Logistics and Warehousing with Shopify

Sun Tzu

As a new merchant, especially with a small store, these terms may be slightly newer to you. Logistics is the behind the scenes, backoffice management of an order from the moment the order is placed till the order is delivered to your customers. Your logistics flow can even start before anyone even places an order on your store, like when you purchase your stock. Warehousing is where you actually store your products before it is shipped to a customer - but note, that doesn’t mean it has to be in a physical warehouse - it could just be a back room or a showroom, it all depends on your business.

Logistic Options

To manage your inventory, there are many different methods - we are going to just simplify everything and describe the most popular options. Some companies may find a more unique or specilized option.

Third-party Logistics (3PL)

When you don’t want to have the overhead for a full warehouse and shipping operation, you can have your entire warehouse managed by another company. There are many sizes of 3PLs, but they all offer some basics - inventory storage, order fulfillment and shipping. Some offer return processing and other features that your company may need, like customization / embroidery / printing.

Benefits:

  • No Physical Buildling required to store your inventory
  • No Staffing requirements to ship your orders
  • Potentially a significantly discounted shipping rate (as they would group all customers into one larger discounted rate)
  • Inventory Management Software typically setup and included, plus sync with Shopify
  • Multiple warehouses around the US, allowing for faster delivery and less expensive Shipping rates (because you are going to closer locations)

Cons

  • Costs per item stored + shipped
  • Sometimes hard to find a good 3PL as they don’t typically have great web presences.
  • Less control of the packing and quality of the end product. Some 3PLs are amazing and you would never know it was packed by a 3PL, but sometimes they just toss things in boxes and ship.

Company Logistics / Warehouse

Your company manages a full warehouse, like a 3PL, and use your own shipping rates and shipping software. You have 100% control over the workflow and processes at your own warehouse and you can make sure your orders are shipped per your exact requirements.

Benefits

  • Full transparency and quality are easier to maintain.
  • No per item costs
  • No per item storage costs (although, see cons for the cost of the whole building instead :-) )
  • Ability to do more customization and embroidery / laser engraving

Cons

  • You have to have a building or storage for your products - that is controlled so that your inventory does not go bad
  • Employee wages / hiring
  • Your own inventory management system / software needed
  • Typically higher costs for shipping
  • Seldom able to have multiple warehouses around the US

Amazon Logistics (Amazon Fulfillment)

We thought about including this with our 3PL above, because that is exactly what Amazon is, but they are so large you have to include them separately. You can have Amazon handle all your fulfillment and logistics needs, but it will cost you a good amount of money to do this. Amazon is typically the most expensive option in the 3PL world, because they are just so large and able to handle such volume. They have the same benefits and cons as the 3PLs above, but one additional issue we have found that is really specific to Amazon. First in, Last Out - that is how Amazon handles their inventory. For most items that are just non-expiring, that is not an issue, but if you have a food or another product that has expiration dates, you have to essentially clear out ALL your stock in Amazon before adding more, because that is the only way you are guaranteed that your product is fresh and not already expired.

Reverse Logistics

One area a lot of business’s fail to take into account until later on is their returns process. Returns are a thing for almost every online store and having a procedure for doing it is very important.

We have a great article on Returns (it is from 2022, but still very relevant) - https://textconnects.com/blogs/news/return-magic

Logistics Software

Inventory Management

Shopify has some built in inventory controls, but it is still very cumbersome to use and typically once you start shipping larger volumes of products falls short of what you need to manage your business.

For stores that have both a physical store and an online store, we suggest you try Shopify’s app STOCKY, it is free for anyone with the SHOPIFY POS PRO Plan and allows you to do purchase order management / inventory counts and reporting. You can use it for both your online and physical store.

For other stores, there are a large number of inventory management apps that work for your vertical. Each vertical has different requirements and we like to take the time to work out the best solution for our clients - especially if they want to track raw materials to product created and assembled.

Some inventory management systems to look at
  • Netsuite
  • Quickbooks
  • Microsoft Dynamics
  • SAP
  • Sage
  • Apparel Magic

Shipping Software

If you have decided to go the route of self-fulfillment, you will need a way to bulk ship your orders. Shopify provides a way to manage orders out of the box, but we have found that after about 15-20 orders a day, you are going to be wasting too much time clicking around to manage your operations.

Easy to setup and use / low volume shipping:

PirateShip - we love the people at pirate ship, their system is super simple and streamlines your whole shipping process. It doesn’t have a ton of bells and whistles, but for base pack and ship, you can’t go wrong

ShipStation - the gold standard for a lot of merchants on Shopify, ShipStation allows you to quickly and easily ship entire orders to your customers. One caveat we have found, you can’t easily split orders in ShipStation, so if you typically do shipments across multiple boxes or have backorders/preorders, ShipStation may not be your best bet.

Shippo - Shippo allows you to rate shop multiple carriers at once and ship, it has a lot of the same features as PirateShip, but allows you to use UPS, FedEx and other carriers (PirateShip is only USPS)

Mid Volume shipping

ShipStation, it is still works really well at high volume. ShippingEasy - allows you to generate picking lists that go across all orders with binning and other fancier controls

Large Volume Shipping

  • Netsuite
  • SAP
  • Sage
  • Microsoft Dynamics

Instore Pickup

Shopify has been building out their instore pickup offerings for the last 2 years. Starting as little more than a new Shipping option, now inventory can be confirmed with the store before allowing a customer to select a specific location for instore pickup. If you utilize Shopify’s POS system, it will even alert your team at the register that a new pickup order has been submitted and help with picking that order.

Every store we have worked with on instore pickup has done a slightly different method, while some stores (like Target and Best Buy) have super charged their mobile apps and in-store logistics to make pickup a breeze.

Whatever method you choose, we suggest starting with just one store and working out to your other stores after you have worked out any operational kinks in your workflow. Because really, this isn’t about technology as much as it is about your in-store operations.

Local Delivery

Local Delivery can take a few different variations, but for really small stores, we have seen a single person driving orders to local customers. Shopify even has a mobile app to help accomplish local delivery (Search for Shopify Local Delivery in your app store).

More advanced setups might include a third-party like DoorDash or Instacart delivering to your local customers.

Distributed Warehousing

REI and Macys were pioneers in the distributed warehousing category, using their individual stores a warehouses. The benefit to this plan is that your local customers can shop the inventory in each “warehouse” aka Store while also providing the ability to ship to the customer from a closer location, typically reducing your shipping timelines.

Running a distributed warehouse in Shopify is possible, but requires thorough planning and typically a few additional apps / custom development to manage the back-end logistics and shipping of every item correctly.

Not convinced that logistics and warehousing are sexy enough to warrant your attention. Remember what the 6th century BC Chinese sage Sun Tzu said, “The line between disorder and order lies in logistics.”