Logistics 101 For Startups: Top Five Mistakes You Must Avoid

When chalking out the blueprint of a new business, startups often tend to overlook the logistics aspect. If not managed efficiently, logistics can pose a huge challenge for a startup, especially in the e-commerce industry. Poor logistics services can risk a startup’s viability with loss of capital as well as customers.

In 2022, investors are quite wary of businesses with makeshift logistics solutions. This includes even startups with premium quality products or innovative marketing. To survive in the long run, you need to devise a foolproof logistics strategy that:

Meets the demands of the customers
Consumes fewer resources

Before we jump onto the top five mistakes you must avoid in startup logistics, here is a quick fact for you. Average logistics costs for an e-commerce startup should ideally be more than 5% and less than 15% of the total sales revenue. But how do you maintain this? By NOT doing the things mentioned in the list below.

1. Choosing Informal Players in Logistics

The Indian logistics sector is largely fragmented. More than 90% of the industry is dominated by unorganized players. For any startup, finding a reliable, end-to-end logistics solution is difficult but highly important.

For cutting costs, many startups make the cardinal mistake of approaching local vendors for their logistics. This can cause several problems in the long run:

Unprofessional drivers
Poor handling of products
Delivery delays
Lack of proper payment receipts, invoices
Limited fleet with no capacity to upscale

In addition, having multiple local vendors in charge of different parts of your logistics only adds up to the confusion and delays. Many startups these days are thus choosing a Third Party Logistics (3PL) partner to handle their end-to-end shipping. The cherry on the cake is finding a 3PL service with a footprint in multiple cities to help your business expand.

2. Giving Less Importance to Technology

Manually managing inventory or tracking shipments leaves ample room for inconsistency and errors. More than 56% of Indian logistics companies are already using real-time shipment tracking software. In the next 2 years, 29% of Indian companies will go for automation in warehouse management.

Experts believe that India is headed towards a technological revolution in logistics. So, any high-growth startup must opt for tech-powered solutions for their supply chain management. Technology can help optimize operational flow and increase efficiency. This in turn will translate to more happy customers and fewer return orders.

3. In A Warehouse Far, Far Away

Gone are the days when customers would gladly wait a week for a product to reach them. Research shows that 56% of customers expect same-day delivery while 25% abandon their cart if fast delivery is not available.

So how would you offer express delivery to your customers, if your inventory is in a warehouse far away from their location? This is why most startups in 2022 are going for micro-warehouses. These are small-sized storage facilities located at city centers closer to your customers. Products never stay here for more than a day and are delivered within hours to the customers’ doorstep.

Read this article to find out why more eCommerce startups are choosing micro-fulfillment.

4. Poor choice of executive

Many startups underestimate the importance of logistics for the success of a business. They entrust non-logistics executives in charge of the operations, often resulting in disaster.

It is highly recommended to appoint trained experts only when it comes to your logistics management. Well-skilled professionals can bring down errors in picking, packing, and final shipping of a product. An experienced leader can also avert frequent slip-ups and operational hassles.

5. Logistics in Emergency Situations

Nobody predicted the Covid-19 pandemic and the worldwide economic crisis that came with it. Many businesses shut down within months of their launch simply in the absence of a risk management plan, especially pertaining to logistics.

Experts are now advising startups to partner with established 3PL providers who have a contingency plan in place for any emergency situation. They will make sure no unforeseen circumstances affect the flow of goods to your customers. After all, logistics is a 24x7 industry and there is no room for slowing down.

Logistics comprises a major part of the supply chain management process. For every product you manufacture or sell, you must consider the costs and challenges in transportation, warehousing, and delivery. After all, investing money in branding might be pointless if the product fails to reach the customer on time!