Online sellers often communicate with international suppliers for product manufacturing, sourcing, and shipments. The international supply chain system revolves around common terminologies to make better communication among business owners and suppliers from diverse regions.
Here are some key terminologies for shipping, sourcing, and fulfillment to communicate effectively with suppliers across the globe.
A third-party logistics commonly known as 3PL is the company, providing supply chain services that include storage, picking, packaging and shipment to other businesses. The major service they offered to the online sellers is e-commerce fulfillment.
Why a seller approaches 3PL?
Various reasons may compel an online seller to contract with 3PL. the foremost reason is the non-availability of the own warehouse, or incapacity to store high volume inventory in warehouse. In addition, some sellers want to outsource logistics to concentrate on other matters. Nevertheless, sellers who sell on Amazon are facing some inventory restrictions so they also prefer 3PL to launch aggressively and to avoid going out of stock (OOS).
3PL services vary with the company you get in contract. Even, you can choose what services you want to get from the 3PL either shipping, storage or whatever.
Distributed inventory denotes to the distribution of your inventory in different fulfillment centers of the Amazon across the country. The purpose is customers are located all across the country or even all over the world, placing inventory in multiple warehouses making shipping faster and cheaper. If you are selling in the United States, your inventory can be distributed between warehouses in Illinois, Atlanta, and New York. Rather one product travel from one warehouse, you can choose the closest warehouse to ship the product to save time and money.
BS is the process when a firm evokes in-house services which were outsourcing previously. It is a solution to the problems raised in the outsourcing contracts and changing business situation.
Shrinkage is the nice way to say that your inventory has disappeared, either due to theft, damage or improper handling. While large volumes of products are moved around, it is more likely to damage, or misplaced.
What will happen, if you find your product damage or misplaced?
Many 3PLs insert the shrinkage clause to get them out of liability in case of misplace or damage, they offer specific amount of good to be paid that is usually limited to specific percentage (2-10%).
Self-fulfillment means that you do it all yourself. It is also called In-house fulfillment method; it is time consuming as well as burning lot of your energy. The basic components of DIY route are to secure warehouse space, recruitment and staff, installation of warehouse management software, and many more.
The beginners prefer using self-fulfillment for their online stores. As the sales increases, sellers may scale up to the professional level through contracting Amazon FBA or 3PL which suits the best. You can you all of the three even or either of it. Learn about Management of Amazon Inventory Fiasco in 2020: FBA or 3PL
The most common definition of product breadth is the variety of product stays to sell. For example, a company may only offer to stock five items of each SKU, but it may have huger variations. The more the SKUs you have, the wider your SKU breadth. SKUs does really matter if you engage 3PL, such companies have certain requirements of SKU Breadth. Whenever you are going into the contract with 3PL, consider the SKU breadth.
The time duration a supplier requires delivering units after receipt of orders. It includes confirmation, order acknowledgment, shipping notice, receipt of goods, and payment.
Omnichannel is a customer phenomenon where all sales and marketing channels integrated as one entity. The Omnichannel strategy helps customer having seamless shopping experience across all channels simultaneously. The logic behind Omninchannel is to identify various platforoms, integrate them, and provide customer-friendly shopping experience to generate maximum sales. If you, as a seller, don’t integrate data of your customers, and allow your multiple stores (physical, website, Amazon or eBay) to keep the data in silo, won’t let you grow as a brand or business enterprise. Integrating all data will help you get more sales, and provide optimized user experience to the buyer.
3-Way match approach involves matching three documents- the product invoice, purchase order and the receiving report. The approach aims at ensuring order has fulfilled in accordance with the contracts.
Dimensional weight/ DIM Weight
It is a pricing technique, used for commercial carriers, postal services and freight forward companies. DW is calculated by multiplying length times width times height.
Choose appropriate boxes to ship your products, large boxes will have larger DIM weights that may be expensive shipping cost. In order to save money, don’t use smallest box that has no room for air fill, bubble, wrap etc.
When the package ships, two different types of “weight” are measured: the dimensional weight and actual weight in pounds and ounces. The dimensional weight is also called as volumetric weight. It is the volume that the package takes up.
Remember: each carrier has its own measurement scale to calculate dimensional weight. Therefore, it is advisable to have shipment package as lean as possible with lower weight.
Multi-sourcing is the technique used by big-scale business. They believed that working with small pool of vendors won’t work; they prefer engaging multiple suppliers to engage multiple sectors.
RL refers to planning, executing and controlling the efficient, cost effective flow of raw material, goods, inventory from the point of consumption to the point of origin. The main purpose of RL is to recapture the value or proper disposal.
RL may also cover to remanufacturing and refurbishing activities. More precisely, if a customer returns and called it ‘defective’, the product is likely to reverse back with the same supply chain network.
RL is a costly method; therefore, make your return policy cost effective. The major expenses are involved in shipping the product back in warehouse and restocking cost. This is the reason many sellers charges customers for return shipments, just to recoup costs.
Acceptance Quality Limit (AQL)
AQL is a method used in sampling inspection to estimate the quality of entire stock. AQL is the minimum threshold of acceptable defects during the random sampling at an inspection. This data helps client take informed decision either to accept or reject the inventory.
Selling in bundle or pack of 2 or 3 and so on is the technique called kitting. Many sellers use kitting technique through combining multiple SKUs as one SKU to reduce the packing and shipping cost.
Kitting is combining multiple SKUs to sell together as one SKU, or to put it a little more simply, multiple products to sell together as one product.
For example: if you order a mobile phone online, seller adds up headphones, mobile holder, and mobile cover and ship all as one unit.
Kitting is the laborious work, putting together all items in one box, and time consuming as well. If you have engaged 3PL, let their rules know first.
It is most expensive shipment process; it takes the product to the customer’s doorstep. To expedite the shipping process, products are shipped in midsize vans. It reduces the delivery time but at the same time it increases the cost. The probability of using last mile services by the customers, companies are figuring out cost-effective methods to reduce the last mile cost. Drone Delivery is in its nascent stage but in-store pick up is the feasible option so far.
Getting acquainted with the common used shipping, sourcing, and fulfillment terminologies will help you increase your business efficacy. The online sellers particularly selling on Amazon have to source their products across the globe. Be informed to such terms will help you make your sourcing step easier and manageable. Learn about Amazon FBA PL – A Journey Towards Million Dollar Flip-Able Asset