eCommerce has been expanding rapidly in the past few years, especially during and after the COVID-19 pandemic.
Successful businesses have switched from traditional brick-and-mortar stores to online shops to stay competitive.
Running an online store is very different than the traditional approach. It comes with all kinds of challenges, with supply chain management (SCM) being the most complex.
Businesses today face massive competition online, so they have to optimize their entire operation to attract customers and make sales.
Most consumers expect same-day deliveries whenever they buy something online, so you need a strong eCommerce supply chain strategy to succeed in this new environment.
Let’s see what you have to do to optimize your supply chain to stay ahead of your competitors.
eCommerce Supply Chain Management Explained
eCommerce SCM is much more than assuring that your customers get their orders on time.
For everything to work, you have to optimize the flow of information, resources, and cash between all individual stages of the supply chain. That includes everything from ordering raw materials to delivering products to customers.
As you can imagine, ensuring that all suppliers, vendors, warehouses, producers, and transportation companies work in sync is hard, especially in some industries. If only one element falls behind, the entire supply chain can crumble and harm your overall success.
eCommerce customers are very unforgiving, so a single mistake can end up costing businesses their reputation.
Essential Parts of eCommerce Supply Chain Management
Every eCommerce supply chain is the same. Products always flow from the supplier to the consumer, while the cash flows in the opposite direction. Information, on the other hand, needs to flow both ways for the supply chain to work.
Raw materials are sent to the manufacturer who converts them into products which are sent to a warehouse, and finally to the customer.
Manual SCM can’t cope with so much information, so most eCommerce platforms and other businesses today use some kind of Enterprise Resource Planning (ERP) software solution. These solutions have built-in artificial intelligence that improves efficiency and streamlines SCM.
With that said, here are some of the essential processes in eCommerce supply chain management.
1. Inventory Management
The times when businesses used their own warehouses to sell products to customers are over.
Today, successful businesses pull products and materials from various locations on demand. The new approach has become the norm because it helps companies save a lot of money on waste and warehousing costs.
Having the ability to predict future demand using AI-powered ERP solutions reduced the need for large safety stocks used to buffer sudden increases in demand.
Dropshipping became the most popular model for getting products to customers, which is no surprise as it’s the most affordable strategy.
Instead of stocking up on items, many eCommerce businesses send orders to third-party sites that ship them directly to the customers. eCommerce platforms act as a middleman between the consumer and the manufacturer.
2. Product Availability and Service Level Management
You can’t have a successful business without happy customers. The key to a successful eCommerce website is to find and purchase popular products at the right time.
In other words, you must have all items available in stock to fulfill the customer’s expectations. After all, they are looking for a convenient and fast way to buy what they need.
If you fail to meet your customer’s expectations, they will simply go to another eCommerce platform that can. That’s why inventory management is extremely important if you want to succeed.
Your site has to display accurate information and product details, and you must update everything on time to keep your customers happy. It’s not a bad idea to get a Product Information Management (PIM) system to make things more manageable.
3. Customer Happiness Reviews Monitoring
You can’t know if your supply chain is working well until you know what your customers think about your service.
Luckily, there are plenty of ways to gather customer reviews to see what they think about your brand.
Almost every customer will take the time to compare product features, prices, and quality, and check the company’s reputation before buying something, so you have to work extra hard if you want a spotless reputation.
Product quality and company reputation play the biggest roles in making sales.
Therefore, if you want your consumers to have a good opinion about your brand, you have to ensure that all orders are met and delivered on time. Of course, product quality also has to be at a peak level.
4. Inventory Optimization
Inventory optimization is easy at first, but it becomes more and more complicated as you add more products to your offer. The worst thing you can do is to increase your inventory too much, as that will make it much harder for you to track incoming and outgoing items.
Too much inventory usually results in more waste. Too little inventory may harm customer satisfaction in a case of a demand surge. Neither option will work, so the trick is to find a way to balance your inventory within acceptable levels.
Making things work well takes some trial and error, but with the right ERP solution in place, you can optimize your supply chain according to your needs.
Remember that the goal here is to reduce overall costs, and that can only be achieved with the right balance.
Five Stages of eCommerce Supply Chain Management
Every eCommerce supply chain management goes through five stages. Here’s a quick overview of each one:
1. Planning
The planning stage always comes first and it involves collecting data across the entire supply chain to identify the inventory needed to meet market demands.
You must get things right the first time, or you might have problems down the road.
2. Sourcing
After you’ve calculated everything you need, you have to find vendors, suppliers, and manufacturers that can provide you with the inventory you need to run the store.
3. Making
Creating products involves taking raw materials and turning them into finished products. Those products still have to go through testing, packaging, and storing before they reach the customer, so it’s important to consider every detail to meet the deadlines.
4. Logistics
If you’ve done everything right up to this point, the next step is to establish the supply chain between the warehouse and the end consumer.
5. Return Management
Lastly, sometimes your deliveries won’t reach the consumer on time, so you’ll have to process returning goods. That might happen due to transportation problems, defective products, or expired products.
Technologies Behind Modern Effective Supply Chain Management
The modern approach to supply chain management is possible only because of new software solutions designed to increase efficiency and monitoring.
Managing a supply chain in the 21st century involves the following:
Visibility
Powerful SCM software provides you with access to real-time data across the entire supply chain. That allows you to monitor every stage in real-time, making it easier to predict supply and demand.
Automation
Automation is the next step in running a business. As mentioned earlier, the majority of ERP software solutions come with integrated AI capabilities that allow you to manage, analyze, and store data on a cloud. This approach is far more efficient than traditional manual data collection and processing.
ERP System Integration
Once you integrate an ERP solution with your eCommerce platform, you’ll get access to a central hub where you can review all critical business information. In turn, that will allow you to optimize SCM, increase efficiency, and productivity, reduce errors, and much more.
ERP system integration can sometimes be complicated due to existing legacy systems and outdated technology, so feel free to reach out to one of the top IoT companies for expert help.
Benefits of eCommerce Supply Chain Management
Here’s a quick overview of some of the benefits you can expect after optimizing your supply chain.
1. Transparency
Optimizing supply chain management will provide you with transparency and real-time data throughout all stages, making it easier to spot bottlenecks in the operation.
2. Cost Reduction
Ensuring that all orders are met on time will reduce overall processing costs and loss of sales.
3. Fast Delivery
Having the ability to see and communicate directly with vendors and warehouses allows you to respond to increased demand quickly, ensuring that all orders are met on time. That will help you build trust with customers, which leads to more sales and higher revenues.
4. Accurate Market Forecasting
Since you have access to real-time data at every stage of the supply chain, you will be able to make accurate predictions about the demand. That way, you will have time to organize your operation to meet increasing demands while increasing revenues by reducing wastage and overstocking costs.
5. Stock Availability
Once you have an overview of the entire supply chain, you can ensure that your inventory always meets the customers’ demands.
Conclusion
We can’t emphasize the importance of supply chain management optimization in eCommerce enough.
SCM can truly make or break a company, and if you don’t organize everything according to the best practices, you will surely fall behind your competition, lose a share of the market, and put your business to a stop.
The key to success in eCommerce is to react to the customer’s needs quickly, which is why you need a flexible platform that can help you do that.
Once you’ve optimized the logistics, you will be able to grow your company on the best practices and scale your business in the future.
Author bio
Rick Seidl is a digital marketing specialist with a bachelor’s degree in Digital Media and Communications, based in Portland, Oregon. He carries a burning passion for digital marketing, social media, small business development, and establishing its presence in a digital world, and is currently quenching his thirst through writing about digital marketing and business strategies for Find Digital Agency.