Managing the supply chain has become crucial for today’s eCommerce companies in order to compete effectively. Proper supply chain management helps move a company’s products through a chain of people from the manufacturer, warehouse, retailer, distributor, and finally, the customer. Acknowledging the importance of eCommerce and supply chain management, many companies are now looking for ways to streamline their supply chain.
Supply chain management, or SCM, is concerned with developing and running supply chains in the most effective and efficient ways possible in order to maximize customer value and achieve sustainable competitive advantage. Supply chain activities include everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.
Supply chain management in eCommerce recognizes that every product that reaches an end-user does so through the cumulative effort of multiple vendors and manufacturers. These organizations make up the supply chain and are linked through the flow of goods and information.
SCM consists of five parts, that when optimized, create a better eCommerce value chain:
Streamlining your business supply chain can make a number of positive impacts on your business. In fact, reports show that when compared to the average of other companies within their industry, businesses with an optimized supply chain enjoy:
Unfortunately, while 86% of companies regard a typical supply chain as a critical competitive differentiator, according to SupplyChainDive an overwhelming 94% of businesses do not have full visibility of their supply chain and logistics operations. However, by monitoring and managing SCM strategies, eCommerce companies can more easily deliver their products, bring down the cost of production, and increase customer value.
Want to dive deeper into SCM? Be sure to check out the Association for Supply Chain Management (ASCM) Learning Center.
Analyzing and streamlining supply chains is a learning process not just for improving product deliveries today, but also for improving customer service in the future. Ready to optimize your supply chain? Here are eight things you should be doing.
To uncover supply chain challenges, problems, and bottlenecks, eCommerce companies need to conduct a high-level process review. Afterward, a more streamlined manufacturing or production line can be created to reduce costs and pass savings along to customers. A successful review is also important as it will inform the baseline for a follow-up ROI analysis after supply chain methods have been adopted or partnerships have been formed.
As your company grows, you’ll need to bring aboard more employees and more external vendors. It’s important to keep the lines of communication open so that everyone is on the same page working toward the same goal. This reduces downtime, confusion, and errors, resulting in greater efficiency, faster service, and fewer returns.
Additionally, customer service departments spend a lot of time trying to figure out where specific shipments are at any given time. By implementing an interface that allows clients or customers to check on shipment status remotely, both staff and clients save valuable time.
The ideal source offers low prices, high quality, and short lead times. Of course, it’s hard to find a source that offers all three at once, so most eCommerce businesses will need to decide which attribute is most important to their consumers and provides the best competitive differentiator.
Is your strategy to produce the best quality products? The best-priced products? Or do you just want to get your products to market the fastest? Answering these questions can also help determine whether you’re sourcing within the United States or abroad.
Of course, since e-procurement is usually felt across all departments, be sure to discuss this with all that are involved and include them in any decision-making if a better opportunity presents itself.
Read more in our blog 10 Product Sourcing Strategies for Ecommerce Startups.
After you’ve settled on a source or sources, it’s important to connect directly with the factory. Communicating with the manufacturers producing your product or product parts helps them better understand your needs and goals, which can streamline production and get to market faster. Perhaps more importantly, factory direct methods will typically provide the strongest margins while increasing your supply chain visibility.
Pro-Tip: While working with international factories can cut costs, it could damage your business if you fail to get domestic intellectual property (IP) protection. While it’s not always necessary to get protection in places like China (legal battles like these are expensive and rarely won there) you should always protect your product and IP in the US with a patent and trademark.
It’s a fact: Amazon can already ship to 72% of the US population in one day. This puts pressure on eCommerce startups and small businesses to improve their shipping speeds. But how can you improve shipping speeds without increasing costs? One way to expedite shipping and reduce costs is by working with a third-party logistics (3PL) company.
Because of the volume most 3PLs ship, they have relationships with carriers and get special pricing. Many will pass these savings onto their customers. In addition, if a 3PL has multiple fulfillment centers, they can ship from the facility closest to your customer to get the product to them faster and cheaper (shorter distances mean fewer shipping zones, reducing cost).
Read more in our blog, 12 Small Business Shipping Tips to Improve Your Profit Margins.
Many eCommerce startups and small businesses fall into the trap of duplicating processes as they grow. Unfortunately, overcomplicating daily tasks can take up a lot of your employees’ time, reducing productivity. To avoid this, evaluate your operations and look for similar functions that can be consolidated or eliminated (these may be discovered during the supply chain processes review).
It’s also important to have clean data. Duplicate data can slow down your networks and make database administration more complex than it needs to be. If this sounds daunting, a database administrator can help clean up records and simplify routine data entry and maintenance.
As an eCommerce company, it’s important to be on the cutting edge of technology as the industry is constantly evolving. While large eCommerce companies are adopting automation through robots and AI to speed up processes, they may be a bit out of your budget at this point! However, there are other relatively inexpensive ways to streamline logistics for startups and small businesses such as inventory scanner systems (check out five great ones here).
Warehouse management systems (WMS) also offer transparency into the supply chain and help ensure that goods and materials move along in the most efficient and cost-effective way. A good WMS keeps an eye on warehouse design, inventory tracking, picking and packing goods, receiving and put-away, shipping, labor management, yard and dock management, and reporting. Many of these are cloud-based solutions, which also integrate with third-party logistics providers (3PLs).
Read more about WMS in our blog, Benefits of a Warehouse Management System (and Choosing WMS Software).
Along with other technologies, blockchain is considered “Web 3.0.” So what is it? After all, 28% of professionals say a lack of understanding is the number one obstacle to adopting blockchain (34% say it is the second biggest reason).
Blockchain is a peer-to-peer network where every process and agreement has a digital record that can be identified, stored, and shared. It offers total transparency and shared accountability for everyone in the supply chain. Think of it as a form of logistical trust between parties.
Blockchain also offers amazing auditing potential. It lets you track deliveries, demand, material consumption, receipt of goods, contracts, and accounts payable. It provides ledgers that easily certify the backstories of products, offering up useful information for consumers and also companies performing due diligence on working practices.
If you’re not automating processes, such as the procurement process, you’re likely to fall behind. In a recent survey, 66% of respondents say they have adopted procure-to-pay systems. These AI supplements help push manual tasks to machines instead of humans, freeing them up for more important tasks.
For example, automation means invoices can be automatically generated and sent from the supplier’s system to the purchaser’s finance department. It’s an elevation of the procurement function, not a scaling down. Automation through AI can also run spend analysis reports before, during, and after sourcing; it also can provide demand breakdowns, component analyses, market analyses, and supplier performance analyses in real-time using internal and external data.
Transportation regulations are updated often. This is even more true in the global marketplace, where laws and treaties governing what can and cannot be transported into foreign markets change frequently. It’s important to keep tabs on policies, as economic and political situations often arise without notice. When shipping to new markets, due diligence and research are critical (using a 3PL partner with knowledge of international shipping is another way to go).
Learn more about International Shipping with The Fulfillment Lab.
While these are all great ways to streamline your supply chain, one of the best ways to optimize may be to consider a 3PL provider (or a new 3PL provider if your existing one isn’t getting the job done). Today, more than 90% of shippers say that their relationships with 3PLs are successful. In addition, shippers who have used 3PLs report almost a 10% average cost reduction (5% reduction in inventory cost and 15% reduction in fixed logistics cost).
That’s where The Fulfillment Lab comes in. We understand that in today’s competitive market, order fulfillment needs to move fast while bringing your brand to the forefront. That’s why we created fulfillment marketing — combining expedited shipping, order transparency, and complete customization to keep you and your customers happy. Learn more about The Fulfillment Lab or contact us today!