5 Advantages And Benefits Of Supply Chain Management In E-commerce
As popular as eCommerce businesses have become, many in the industry still have not fully grasped the unique challenges that this particular business model entails. Whereas the absence of a physical location is liberating to a specific degree, it also indicates that other aspects of an eCommerce business might be a risk of slipping off-course over time.
Sure, extra flexibility emerges, but how can business professionals keep their objectives in place and make sure that every aspect of their operation goes as planned? As it emerges, tightening up your supply chain management is a good place to begin.
What is the Supply Chain?
On its most basic level, a business’s supply chain denotes a complete network of players engaged in the distribution and production of your products- i.e., the roadmap that leads from your hands into that of your clients. This incorporates any business partners your business might work with along the way and the many associated processes you use to facilitate timely delivery to your loyal client base. Since the supply chain is essentially the underpinning structure that governs so much of your company, supply chain management plays an imperative role in your potential success.
Supply chain management in e-commerce
Generally, business efficiency at all operational levels is vital for the success of e-commerce. Supply chain management is a significant element of e-commerce. Supply chain management in e-commerce concentrates on procurement of manufacturing, raw material, and distribution of the right product at the right time. It incorporates managing supply and demand, inventory tracking, warehousing, distribution, order management, order entry, and delivery to the customer.
Logistics and supply chain process in the e-commerce industry
The e-commerce industry is not restricted to setting up a website and selling products online. It includes suitable infrastructure, product configuration, supply chain management, and secured payment gateway. An efficient supply chain improves e-commerce processes to meet clients’ expectations. Crucial components forming the logistics processes and supply chain of the e-commerce industry:
- Inventory management: Inventory is a vital component of supply chain management. Following the traditional inventory model, companies used their own warehouses to sell the products directly to clients. However, now as per the risk-pooling strategy, e-commerce businesses don’t hold their own inventory and instead outsource their inventory to a larger wholesaler. It allows e-commerce businesses to lower the risk of keeping their own inventory. Several companies are implementing the drop-shipping model for inventory. Following this model, a store does not hold the item it sells on the website; instead, it purchases it from a third-party and ships it to the client.
- Reverse logistics: e-commerce businesses also have supply chain management which entails reverse logistics. Reverse logistics is denoted as the planning and execution of the movement of products from the point of consumption to the origin point. Almost all e-commerce companies offer the facility of returns and exchanges. This maximizes the need for logistics.
The Importance Of Supply Chain Management In E-commerce Business
It is well-recognized that supply chain management is an integral part of most businesses and is vital to business success and customer satisfaction. Here is an overview of the advantages of supply chain management in the e-commerce business:
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Effective supply chain management boosts customer service
- Right after-sale support: Clients expect products to be serviced faster (for instance, customer satisfaction reduces when a home furnace stops working in the winter and repairs can not be made for days)
- Right delivery time: clients expect products to be delivered on time (for instance, customer satisfaction reduces if Christmas presents arrive on December 26 or pizza delivery is two hours late)
- Customers expect products to be accessible at the right location (for example, customer satisfaction reduces if a car shop does not have the necessary parts in stock and cannot fix your auto for an additional day or two).
- Consumers expect the correct product assortment and quantity to be delivered.
Efficient supply chain management Improves financial position
- Decreased fixed assets: Companies value supply chain managers since they decrease the use of large fixed assets like warehouses, plants and transportation vehicles in the supply chain. If supply chain experts can remodel the network to properly serve the United States customers from six warehouses instead of ten, the firm will avoid building four very costly buildings.
- Increase cash flow: Companies value supply chain managers since they speed up product flow to clients. For instance, if a business can make and deliver a product to a consumer in ten days instead of 70 days, it can invoice the customer 60 days sooner.
- Increase profit leverage: Companies value supply chain managers since they help control and reduce supply chain costs. This can lead to dramatic increases in business profits. For example, United States consumers eat 2.7 billion packages of cereal yearly, so reducing the United States cereal supply chain costs just one cent for every cereal box would result in 1.3 million dollars saved industry-wide as 13 billion boxes of cereal flowed via the improved supply chain over five years.
Little is known how supply chain management also plays a vital role in society. Supply chain management capabilities and knowledge can be used to conduct disaster relief operations, support medical missions, and handle other kinds of emergencies.
Whether you are dealing with daily product flows or an unexpected natural disaster, supply chain experts roll up their sleeves and get busy. They diagnose issues, creatively work around disruptions, and identify how to move essential products to people in need as efficiently as possible.
Economic supply chain management will be a tool for reducing operating costs
- Reduces production cost: Manufacturers rely on supply chains to reliably deliver materials to assembly plants to avert material shortages that would shut down production. For instance, an unexpected parts shipment delay that leads to an auto assembly plant shutdown can cost $20,000 for every minute and millions of dollars per day in lost wages.
- Reduce purchasing cost: Retailers depend on supply chains to quickly deliver costly products to avoid holding expensive inventories in stores any longer than necessary. For instance, electronics stores require fast delivery of 60” flat-panel plasma HDTVs to avoid high inventory costs.
- Reduces total supply chain cost: Retailers and manufacturers depend on supply chain managers to design networks that meet client service goals at the least marketplace. For instance, Dell’s revolutionary computer supply chain approach involved making each computer based on a particular customer order, then shipping the pc directly to the client. As a result, Dell avoided having huge computer inventories sitting in warehouses and retail stores, which saved millions of dollars. Also, Dell avoided carrying computer inventories that can become technologically outdated as computer technology changed rapidly.
Efficient and effective supply chain management lays the foundations for positive customer reviews
It is fair to say that online customer reviews are a key driver of eCommerce sales. According to Spiegel Research Center, almost 95-percent of shoppers read online reviews for starters before making a purchase. Progressively your brand reputation is being measured by customer reviews that are impacted by their customer experience. Customer reviews also influence online product positioning; for instance, price comparison search engines take reviews into account when listing goods, and marketplaces such as Amazon and eBay allow shoppers to sort by recommendations. With numerous online websites encouraging customer reviews, e-commerce companies are mainly vulnerable to negative feedback. It is thus imperative that you deliver a great shopping experience and keep clients happy. Whether you deliver to door or offer click and collect services, effective supply chain management is the backbone of your eCommerce strategy.
Efficient supply chain management ensures stock availability
The eCommerce marketplace is very transparent. Clients can discover with the click of a mouse if the product they want is in stock and how long it takes to be delivered. Stock availability is thus a number one factor to succeeding in the eCommerce arena. Ecommerce has assisted spawn customers’ expectations of instant gratification. If you cannot fulfill clients’ orders since you are out of stock, it is easier than ever to find a competitor who will. Just one out-of-stock product can cause abandoned baskets, lost sales of supplementary goods, and after loyal customers taking their future business elsewhere.
Effective supply chain management will make sure goods move from manufacturers to the end-user as efficiently as possible. This could engage multi-channel operations or shipping goods internationally. Regardless of the difficulties, order fulfillment should be a core objective at the heart of every eCommerce business.
The vital components of supply chain management in eCommerce
Many elements need to come together to form an effective supply chain that serves a successful eCommerce business.
- Planning: An efficient eCommerce supply chain strategy starts by having an in-depth understanding of your trading environment. Various demand and supply variables require to be taken into account. For instance, can you accurately forecast demand, and how do you mitigate the risks of lead time delays? The list is endless.
- Returns: Having an easy returns process is significant to customers who want convenience and choice; however, at the same time, it’s vital to the efficient running of your internal operations. The growth in omnichannel sales and global marketplaces has made it difficult to attain this.
- Data management: Information is king and lets businesses understand what is happening at every stage of their eCommerce supply chain. From website analytics that provide insights into purchasing behavior to real-time stock management that gives total transparency over SKU levels- data leads to increased efficiencies at all levels.
- Logistics: Whether it is raw materials, finished goods, parts, eCommerce businesses need to consider the speed, cost, security, reliability, and sustainability of moving inventory along the supply chain.
- Sourcing: Some e-commerce businesses have sophisticated networks of global manufacturers; others depend on their suppliers for dropshipping. Whatever your company’s contractual requirements, procuring quality goods at the right price is key to e-commerce competitiveness.
What is the secret to effective supply chain management in e-commerce?
At the heart of these supply chain management components is a need to balance demand and supply, e.g., ensure that the upstream supply of inventory from suppliers matches clients’ downstream demand. This entails optimizing inventory levels at every stage of the supply chain. Introducing inventory optimization techniques is one way to attain this. Inventory optimization is the art of balancing inventory investment with the need to hold sufficient stock to achieve high service levels.
Optimized eCommerce inventory management involves:
- Classifying inventory products and setting stocking policies so you can prioritize the items you hold in stock, depending on their value, order lead times, and pick the frequency, to free up working capital
- Demand forecasting takes into account product life cycle demand patterns, seasonality, market trends, and promotions.
- Reducing the effect of variable supplier lead times and ordering constraints on supply chain efficiency
- Calculating safety stock and reorder point levels, so your risk of stockouts is drastically lowered.
(Supply) Chain Of Command
Whereas the particular strategy that works best for your niche might vary greatly, the fact remains that the structure you put in place for your supply chain will inevitably impact your business as a whole. Just a strong plan of action will bolster your success and efficiency; a short-sighted will take a toll on your supply chain and, by extension, your long-term relationship with customers. That is not a price you should be inclined to pay, mainly when a comprehensive supply chain strategy can positively affect how you do business.
Now that we have demonstrated the importance of a top-notch supply chain, the time has come to make the essential adjustments to your own operation. After all, without adoption, all the knowledge in the world serves little purpose. So do not delay updating the way you conduct business to suit the particular needs of your supply chain.
