Ecommerce Logistics Management in Nigeria: Tips for Entrepreneurs

Logistics management is a crucial aspect of supply chain management that involves efficiently planning and controlling a product from the point of origin to the end of consumption. 

The demand for logistics management has become exceedingly higher in Nigeria as logistics is one of the biggest problems Nigerian entrepreneurs face. Products are usually delivered late or in poor condition, frustrating customers and business owners. 

Effective logistics management is needed to deliver products at the right time and for smooth business operations. This article will explore Nigeria’s logistics management landscape, challenges, and opportunities while highlighting solutions.

Nigerian Logistics Landscape

In identifying the challenges and opportunities of logistics for e-commerce businesses, we need to understand the scope of logistics management. Imagine playing a game that involves sourcing raw materials and delivering goods to the customer. In this game, you earn points for timely and cost-effective deliveries.

You will also get a bonus if the customer service is excellent. On the other hand, you will lose points for late delivery, high delivery fees, and low customer satisfaction. This illustration helps us understand that delivery fees and customer service are essential in logistic management.

We can divide it further into these critical components:

• Procurement: The first step in production is acquiring raw materials needed for production or finished goods needed for reselling. Logistics management at this stage ensures that the sourcing process is efficient and cost-effective. It would be unreasonable if the shipping or logistic fees greatly affected your profit.
  
• Storage: Logistics management involves deciding the location of goods, considering inventory turnover, storage costs, and closeness to distribution channels.
  
• Movement: What is logistics without movement? Ecommerce entrepreneurs need to consider the management of logistics partners who will oversee how goods are transported.
  
• Information Flows: Delivery won’t be possible without information. Timely and accurate information flow is the difference between an excellent and poor customer satisfaction level, so communication is essential.

Logistics management handles the movement, control, and storage of goods and information cost-effectively across the supply chains. Always consider the above factors to decide profits and delivery locations.

Opportunities in Logistics For E-commerce Entrepreneurs 

Below, we will review some opportunities in logistics for ecommerce entrepreneurs in Nigeria.

Let’s see them in detail:

• Nigeria’s population and the growing e-commerce market: Nigeria has always boasted of its large population of over 200 million, presenting a monumental opportunity to reach millions online. More entrepreneurs and business owners will leverage transport, logistics, and e-commerce opportunities to contribute to economic growth.
  
• Government Support: The importance of the government’s role in fostering the growth of the logistics and e-commerce sectors cannot be overemphasized. Nigeria’s current economic situation has driven up the delivery fees, slowing down the buying power of citizens online. With the government’s help, the economy may improve, and many ecommerce stores can deliver quality products on time to meet customer needs.
  
• Impact of COVID-19: Although the COVID-19 pandemic had its downside, it presented new opportunities in logistics. During the lockdown, citizens had to receive products through third-party logistics as the demand for the movement of goods and services increased. Though the pandemic is gone, millions of Nigerians still use third-party logistics to get their products till today.
  
• Market Growth: Despite challenges such as poor infrastructure and unfavorable customs procedures, the logistics sector is expected to grow at a compound annual growth rate (CAGR) of around 4% in the coming years. The e-commerce market, in particular, is expected to experience a CAGR of 20.5%, reaching a market volume of around US$10.29 billion by 2023.

Also, don’t forget that planning and partnering with other nations to improve other areas of transportation can boost the growth of logistics and e-commerce industries. For example, a possible improvement and subsidy of the railway and aviation sectors can make logistics companies consider them for deliveries.

Challenges You May Face

In Nigeria, one of the biggest challenges to logistics is the bad roads and sometimes poor mobile networks.

Let’s see some other logistics challenges you may face as an ecommerce entrepreneur in Nigeria:

• Traffic Challenges: Sometimes, the third party logistics company is not to blame, but traffic. Some logistics companies use vans and will be stuck in traffic for a while. Some of these products may end up in a bad situation getting to customers.
  
• Policy and Security Concerns: While delivering these goods, some logistics companies can encounter theft or be required to pay unplanned expenses on the road. Aside from that, there is a general lack of safety in the country that needs to be addressed.
  
• Low Global Ranking: The logistics sector in Nigeria has ranked low globally. Alongside, it is more challenging to do business in Nigeria.

By all means, the opportunities outweigh the challenges, which is why there are some thriving logistics businesses in Nigeria. However, they will be more than happy to continue the business if the challenges are worked on.

Essential Logistics Considerations for Ecommerce Businesses Operating in Nigeria

There are some important logistics considerations to have in mind when starting a new ecommerce business in Nigeria. They include both inbound logistics (the movement of the supply from supplier to business) and outbound logistics (the movement of finished products from suppliers to customers).

Learn more about them below:

• Infrastructure and transportation: E-commerce businesses in Nigeria must evaluate the state of transportation infrastructure, including roads and third party logistics.
  
• Customs clearance and duties: If your supplier is abroad, ensure compliance with the customs procedures to avoid delays in the clearance of your imported goods. Also, you should factor in import duties and taxes when deciding the price of goods.
  
• Security and fraud prevention: Partner with logistics firms with great work ethics and high consciousness of your product’s security.

Some logistics companies make the use of one-time passwords to track deliveries and ensure the package’s safety. This ensures that products are delivered from the right store to the right customer on time.

Choosing the Right Logistics Partner in Nigeria

One of the essential factors in managing your logistics is your logistics partner. Delivering every product yourself is only realistic if you have a logistics business. Finding a reliable logistic partner is the key to your customer satisfaction.

Below, we will further explain what to look for when choosing logistics partners for your ecommerce business in Nigeria.

Safety Management and Reputation Among Customers

Safety management and awareness are the first things to look out for when sourcing for a logistics management company. A great logistics company always follows safety rules and regulations to ensure the safety of your package.

Find out if the logistics company has excellent customer service and a good reputation. Are they professionals? How is their communication? These are the questions to ask. Some logistics companies run their businesses based on vibes or with the thinking that businesses can’t do without them.

Price, Coverage, and Location

Another vital factor to consider is the price of a logistics company. A logistics company’s quality and efficiency won’t matter if most customers cannot afford them. Also, a high price may not necessarily mean it provides the best value; evaluate it well.

You should consider partnering with several logistics companies because not all can deliver to every customer. Some can only deliver within a particular state; therefore, having multiple options will prevent you from being stranded.

Packaging and Delivery Time

Logistics companies should have protective packaging for products. It could be a carton of nylon wraps or containers to facilitate the movement of goods from one place to another.

They should also train their staff to receive and deliver orders promptly. Depending on the distance, you should know the delivery time.

Optimizing Your Logistics Operations to Reduce Costs and Increase Efficiency

Logistics efficiency measures how goods are effectively transported from the point of origin to consumption. It covers the inbound and outbound logistics delivery process, route optimization, and inventory management.

The following are suggestions for how to optimize your logistics operations to increase your business efficiency:

• Use logistics software as a service platform: When you use logistics platforms, the relief of knowing your package will be delivered safely saves time and reduces costs. You can monitor the accuracy of your delivery order and even know how many deliveries you make in a month. Some of these platforms have real-time tracking, making it easy to detect a malfunction.
  
• Monitor performance: You may not always use SaaS, as some don’t deliver everywhere and interstate. Still, you need a system to monitor performance.
  
• Establish a straightforward communication process: You should have a means of communication with the logistics company. If it’s Saas, then it is the app’s chat section, while for a regular company, it could be through WhatsApp, Instagram, phone calls, etc.

Some of these companies would have policies stating that you order a day before or in the morning so your customers can get their orders on the same day and avoid extra costs.

The Importance of Real-time Tracking and Communication

Businesses have so many activities to keep up with, so it’s possible to lose track of deliveries and not follow up with customers. However, what happens when a customer calls to complain that an order you sent out five hours ago hasn’t been delivered?

What will happen if the logistics company informs you that they have delivered? Now, you must analyze what went wrong, who was at fault, and who should take responsibility. So, to avoid telling stories, it’s essential to have real-time tracking tools set up.

Below are some of the critical aspects of real-time tracking communication:

• Improved efficiency: Partnering with logistics companies that implement real-time tracking helps save delivery time and effort. How? With real-time monitoring, these companies can discover faster and more efficient routes to avoid traffic and prevent excessive fuel consumption.
  
• Improved security: Depending on the features of the real-time tracker, you can be alerted to theft of your goods. Currently, in Nigeria, the rider’s smartphone acts as the tracker. However, there are situations where real-time trackers with security alerts will be attached to high-value goods.
  
• Improving customer satisfaction: Real-time tracking allows customers to know when they will get their items. The real-time tracker gives delivery estimates after considering traffic and weather, significantly improving the customer experience.

If a delivery takes longer than expected, you can contact the rider to discover what is happening. This also prevents mix-ups from happening as the rider will confirm the number and address of a customer before delivery.

The Role of Technology in Streamlining Logistics Operations for Ecommerce Businesses in Nigeria

Nowadays, it is almost impossible to separate logistics from technology. Adding an element of technology to warehousing, inventory planning, and transportation helps streamline logistics.

Let’s see why below:

• Warehouse management systems (WMS): Warehouse Management Systems (WMS), being part of the ecommerce website management services plays a crucial role in streamlining logistics operations by providing advanced tools that enhance the efficiency and accuracy of warehouse processes. With a WMS, you can seamlessly handle order fulfillment, stock tracking, labeling, and reporting. Meanwhile, technology can also minimize package and shipping-related errors.
  
• Data analytics: As a business, you can identify inefficiencies across some supply chains using tools for data analytics. Meanwhile, ecommerce brands can use real-time data to design inventory planning while logistics companies can choose better delivery routes.
  
• Internet of things (IoT): IoT provides tools and features that permit asset tracking and fleet management for e-commerce businesses and logistics providers. With real-time visibility of vehicle locations and package transit status, responsive measures can be taken to avoid delivery delays.

Each package is equipped with an IoT device or sensor with GPS for location tracking and environmental sensors to monitor conditions like temperature and humidity.

Managing Unexpected Logistics Challenges and Disruptions in Nigeria

Part of being a business owner comes with uncertainty. Sometimes, you will have to deal with an unexpected logistics error – if not almost every time.

Below are some important logistic examples and how to deal with them.

Diversifying Suppliers and Partnerships

Imagine a customer placing an order by 10:00 am and requesting same-day delivery. You already told them the delivery fee, and on reaching out to the logistics company, you found out they charge higher for deliveries after 10:00 am. 

Either inform your customer of the price change or wait until the next day. Both scenarios deter customers and lower customer satisfaction. You should work with multiple logistics partners to reduce dependency on a single source. 

Real-time Monitoring and Data Analytics

On platforms like Uber Eats or Bolt Delivery, it is possible to have registered drivers who are not trustworthy. So, tracking the delivery in real time helps you stay alert.

You can check your dashboards on these Saas platforms to identify patterns and trends in your logistics operations.

Risk Mitigation and Contingency Planning

You should conduct regular risk assessments to discover potential vulnerabilities in the supply chain. For example, following fuel subsidy removal, delivery fees escalated, and some vendors were clueless about handling customers’ hesitation.

Additionally, prepare for unforeseen events by developing a comprehensive contingency plan detailing steps to take. At this stage, you should identify alternative suppliers, transportation routes, logistics partners, and storage facilities in advance.

Constant Communication, Adaptability, and Flexibility

Maintain open lines of communication with suppliers, logistics partners, and customers. It is best to use different customer communication channels and have someone who handles logistics overall so that you can focus on marketing and selling products.

Furthermore, always try to adapt when the situation demands it. Be flexible when it works in your favor. However, you shouldn’t change your values because you are trying to adapt. It’s essential to respond quickly to changing circumstances.

Addressing Customer Expectations and Concerns

Every customer anticipates same-day or fast deliveries, preferably on the same day, except in situations involving far distances. However, when unforeseen scenarios arise, it’s best to communicate early with them.

It may not be your fault, but you must take responsibility and notify them before it escalates. Such situations reassure newcomers that you are a professional, demonstrate integrity, and offer excellent customer service.

Additionally, a public address may go a long way, especially if it is rampant. This would help calm customers and show your honesty. The best way to go is to take responsibility and inform them of the steps you will take to restore the situation.

Effective Inventory Management Strategies

Inventory management and logistics management are similar terms that often need clarification. However, the distinct difference is that logistics management involves the physical movement of goods, focusing on transportation optimization, warehouse services, order fulfillment, and overall supply chain coordination. 

On the other hand, inventory management focuses on managing stock levels, tracking inventory turnover rates, and optimizing reorder points. Think of inventory management as arranging your house, while logistics management is planning a trip.

See the below inventory management strategies to optimize logistic efficiency and customer satisfaction.

Just-In-Time (JIT)

JIT is a strategy where inventories are made available when the production process or customers need it. In this case, you have just the right amount of inventory at every point.

For example, automobile manufacturing companies focus on reducing waste, minimizing storage costs, and quickly responding to customers’ demands. Therefore, they only produce specific vehicles with specific features when customers request them.

Impact on Logistics: JIT helps resolve the need for large warehouses to store bulk items, minimizing the time and effort to handle inventory, thereby streamlining logistics.

ABC Analysis 

ABC analysis involves classifying inventory into three categories (A, B, and C) based on importance. A-items are of high value, while C-items are of lower value.

For example, if, after gathering sales volume data, one discovers that some products bring in more sales than others, the company should categorize the most selling products as A items and the least as C items.

Impact on Logistics: Prioritising high-value items ensures swift and efficient logistics for high-value products to high-value customers.

Safety Stock Management

Safety stock helps reduce the risk of selling out due to unexpected demand fluctuations or supply chain disruptions. It involves keeping an extra inventory aside to mitigate the risk of being unable to restock immediately.

Impact on Logistics: Properly done safety stock management helps prevent supply chain disruptions and prevents cutlers from buying from your competitors. 

Measuring Logistics Performance and Using Data to Drive Improvement

Tracking logistics KPIs will help you identify and improve mistakes to reduce costs. There are different logistics KPIs, but we will focus on transport management KPIs below as they directly impact customers. This type of logistics KPI focuses on customer delivery.

See more below:

• Delivery time: Consider how often customers are satisfied with deliveries compared to times they weren’t. What can be done differently?
  
• Average days late: How many extra days were you late to make a delivery? For example, if your delivery time is within 24 hours, what’s the average number of days after 24 hours that you were late?
  
• Truck turning: This refers to the time the rider spends receiving or delivering goods. If a rider takes too long to collect products, it will affect delivery time.

Over time, this may lead to frustration, and ultimately, some deliveries may get affected. So, it is best to pack the orders a day before or early in the morning to save your rider’s time.