When deciding to sell online, it is important to choose the distribution model that best suits the characteristics and needs of your business or company. Dropshipping and Crossdocking are commonly discussed. But how do we know which is the right option for our online store?

Here are the definitions of both types of logistic distribution to understand the differences between Dropshipping and Crossdocking:

Dropshipping

Dropshipping consists of a type of distribution in which all the distribution and transportation of the products is carried out by the supplier or manufacturer instead of the business that sells on its own behalf. It should be noted that it is a very popular distribution model among small e-commerce because of its accessibility, since it dispenses with warehouses and all the management and expenses involved.

Crossdocking

Crossdocking is a type of distribution where the supplier or manufacturer sends the orders to the same seller or to a distribution center to be delivered to customers. It is certainly a distribution model recommended for stores with small warehouses where they can prepare orders.

Once the types of distribution are known, you should take a look at the following points that mark the differences between Dropshipping and Crossdocking:

Logistics costs

Undoubtedly, the most economical model for the distribution of orders to end customers is Dropshipping because it is not necessary to have available space to store all the merchandise. And this is because orders are shipped directly from the supplier's warehouses to the end user, without the need to go through so many intermediaries, which means that they also take care of the logistics costs except for reverse logistics.

However, Crossdocking is also a relatively inexpensive system because of the short time shipments spend in your inventory. That is, once the order is received from the supplier, you go to a carrier to pick it up and ship it to the end customer. Although it takes an additional day for the package to arrive, the inventory holding costs are less than the cost of a warehouse to store the merchandise.

Agreement with suppliers

It is worth mentioning that each supplier has its own preferences in terms of the type of distribution it offers to merchants and businesses. In general, Crossdocking is the most accepted system by suppliers and the most compatible with a relatively high volume of orders and more variety in the e-commerce catalog.

However, this does not mean that there are several suppliers that ship using the Dropshipping model, which is especially focused on small online stores, but they are limited. In this regard, choosing one type of distribution or another depends entirely on the products themselves and the volume of orders received by the online store. 

Product error management

This is one of the most important aspects to take into account in the distribution model, since defects in a product will cause customer dissatisfaction. This can result in more expenses to process its return to the warehouse and in the loss of the affected user.

In the case of Dropshipping, it is not possible to perform a preventive review to ensure that there are no manufacturing defects in the item and that it is well packaged, since such measures are the responsibility of the supplier. Therefore, the only thing that can be done is to maintain an efficient communication with both the supplier and the customer to detect and find the best possible solution.

Crossdocking, on the other hand, allows control over the condition of the product, but depending on the type of product. In the case of indirect crossdocking, it is possible to unpack the products and detect defects beforehand in order to request a replacement from the supplier. On the other hand, if it is direct crossdocking, only the label on the packaging is changed and it is not usual to open the package, which means that the condition of the product remains uncertain until the customer receives it.

Order tracking

Similar to product defect management, order tracking in delivery and reverse logistics are handled by whoever makes the final shipment to the customer. In the case of Dropshipping, you can hardly have control over the status of the shipment and you must contact the supplier to facilitate the tracking of the package and inform the customer.

On the contrary, with Crossdocking it is the seller himself who receives information from the transport agency about his shipment and possible incidents. In this case, as a seller, you can hire the company that offers the most appropriate service and manage incidents smoothly without so many intermediaries.

Returns

As for returns, this is an issue for which the seller is fully responsible, regardless of the type of distribution, although there are certain exceptions. With Dropshipping, it is a factor that changes slightly depending on the vendor's return policies.

For example, the supplier can accept returns for broken or damaged goods, but the seller must pay the shipping costs. However, returns for item dissatisfaction are entirely at the seller's expense, which can be problematic to store without adequate space and manage many logistical costs.

Crossdocking, on the other hand, is the same seller together with the transport agency in charge of managing all the reverse logistics. As it already has a storage space, it is easier to manage returns if clear return policies are established and good decisions are made when looking for the best solution for the customer concerned. 

Conclusion

The differences between dropshipping and crossdocking are quite clear because one type of distribution does not require storage space, while the other does. To choose which is the best option for your company or business, you should take a good look at the size of your e-commerce, the types of products you sell, if your return rate is high, and so on. In addition to having a good shipping agency that optimizes your routes, it is a wise decision.

At Hedyla our software is based on artificial intelligence to study various processes, taking into account various parameters and constraints to choose the most optimized decisions possible in order to save costs and resources.

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com

One of the rising trends in the retail sector is Click & Collect, an option that has gained prominence in recent years and offers several advantages for both the store and the consumer, including reducing carbon emissions.

If you want to know the advantages of Click and Collect in logistics operations, take a look!

Accorciare l'ultimo miglio

The last mile often has a number of challenges that have arisen in recent times, which are difficult to circumvent and employ good capillarity in delivery. For example, restrictions on the entry of large vehicles into urban centers and difficult access to certain addresses with very narrow streets along with the common challenge of facing the usual traffic congestion of large cities.

With Click & Collect , the final destination is shortened, being its ultimate transport objective that it arrives at the establishment meeting the established objectives. However, it still depends on the location of the premises, which will be easier if it is located in a shopping center on the outskirts with a good platform for unloading goods or just as difficult if it is in a pedestrian area in the heart of the city. Nevertheless, it is still a very economical option for both the logistics operator and the company.

Avoid missed deliveries

One of the biggest inconveniences faced by deliveries to the end customer is that they are not completed successfully. Among its main causes are the absence of the end customer at the home or office, generating more inconvenience for redelivery, which results in more reverse logistics costs. In addition, not all logistics operators can guarantee that the order will arrive in a very specific time slot requested by the customer.

The Click & Collect gives the guarantee of successful delivery of the package and the freedom to pick it up at the store or post office when the customer is available. This is as long as it does not exceed the order booking period (usually about 15 days) and within the business hours of that establishment. Although time restrictions can be eliminated with the option to store them in automatic lockers accessible 24 hours a day.

Improves stock control

It is known that it is crucial to maintain a rigorous inventory control in any company dedicated to offer physical products. This can be a very cumbersome task when the company itself has several warehouses or third parties offer storage systems for them, being very limited its management, especially in the second case.

If you have your own warehouse in the physical store, it is easier to prepare the order because it may already be present at the pick-up point. Or, if you don't, you can order the products themselves and replenish them, updating inventory levels. However, if there is replenishment of inventory from other physical stores, the challenge of maintaining good stock management will be even greater.

Assistance in product placement strategy

As mentioned above, there are certain stores that offer the ability to ship a product from a store out of reach of the customer to a store closer to the customer. While this may be a one-off situation, if it is repeated frequently, it may be an opportunity on the popularity of an item in a particular location.

This, without a doubt, can be very useful for professionals in charge of conducting market research to find the ideal customers for their products. By observing and analyzing their buying habits, they can establish new logistics strategies in which more inventory is collected for the most sought-after establishments, maintaining a good stock rotation and generating profits.

Conclusion

The Click & Collect not only offers advantages and opportunities in terms of business and customer satisfaction, but also facilitates various logistics operations that result in reduced costs and use of resources. And this is one of the main objectives when managing certain logistics processes such as transportation management with a TMS.

Hedyla has worked with customers from various verticals and we offer solutions tailored to a specific sector that requires a set of parameters and modules designed for them.

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com

As a result, the e-commerce sector is one of the sectors that is gaining more and more relevance due to the changes that consumers have made in the face of this abrupt change in their habits and are now accustomed to this way of consuming. However, there are important sectors that are not progressing as much in the e-commerce section as expected despite the demand to offer this type of business.

If you want to know some of the sectors with e-commerce potential that need to mature their services, take a look!

Pharmacy

According to this study, more than 75% of patients prefer to use the services of a telepharmacy or receive their medicines at home instead of going to the pharmacy in person, with 9%. However, pharmaceutical e-commerce in Spain has only experienced a growth of 2% compared to other countries such as Italy and Germany, which have had a growth in turnover of 34% and 10% respectively.

This is because infrastructures still need to be improved to ensure data protection on the part of patients and to enable them to use these services at home. Despite this, the pharmaceutical sector has had very good communication in the supply chain to cope with the health crisis and ensure the supply of several drugs.

It is worth noting that one of the solutions that has potential in the face of occasional drug shortages is FarmaHelp, a digital platform that allows a pharmacy to notify and contact other nearby pharmacies when a drug is out of stock and there are supply problems so that the patient can receive it in time. 

Groceries

Food includes everything from basic products necessary in our daily lives to gourmet goods that are usually occasional purchases. In 2020, it experienced a growth of 71.6% in the online channel. In addition to that the market share was 3.5%, from which they turn out to be further away from countries such as France and the United Kingdom, with shares of 8% and 11%, respectively.

One of the e-grocery's concerns is the adaptability of logistics for perishable products with stringent requirements, such as the relatively high cost of the cold chain. It is therefore necessary to establish a stable logistics network that can meet current and future demand.

Another handicap is that this sector usually has to deal with low average tickets, affecting the profitability of logistics operations. For large supermarkets, this is not a problem because of their variety of products, but for a small e-commerce specialized in a specific range of foods, shipping costs are usually high for them. Nor is it a big problem for the gourmet food niche because it offers an expensive product in line with its quality.

Automobile

When talking about the potential of e-commerce in the automotive sector, we usually talk about loose parts and accessories that do not require a mechanic to be replaced, as more complex parts are favored by click & collect. On the other hand, car purchases themselves are still made through visits to dealerships because of their more thoughtful purchase decision and payment terms, with the exception of companies such as Tesla.

It is also known that one of the industry's best-known challenges is its importance in maintaining a very solid logistics network between suppliers and manufacturers, since the manufacture of a car requires more than 20,000 parts. This, if applied to the simplest parts that can be sold in the online channel, turns out to be a good opportunity to boost automotive e-commerce.

It is also worth mentioning that, thanks to this boost to the online channel, interest in buying a car online has increased by 67% in Spain. Everything points to the fact that, for the moment, it is recommended to apply an omnichannel strategy in which the customer has the entire catalog on the website and then closes the purchase by visiting the nearest dealership.

Conclusion

There have been many occasions to talk about the great growth that e-commerce is experiencing and the changes in logistics operations needed to meet this new demand, among them the digitization of the sector. While it is true that e-commerce and the last mile are having a great boost in star industries such as retail (which includes fashion, accessories and personal care), there are others with the potential to have a good online channel, but which still do not have a good foundation and have logistical challenges that make them not yet consolidated as benchmark sectors of online commerce. These include solutions based on optimizing last mile routes.

At Hedyla we are attentive to the new challenges and technologies that logistics in any sector needs to offer you the system that will help you improve your logistics operations.

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com

To this end, there are two ways to fill inventory in a distribution channel: Push and Pull. Knowing their definitions and their advantages and disadvantages is crucial to choose the right strategy according to the industry you work in and your needs.

If you want to know the differences between Push and Pull distribution, their benefits and drawbacks and for which cases one strategy or the other is intended, read on.

Push Distribution

In a Push distribution system, it is the manufacturer or supplier that decides how many units of product are manufactured and distributed. First, they aggregate all the lower level storage points to historical demand and then perform demand forecasting to determine quantities. Next, replenishment inventory is shipped through the warehouses from the originating supply facilities.

This method makes the first nodes of the supply chain responsible for replenishing the stock, manufacturing the efficient amount of goods to be able to ship them to their distributors and avoid excess inventory.

Push Advantages

One of the advantages of this method is that high inventory levels can be maintained by predicting demand to generate a safe stock level. This is a producer-centric strategy. Therefore, for products that have peaks in demand at specific times of the year or are in high demand throughout the year, such as the food sector, such an approach is effective.

Push Disadvantages

However, one of the most notable drawbacks of Push distribution is that, as this decision is made by the lowest nodes in the supply chain, it is far removed from the actual demand being demanded by current customers. For this reason, it suffers from a notable lack of transparency and visibility into the needs of those customers.

That is why it is difficult to adjust to peaks in demand that are difficult to predict and provide good service, usually causing stock-outs. In addition, it requires good management to maintain a good product flow.

Pull Distribution

In contrast to Push distribution, Pull distribution consists of the lowest node of the supply network, the end customers and retailers, deciding how much stock to order to meet their needs. The factories or manufacturers then receive this order and start producing around a direct demand. 

After the other processes, inventory managers can choose between two techniques: reorder point (ROP) or distribution requirements planning (DRP). The decision to choose a Pull technique depends on how stock moves through the channel and the level of control needed.

This mode of distribution plays between the risk of stock shortages and excess safety stock due to demand variability, so it is essential to maintain a balance between inventory levels.

Advantages Pull

Among the benefits of the Pull distribution strategy, one is that it has limited inventory, as it is produced when a customer places an order, so it is a reactive mode of operation and stands out as a customer-centric methodology. For example, this occurs in cases of customized and higher value products, such as cars with the Just in Time method.

Pull disadvantages

However, this Pull distribution mode has several drawbacks that work against it. For example, if a node in the supply chain makes inventory management errors, this can lead to overstocking and increased operating costs, losing money. It is also possible to cause customer dissatisfaction if there are damages or delays in their order.

Another disadvantage is that picking times will have a big impact on throughput because most of the requests will be very rushed orders with a high level of stress. Therefore, a picking optimizer helps to improve warehouse routes and increase the productivity of the warehouse, as picking is one of the most intensive and costly activities, representing up to 55% of the total expense of the warehouse operation.

Conclusion

There are obvious differences between Push and Pull distribution from which to choose one strategy or the other depending on the sector in which you operate and the type of products you offer. Since each of them has its benefits and drawbacks, the question is to study them well in order to choose the most appropriate and efficient one to have and maintain an optimal inventory management.

At Hedyla, we adapt the solutions according to the strategies and needs of a warehouse, for that reason our WMS (Warehouse Management System) is flexible according to each case. 

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com

However, the boom in e-commerce in recent years, together with the summer sales in sectors such as retail, has meant that logistics is no longer completely closed for the vacations and continues to be active to a greater or lesser extent during the rest of the year. If you want to know how logistics and distribution are affected by the vacations, take note!

Staff vacations

Among the most notable changes that have a significant impact on logistics work during the holiday season are employee vacations. It is possible that both carriers and warehouse personnel may have their days off in July, August and/or September, reducing the activity within the distribution and the warehouse. This is if they are granted permission to choose their vacation days with prior notice or have their dates set in the summer.

To do this, it is necessary to carry out a rigorous human resources work and manage vacations for employees, taking into account the following points: the types of contract or agreement and the priority of workers, either by having children, seniority and rotations. In this way, a calendar is planned, which must be provided to the staff in order to maintain efficient communication and operate as well as possible in the face of peak demand or a time of minimum services during the vacations in logistics.

High demand before holiday periods

Several organizations are already well aware of when the high demand for their goods starts, so they order a high quantity before the vacation season arrives in order to have an assured stock level. However, they must also take into account that other competitors or other companies order a large volume of goods at the same time due to closures or minimum services of logistics operators and factories.

Consequently, the prices of shipments increase greatly, which is a problem due to the current high cost of transporting goods. So it is recommended to anticipate earlier than usual, keeping in mind the prediction of demand and being attentive to the way in which vacations in logistics can be affected, both vacation periods domestically and internationally in case of exporting abroad.

And, of course, if necessary, temporary staff contracts must be prepared to increase operations and meet the high demands of sectors such as retail and hospitality industry.

Minimum services in distribution

If on the one hand we have industries in which demand soars to high levels during the logistics vacations, on the other hand we have more industrial and B2B-focused sectors in which their activity is reduced and, therefore, they operate with fewer active personnel. Not to mention that a section of the logistics chain such as some factories would paralyze their operations or reduce them to minimum services, especially in August.

Therefore, within the minimum services, which would include a lower level of order preparation and a reduced number of daily shipments, it is necessary to guarantee, as far as possible, its correct operation and customer satisfaction. At the same time, it is necessary to maintain fluid communication with the customer, informing him in particular of the estimated delivery times, which would be longer than usual.

Successful delivery problems with the last mile

It is known that a large proportion of Spaniards plan to travel this year, particularly between June and September. Therefore, the time in which consumers are away from home is increasing and consists of an average of approximately two weeks in which homes will be empty. So sectors such as e-commerce must face several challenges in this respect during the vacation season in logistics.

One of the big problems of the last mile is that there is a high incidence in the delivery of orders, precisely because 90% of unsuccessful shipments are due to the absence of the user or another person who can receive the package, increasing costs and emissions in reverse logistics. Therefore, various consumer shipping solutions and options such as smart lockers, pick-up points or other logistics operators need to be implemented, so a TMS can be of great help to manage this.

In addition, the buyer himself is responsible for providing solutions to the operator, for example, providing the address of a trusted neighbor available to pick up the order during the time he is away from home.

Conclusion

Nowadays, logistics and distribution generally do not rest during the summer. For some industries it means a great growth in operations, while other sectors reduce their activity to minimum services, and may even close for vacations. Due to this irregular season, it is not easy to have control over the supply chain and, for this reason, it is recommended to maintain strong communication with the end customer and to keep the level of stock and personnel covered in line with demand.

At Hedyla, we understand the ever-increasing changes in the logistics and distribution industry. For this reason, we provide flexible solutions that adapt to the constraints and specifications of any sector, such as vacations in logistics and distribution.

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com