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E-commerce supply chain management: An effective guide

October 12, 2022


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The global e-commerce market sales is expected to reach 8.5 trillion by 2025. The rise in power of e-commerce marketplaces like Amazon and the blend of advanced technologies like chatbots, AR, AI, and Big Data are some of the few examples of ongoing E-commerce trends that serve one objective – building incredible customer experiences. From a business perspective, e-commerce shortens product lifecycles, which significantly impacts supply chain management. Following the global health crisis, the heightened demand for online retail necessitates agile, adaptable, and innovative e-commerce supply chains to quickly and efficiently deliver products to customers in the shortest time possible.

E-commerce supply chain – an overview of challenges and opportunities

The e-commerce supply chain is a network of processes involved in moving products from the manufacturing facility to the buyer’s desired shipping location. Customers prefer delivery of ordered items on time. And to accommodate that, e-retailers need to have a proper infrastructure in place and the required personnel to deliver goods on time. This is where e-commerce ventures struggle and the challenges can be categorized into four segments:

However, with the advent of new technology solutions, e-commerce owners are finding ways to address the above-mentioned challenges. A few examples of such innovation would be manufacturing and distributing items geographically closer to the end user, circumnavigating physical store locations to ship goods directly from fulfillment centers to customers, and omnichannel sales and marketing for a unified customer experience across all channels. These new approaches will, in turn, significantly reduce the E-commerce supply chain but present ample opportunities for encashment.

What matters for a successful e-commerce supply chain management?

Even though brick-and-mortar retail sales increased by 13% in 2022, online purchases continue gaining traction alongside physical stores. That places a lot of pressure on the owners to match up with the rising demands for e-retail shopping. But what does it mean for e-commerce supply chains?

To answer the question, e-commerce suppliers and distributors face tremendous pressure to meet buyer expectations for one-day delivery. And since the online market is spoiled for choices having multiple e-stores selling similar products, lowering the expected delivery date is one of the critical factors to staying ahead of the competition. The concept of a just-in-time delivery model arises from the need to accommodate one-day delivery and prevent unnecessary inventory stockpiling and overhead storage and warehousing costs. Proper inventory management, increased mobility and visibility of storage, seamless picking and packing, and adequate transportation are key factors defining a successful eCommerce supply chain management.

What is e-commerce supply chain management?

ECommerce supply chain management focuses on the seamless procurement of raw materials cost-efficiently, manufacturing items in the required quantity and quality, and distributing them at the right time. And the whole concept comprises functions such as managing supply can demand, tracking inventory, warehousing, order entry, and management, distribution, and delivery to end users.

Benefits of supply chain management in e-commerce

Ensuring stock availability: For an E-commerce enterprise, the end goal is to deliver products to customers within a stipulated time. To meet this requirement, the former must maintain a regular flow of stock available to ship to customers following order placements. Owners can either source from other manufacturers or support an in-house production team to manufacture the required quantities.

Planning strategic shipment of goods: Shipping final goods to customers requires much planning beforehand. Therefore, it is advisable to plan ahead to ensure the smooth processing of customer orders. And the strategic shipment of goods forms an integral part of eCommerce supply chain management.

Maximizing order fulfillment: An e-commerce business should aim to increase the number of orders fulfilled daily. And that is the ultimate objective of eCommerce supply chain management.  Ensuring every customer’s order is fulfilled is possible only when the above-mentioned objectives are duly met.

Meeting delivery targets: The promise of convenient delivery on time differentiates an E-commerce business from its brick-and-mortar store. And the latter has to keep up with the same promise. Hence, delivery targets are decided and are based on the number of orders fulfilled, pin codes serviced, and accuracy of delivery information shared with customers.

Adapting to market trends: An efficient e-commerce business is constantly evolving. And its supply chain management entails owners staying up-to-date with what competitors are offering and what customers demand. This allows for maintaining an agile and flexible E-commerce supply chain that keeps owners a few steps ahead of their competitors.

Ensuring transparency of operations: Supply chain management offers complete visibility of orders and their various stages of fulfillment. From supply and production to warehousing and distribution, owners should be able to track every movement of all processes, and customers should be able to see the movement of orders, from ordering to shipping.

Enhancing CRM: All of the above-mentioned points boil down to one crucial aspect – maintaining healthy buyer relations. And e-commerce supply chain management is directly connected to customer relationship management. SCM oversees the timely delivery of goods and fulfilling buyer requirements, which in turn serves to keep customers happy. In order to enhance CRM, the business should stay attuned to changes in various demands of the products and services. With an integrated eCommerce supply chain, companies can easily keep up with users’ requirements and feedback directly.

Reducing overhead costs: A fully optimized e-commerce supply chain aims to eliminate various intermediary stages of distribution, retailers, and many more. This is being done to reduce unnecessary overhead costs and streamline the whole process.

Adopting omnichannel practices: An omnichannel e-commerce approach can deliver stellar customer engagement. It creates various customer touchpoints, much to the convenience of the end users. A well-structured eCommerce SCM facilitating omnichannel engagement provides higher customer satisfaction.

The five key stages in the e-commerce supply chain

Planning: Here, data is collected from various touchpoints in the supply chain and evaluated to determine the inventory needed to meet market demands.

Sourcing: In the e-commerce supply chain, the suppliers and vendors play an influential role in helping e-retailers aptly meet customer needs. They supply the necessary raw materials, semi or finished goods for completing the following stages.

Manufacturing: The manufacturing stage is also crucial for businesses producing their goods. Here the raw materials are converted into finished items matching the quality expectation of buyers. However, those who outsource inventories from other suppliers can skip the stage and straightaway arrange for the goods delivery as per orders.

Delivering: Here, shipping and logistics are primary players, ensuring the timely delivery of goods in the right conditions to end users.

Handling returns: Also known as reverse logistics, this stage involves processing returned goods from customers and recalling damaged or expired items from warehouses back to suppliers.

Key metrics to track e-commerce supply chain

Inventory turnover: It reflects how efficiently an organization can move its inventories over a given period of time. This metric highlights the inefficiencies of E-commerce supply chains and their buying practices and helps gauge the actual demand for one or all of its products.

Perfect order rate: This metric measures the company’s ability to complete the delivery of orders without facing any issues. The ratio of perfect order completion to total orders received reflects the supply chain’s in-house operational efficiency and agility.

Inventory accuracy: A regular comparison of physical inventories stored in the warehouse to the numbers shown on the database prevents unexpected surges in inventory or logistic costs and backorders.

Shipment time: For the e-commerce supply chain, shipment time is essential. Delayed delivery can impact the brand reputation since the success of an online business is directly connected with timely and safe deliveries.

Reasons for returns: This metric provides valuable customer insights into what they want. This is measured against the products delivered to them to understand the gaps in the process.

Cash-to-cash cycle time: This valuable KPI measures the time difference between when a business pays its suppliers to purchase inventory and when it receives money from its customers in exchange for goods sold. It estimates the cash required to fund day-to-day operations and highlights the overall funding needs of the business.

Ten strategies to improve supply chains for e-commerce businesses

By optimizing your e-commerce supply chain, you are implementing the best strategies to maximize sales and revenue. And to achieve the mentioned objective, you have to ensure that you are selling the right items at the appropriate time and to the right audience.

There are a few helpful tips to improve the proper functioning of your -commerce supply chain:

The future scope of e-commerce supply chains

The evolving demands of customers and the rising volatility of markets will continue to pressure ventures to look for more agile and flexible supply chains powered by technology. The future is hard to predict. But with the direction in which the market is heading, there will be more intricate challenges to overcome, followed by increasing market competition. Agility and flexibility will be the critical criteria for e-commerce businesses to ride the changing tides successfully.

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