2-day shipping.
But fast delivery can be costly. Expedited shipping is always an option, and some customers are willing to pay the extra for shipping that fast, but there are ways to leverage standard shipping options and still provide fast delivery.
Inventory distribution is a common on-demand logistics model. Ecommerce businesses that first start out will often pack and ship items themselves (or might also rent a single warehouse to help with storage needs). But as the business grows, on-demand logistics cannot be achieved by fulfilling orders from a single location.
That’s why fast-growing online brands partner with logistics companies, such as ShipBob, that offer multiple fulfillment locations to store inventory, have orders fulfilled, and ship packages through the most efficient route.
Since on-demand logistics companies partner with thousands of merchants, they are able to provide discounted shipping rates from major and regional parcel carriers and let brands utilize a small amount of space in their fulfillment center(s).
This is just one example of how brands can enable an on-demand logistics strategy without the the need to invest in their own infrastructure and technology.
Here is an overview of how on-demand logistics can benefit your ecommerce business.
Faster shipping times
Amazon Prime might have popularized it first, but now nearly every online shopper expects to see a 2-day delivery option on all ecommerce stores.
Offering fast shipping options, such as 2-day shipping, can be quite tricky, considering you need to ensure that the shipping methods you offer don’t cut into your profit margins.
But by distributing inventory based on where there is demand (and once your volume justifies it, where the extra storage and initial transportation costs can be offset by the average costs savings in shipping), you can offer more or all of your customers affordable 2-day shipping via ground.
This is because you can ship from the location closest to each customer to reduce the average shipping zone.
“We want the customer experience of purchasing on our website to be similar to Amazon Prime. This is possible with ShipBob, without inflating the shipping cost to an insane level. To do this, we strategically place products around the country.
We are storing inventory in three of ShipBob’s fulfillment centers: Moreno Valley, California; Chattanooga, Tennessee; and Dallas, Texas.
These locations map out nicely with our customer base as we have a large group in the South and also get coverage on the West Coast and in the Midwest.”
Tim Fink, Co-Founder of EnduroSport
Lower fulfillment costs
In an extremely competitive retail environment, on-demand logistics might seem nearly impossible to achieve when most of your time and logistics budget is being spent on:
- Warehousing and storage fees
- Hiring and training staff
- Implementing fulfillment software
- Managing inventory
- Purchasing and stocking up on packing materials
- Kitting and assembling items
- Shipping orders
To lower fulfillment costs, you have to consider both the financial investment and the time spent on logistics.
Partnering with a third-party logistics (3PL) company is a great solution. A 3PL partner can help your business save on costs and time, freeing up resources to focus instead on product development, marketing, and business growth. With a 3PL, you can meet customer expectations while keeping fulfillment costs low.
By distributing the right quantities of inventory to multiple fulfillment centers within a 3PLs network, you can sync your sales channels with your 3PL’s technology, so all orders placed are routed to the nearest fulfillment center location. This allows you to optimize your shipping strategy, reduce shipping costs, and speed up last-mile delivery.
“We need to deliver quickly and inexpensively. Since switching to ShipBob from our previous 3PL, our fulfillment cost on comparable orders went down by 25%.
Customers get accustomed to a certain service level at a low price — often free — and want it faster over time. Ever since we started our partnership with ShipBob in the summer of 2018, they’ve been able to deliver the customer service level we need at the right cost.”
Michael Peters, VP of E-Commerce Operations at TB12
Meet consumer demand
On-demand logistics uses technology that allows merchants to expand their operations and access aggregated logistics data in real time.
This allows merchants to gains insights to make better decisions around product allocation and when it’s time to replenish stock (and at what locations) to meet demand.
For instance, ShipBob is a 3PL that operates multiple fulfillment locations across the globe. Every location is powered by the same, proprietary software, which offers visibility into inventory and orders, as well as fulfillment and shipping performance.
With access to advanced data and analytics, you can make better decisions on how to meet consumer demand and expectations.
You can also automatically provide customers with order tracking, and if they ever have an issue or question about an order, you can easily view orders across ShipBob’s entire fulfillment network in real time to provide an update.
Inventory forecasting is another important aspect of on-demand logistics. Without inventory, you can’t ship orders. By using historical data to forecast demand, you can ensure you have enough inventory available and stored at all times, set automatic reorder points, and even calculate how much safety stock to have on hand.
With more online brands growing worldwide, there is a tremendous need for more warehousing and storage space.
Some on-demand warehousing solutions rent our other 3PLs’ open space, but other on-demand warehousing companies simply use garages and other buildings that aren’t designed for fulfillment.
It is a good hack to beat issues such as the lack of affordable warehouse spaces closer to where the customers are located, or if you need extra space during the holiday season.
But the goal is to meet customer expectations, which means your fulfillment strategy must be reliable and accurate, and you can’t rely on geographic location alone.
That said, on-demand warehousing is mostly a short-term solution that cannot guarantee a consistent experience, leading to more fulfillment errors. When the warehouse is not run by your own on-the-ground staff, it becomes difficult to resolve issues quickly, which leads to poor customer support.
“A newer fulfillment network sold us on their solution, but they clearly did not think much through. We experienced a huge surge in fulfillment errors and countless complaints about orders being inaccurately fulfilled.
Errors will inevitably happen when you fulfill orders at large volumes, but not like this. We also had 1,500 units of missing inventory that they couldn’t find. It was a terrible experience. They don’t understand the fulfillment game like ShipBob does.”
Gerard Ecker, Founder & CEO of Ocean & Co.
On-demand logistics for flexible fulfillment
Since the ecommerce landscape is always changing, it is important to partner with a 3PL that provides not only on-demand logistics solutions but also room for growth.
The right 3PL should always being implementing improvements with the latest technology and supply chain best practices, as well as continuously expand their distribution network.
Here are some of the reasons why partnering with the right 3PL can provide flexibility in your on-demand logistics operations.
Manage changes in demand
A tech-enabled 3PL can provide visibility into your supply chain, so you can track shifts in customer demand and plan accordingly.
For instance, ShipBob not only fulfills orders but makes it easy to connect your store with ShipBob’s fulfillment software, so you can get insights to questions such as:
- What were my historical stock levels at any point in time in any location?
- By when do I need to reorder inventory for each product?
- How often is each product sold across channels?
- If I run a flash sale on my site, how will this affect my available inventory levels?
- How does product demand compare to previous periods?
- How are my sales affected by different seasons and months?
- What are my best-selling items?
- Which items are not generating sales and incurring high storage fees?
By having insights into demand, you can use historical data to predict the future, allocate inventory to the right locations, and reorder just enough inventory to optimize storage and meet demand.
Better inventory management
Many 3PLs like ShipBob make it easy to connect your store (and other sales channels) with their technology. Once your store is connected, you can access built-in inventory management software, so you can track inventory in real time.
ShipBob allows you to distribute inventory and manage it all from one dashboard, while you view inventory levels in real-time, set automatic reorder notifications, determine how much buffer inventory you should have on hand, see what your best-selling items are, and much more.
How ShipBob’s on-demand logistics services meet customer expectations
As a trusted 3PL provider, ShipBob offers scalability, reliability, and consistency in our on-demand logistics solution. Here is how ShipBob can help you meet customer expectations.
1. Flexible fulfillment options
As a business partner, ShipBob believes in scalability. You may be a startup when you first partner with us. Then, you stay with us for years as you grow, expand into new channels, regions, fulfillment centers, etc., even across the globe.
ShipBob’s ability to provide flexible fulfillment solutions enables merchants to optimize their supply chain through every stage of growth. Our technology also integrates easily with leading ecommerce solutions. You can learn more about our vast partner ecosystem here.
As your business expands, ShipBob offers hands-on customer support and the resources needed to manage both national and international logistics.
“Since partnering with ShipBob, we’ve been able to scale our business from $300,000 in sales per year to over $1.1 million due to infrastructure, technology, and scalability improvements.”
Ryan Casas, COO of iloveplum
2. 2-day delivery shipping options
Even if you run a small business, with ShipBob’s expansive on-demand logistics infrastructure, 2-day delivery is achievable.
With ShipBob, you have the ability to achieve 100% 2-day shipping coverage across the continental United States, whether you a fulfilling from one of our fulfillment centers or taking advantage of multiple fulfillment centers.
“ShipBob has been a great ally as they have fulfillment centers all over the US, facilitating a 2-3 day delivery time for any customer in the US.”
Andrea Lisbona, Founder & CEO of Touchland
No matter where in the US your customers are located, ShipBob makes it possible to offer 2-day shipping options. Merchants that have enabled 2-day shipping have seen a decrease in cart abandonment and a boost in average order value.
ShipBob’s 2-Day Express Shipping increased our AOV by 97% — from $75 to $148. And we were able to scale our business from $300,000 in sales per year to over $1.1M.
Ryan Casas, COO of iloveplum
3. Network of distributed warehouses
ShipBob offers a network of fulfillment centers, to help you strategically expand into new distribution locations based on where your customers are located. Whenever an order is placed, it is routed to the fulfillment center closest to your customer to fulfill the order.
This not only speeds up order delivery and reduces shipping costs, but it also helps mitigate risks in case of unexpected warehouse closures or inability of carriers to pick up from the facility due to bad weather.
“ShipBob has multiple fulfillment centers in the US, one in Canada, one in the EU, and one in the UK. All locations filter back into one centralized warehouse management system, so everything is under the ShipBob umbrella.
By distributing our inventory across these countries and regions, all of our customers are able to get their orders much faster while paying reasonable domestic shipping rates.”
Wes Brown, Head of Operations at Black Claw LLC
4. Transparent data dashboard
When it comes to on-demand logistics, you have to have insights in the entire inbound and outbound logistics process. You want to keep fulfillment logistics costs down, improve speed of deliveries, and consistently meet demand despite sales fluctuations.
With ShipBob’s free analytics and data reporting tool, you don’t need to juggle multiple spreadsheets anymore. ShipBob makes it easy to automatically track your orders and inventory and provide insights into fulfillment performance, shipping, future demand, logistics costs, and more.
“At my previous 3PL, everything was done on spreadsheets and it was very difficult to get the fulfillment data I needed. Now, we’re working with a tech-enabled 3PL that seamlessly provides data to help us make business decisions.
ShipBob’s analytics tool is a game-changer and it’s helped me grow my business tremendously. With ShipBob’s free analytics tool, it’s so easy for any of my team members to pull data in real-time.”
Courtney Lee, founder of Prymal
5. Accurate order fulfillment
Order accuracy is just as important (if not more) than fast delivery. Once you start to manage a high volume of monthly orders, it can be a challenge to not only replenish inventory on time but also fulfill orders quickly and accurately.
At ShipBob, we take order accuracy very seriously. Whether it’s validations used in our warehouse management system used by our fulfillment team to confirm each step of the fulfillment process, or improving our warehouse picking and packing processes, ShipBob is constantly looking for ways to improve and achieve higher levels of order accuracy.
ShipBob’s customer service continues to improve with direct contacts that know our account, real-time follow through, and a better customer delivery experience. We monitor the ShipBob dashboard on a daily basis, can view our fulfillment metrics at any time, and see if orders are fulfilled accurately.”
Manuel de la Cruz, CEO at Boie
In addition, ShipBob offers transparency into the fulfillment performance. From the ShipBob dashboard, you can pull insights to answer questions like:
- How many of my orders are fulfilled on time (and what’s the breakdown of orders placed, processed, and shipped)?
- How many and which orders can’t be fulfilled because of inadequate stock levels?
- How many days does it take for my orders to be delivered?
- How many times has ShipBob missed its SLAs and which orders were impacted?
6. Best-in-class warehouse management system
ShipBob’s on-demand logistics network is powered by our reliable warehouse management system (WMS). Built and owned by ShipBob, our WMS tracks logistics activities across all of our fulfillment centers.
Since our entire network is powered by the proprietary tech stack, merchants get insights into accurate inventory counts while it enables ShipBob to offer a consistent fulfillment performance and a high accuracy rate — no matter what locations you store inventory in.
“ShipBob’s dashboard is super intuitive and easy to navigate. love that you can view orders based on when they are processing, completed, on hold, and in other stages. It is super helpful for us to have that and track the order every step of the way.
We have a Shopify store but do not use Shopify to track inventory. In terms of tracking inventory, we use ShipBob for everything — to be able to track each bottle of perfume, what we have left, and what we’ve shipped, while getting a lot more information on each order.”
Ines Guien, Head of Logistics at Dossier
Get started with ShipBob
To meet customer expectations around on-demand logistics, ShipBob provides the infrastructure, technology, expertise, and premium customer support you need.
ShipBob can help you save time and money with access to multiple fulfillment center locations, best-in-class software, and the ability to automate shipping.
To get started with ShipBob, click the button below for custom pricing.
On-demand logistics FAQs
On-demand logistics is more than just an industry buzzword. Here are the most common questions about how on-demand logistics works.
What drives demand for the global logistics industry?
Ecommerce provides the opportunity to expand into new markets across the globe and the ability for customers to get products that are not local. However, there are still many challenges with international shipping and fulfillment. That’s why more online brands are partnering with international 3PLs like ShipBob that provide global fulfillment solutions to meet customer expectations no matter where they live in the world.
What is on-demand transportation?
On-demand transportation is when the customer chooses the pick-up location and even shipper that is transporting their order or ride to help ensure the most efficient last-mile delivery. To optimize on-demand transportation, you need to forecast location-specific sales, logistics pricing, and driver and shipper availability. This is really important for businesses that process and assign routes in real time.
How does on-demand logistics work?
On-demand logistics refers to the ability to deliver customer orders as soon as possible, whether it’s through same-day, next-day, or 2-day shipping. Enabling on-demand logistics can be done in a number of ways, such as splitting inventory across different fulfillment locations based on where customers live. This enables affordable 2-day ground shipping to reduce shipping costs while speeding up transit times.
How do 3PLs offer on-demand logistics?
Your online business needs an on-demand logistics partner in this ultra-competitive environment. Tech-enabled 3PLs like ShipBob offer the robust fulfillment network, technology, and customer support need to help merchants on-demand logistics in the most cost-effective and efficient way possible.