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Logistics: The Chain That Binds for Small Business

For small to medium-size businesses today, it’s the little details that can make or break them.

A company might have a great design or desired product, but if they can’t handle their logistics efficiently, all that can go to waste.

(Read more about logistics challenges at Report: How Retailers Could Compete With Amazon on Logistics)

That’s particularly true of the many e-commerce startups today, where customized, smaller orders prevail and a physical home base isn’t necessarily guaranteed.

Nate Herman, senior vice president for supply chain at the American Apparel & Footwear Association, noted that with more companies—many small to medium-sized—using e-commerce models, solutions for logistics are challenging.

“Nobody has really come up with a silver bullet, yet,” Herman said.

UPS tackles SMB challenges

Not surprisingly, UPS, the world’s largest package delivery company, is providing some solutions.

“E-commerce has exploded and you tend to see a lot more younger businesses in the market than in the past, and a lot of those are getting started via market places, in addition to some of the self-service web site platforms,” Jeremy Melis, director of small business marketing at UPS, said. “What we find is that a lot of these customers spend about 20 percent of their time on shipping, which is not what we or they want because they don’t consider that value-added time. They’d rather be working on their business, not in their business.”

So in UPS Marketplace Shipping, a small business that sells through sites like Shopify, Etsy, eBay or Amazon, can have an order consolidation point.

“What UPS Marketplace Shipping lets them do is they can go in and pre-register all of their marketplaces and connect them all to that one platform,” Melis said. “They log in at the end of the day and click a button and all their orders from all four marketplaces are visible.”

Then the orders can easily by organized by various criteria and “they can click one shipping label, print it out and apply it to the order and have them out the door,” he said, adding, “That can save hours a day for a small business that is trying to get its name out there and spend more time on marketing their business and services their customers.”

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In the area of customer service, UPS Connect offers business insights, case studies and customer testimonials, as well as “online whiteboarding,” where customers can fill in some information and a logistics expert will spend time explaining topics like how to apply or print these labels to how to allow for returns.

Larger customers can also take advantage of UPS Worldship that offers label customization, while UPS Technology is a program that offers some subsidies for equipment, software and supply-related items.

In addition, UPS Package Lab has a team of packaging engineers that offer consulting services and make recommendations on proper packaging.

“One of our mantras for small businesses is how can we make sure that they’re completing their shipping activities as efficiently as possible,” Melis added.

The space race

In the area of warehousing, AAFA’s Herman said a key development for smaller companies that have trouble justifying one distribution center is using third party logistics companies, or 3PLs, that can provide them space in a warehouse or distribution center.

The 3PL industry is an ecosystem of companies managing many clients in multiple facilities with a range of requirements.

Herman noted that with the prices for warehousing space going up, ways to handle shipping of small orders are being pursued.

Melis and Herman agreed that mode of transport is also a key decision for small companies.

“Small companies are definitely using more air freight,” Herman said. “It has been a strong upward trend and when you’re talking about small volume shipping, ocean freight really can be problematic.”

As Herman explained, “shipping groups” are being formed to address this need, citing a firm called Gemini, whose “sole purpose is to negotiate rates for a pool of companies.”

Melis agreed that many small firms choose air freight in order to compete and fullfil orders on time, but he also noted that UPS offers guaranteed delivery times in its massive ground service routes, which helps with on-time delivery.

Customized services

A range of companies have come into the market to serve the growth of small to medium-sized firms that have emerged in recent years with the rise of e-commerce and entrepreneurialism.

Mikhail Ledvich, vice president of marketing at Shippo, explained that his three-year-old company based in San Francisco offers companies an API, or application software interface, and a dashboard for shipping that empowers platforms, marketplaces, warehouses and e-commerce stores with the building blocks they need to meet logistical challenges.

Shippo processes millions of shipments a month for more than 15,000 businesses, with instant access to multiple shipping carriers for real-time rates, label creation, automated international paperwork, package tracking and facilitating returns.

“We do have a lot of small to medium-sized businesses,” Ledvich said. “We also serve a lot of Fortune 500 companies.”

Part of Shippo’s value is to take various manual shipping processes and automate them for speed and efficiency.

“Our software can decide who is the right carrier for every specific package, whereas if companies do it themselves, they would need a different shipping station for each carrier,” Ledvich said.

Shippo mainly services the U.S., but does have a global base handling ground and air parcels up to 150 pounds.

“We’re definitely helping to power the growth of e-commerce,” he added. “There’s been an evolution where SMBs want to have the same technology and capacity as larger companies.”

Similarly, U.K.-based Shiply is “an online marketplace where those needing to move large items are matched with transport providers already making that journey,” said marketing executive Lauren Hall.

“The transport providers bid for the work and the customer chooses between the offers,” Hall said. “Customers typically save 75 percent on deliveries this way and it saves transport providers making trips with empty space in their vehicles.”

By enabling consumers and businesses to make use of this spare capacity, also helps to cut down on CO2 emissions and increases the profitability of transport companies.