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We break down the key components of DTC logistics and how to optimize each to improve efficiency, prepare for increased demand, and support growth.
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A direct-to-consumer model offers many advantages for wholesale businesses, digital-native brands, and product manufacturers. If this is your business’ first time selling DTC, you’ll probably need to retool your fulfillment operations and prepare your supply chain for increased demand. This retooling will involve every aspect of how you fulfill orders, from customer service and processing returns to warehousing and product delivery.
In this article, we break down the key components of direct to consumer logistics and how to optimize each to improve efficiency and support growth.
Direct-to-consumer logistics, or DTC logistics, refers to the supply chain and operations involved in direct-to-consumer companies. This includes things like inventory management, warehousing, pick and pack, and shipping and fulfillment.
For many manufacturers, adding DTC to their business model will increase the volume of shipments and the number of locations to ship to. The challenge is to create a solid fulfillment infrastructure and support it with the right technology to meet customer expectations while keeping shipping costs down.
For merchants accustomed to selling B2B exclusively through other businesses and distributors, transitioning to DTC means fulfilling products directly to the end user. With a direct-to-consumer sales model, your business will have greater ownership of various aspects of the purchase and post-purchase experience, including delivery, inventory visibility, returns processing, and customer communication.
To establish a relationship with your customers and create a good impression for your brand, you’ll need to develop an effective distribution strategy that expands on your existing capabilities and introduces new ones. This will involve working with the right carriers and providers, determining your shipping rates, and choosing the right DTC warehouse locations to help you manage fulfillment costs and meet delivery expectations.
Due to Amazon Prime’s two-day shipping service, modern consumer expectations are fueled by fast, free, and no-hassle shipping. Meeting these expectations can be challenging, especially for companies that operate with limited budgets. Aside from meeting heightened expectations, you also have to grapple with shipment frequency and product size, as the amount of products you’ll need to ship to a customer over time as well as the product weight and dimensions will impact aspects like cost, logistics, inventory, and returns.
To ensure your fulfillment strategy is seamless and cost-effective, you’ll have to consider different shipping strategies in your DTC logistics. This could mean investing in last-mile delivery to cut costs, expanding your fulfillment centers, or setting free shipping thresholds to ensure your margins are met. All options come with their pros and cons—the right strategy will depend on factors like the products you sell, their costs, and the geographic locations of your customers.Fulfillment Options
As you handle an increasing amount of orders, you will also need more space to accommodate direct-to-consumer distribution. This could mean obtaining additional DTC warehouse space, expanding and reorganizing existing facilities, and fulfilling from physical locations to provide customers with more flexibility and shorten shipping times. Whatever mix you go with, you want to make sure your strategy helps you accommodate greater order volume and to effectively move products through your supply chain.
A shift to DTC selling also comes with the need for efficient last-mile delivery—the last leg of the shipping process. Last-mile logistics includes things like delivery routes, rider allocation, and traffic consideration. To ensure a frictionless last-mile delivery process, consider investing in technology that can offer real-time tracking and delivery route planning and potentially facilitate communication between the delivery person and customer.
To scale your fulfillment, you might also consider creating, or working with a third-party provider to create, a network of fulfillment centers. This can help expand into new geographic locations where your customers are located, enabling you to speed up fulfillment, lower shipping costs, and mitigate risks with unexpected delays.
Operating a successful DTC channel often translates to greater demand and higher order volume, requiring your business to achieve more efficiency and agility than ever before. To achieve success, you will also need to improve your DTC warehouse setup.
Accurate data and DTC warehouse organization are essential to making sure customers receive the correct item and ensuring your business maintains a steady revenue stream. This involves measuring inventory levels, predicting customer demand, and providing up-to-date stock information to consumers.
To create a smoother workflow, consider automating your back-end processes, working with a DTC warehouse management system, and investing in best-of-breed ecommerce fulfillment solutions. An automated back-end, combined with an adaptable ecommerce platform, can streamline your business across the supply chain, from product manufacturing to delivery.
If you have a network of fulfillment centers, you can strategically distribute your inventory across different locations to get products more quickly to customers. Storing inventory close to your customers can help cut costs and allow you to provide faster turnaround and more competitive shipping options.
Inventory management is how you organize and keep track of the product stock that’s under your control. As a DTC merchant, you’ll want to create a more efficient process for managing and replenishing inventory. This will help reduce costs, forecast demand, identify slow-moving units, and process orders—the benefits of which can bring greater cost savings and higher margins.
You’ll want to use your ecommerce platform or equivalent software to sort, filter, and organize all orders. Effective management will allow you to see where orders are in the fulfillment process, make changes to any orders post-purchase, send customer communications, and get a snapshot of anything that requires immediate attention.
To evaluate the performance and the effectiveness of your DTC logistics operations, consider looking into analytical tools and reports. You can gain insight into which fulfillment centers you need to stock, how much time you have before inventory runs out, and each shipping method’s costs, average order value, and average time to fulfill. This can help inform your decisions for optimizing your supply chain and overall business operations.
Managing DTC logistics doesn’t stop after a product is delivered to a consumer. Since shoppers can’t see, feel, or try out the products that they buy online, they may not always get their order right the first time and may want to return or exchange their purchase. Shipping products one way to customers is already costly and vulnerable to delays—returns add another layer of complexity and expense on top of that.
To streamline returns, make sure you have a clear and flexible returns policy and solid customer service that provides up-to-date communication during every step of the process. Look for any bottlenecks in your return process that can increase costs, like misplaced products coming back into stock or return delays. A positive return experience allows you to earn customer trust and win customers for life.
Forging a direct path to your buyers involves owning every touchpoint in the customer journey. Former B2B sellers and brand manufacturers are learning to effectively pick, pack, and deliver products while keeping their customers informed throughout the entire fulfillment process. Optimizing your direct-to-consumer logistics will allow you to differentiate your brand, exceed customer expectations, and set your business up for growth.
Looking to start selling direct? Download our whitepaper on how to build a resilient DTC brand that sustains your growth in the years to come.
Miva offers a flexible and adaptable ecommerce platform that evolves with businesses and allows them to drive sales, maximize average order value, cut overhead costs, and increase revenue. Miva has been helping businesses realize their ecommerce potential for over 20 years and empowering retail, wholesale, and direct-to-consumer sellers across all industries to transform their business through ecommerce.