According to a UNCTAD report, the percentage share of ecommerce sales in total global retail sales increased from 16% to 19% between 2019 and 2020 throughout the course of the pandemic.
Global retail ecommerce site traffic soared between January and June of 2020, generating nearly 22 billion visits and surpassing even peak holiday season traffic.
While this significant increase in ecommerce initially appeared as a stroke of good luck for business owners navigating a pandemic, surging global demand met with unavoidable supply chain issues means not all businesses have been as fortunate. Heightened shipping costs, wait times and supply chain logistics issues have continued to affect business owners on a wide scale.
Tips to overcome supply chain challenges
In this post, we’re taking a closer look at five of the biggest supply chain challenges and how to overcome them.
1. Meet customer expectations with supply chain diversification
It’s anticipated that customers are given clear expectations on price, availability and shipping times when purchasing a product from your site. Unfortunately, with ongoing supply chain challenges, retailers are facing increased risks of not being able to live up to those expectations as suppliers struggle to keep up with the current demand.
Prior to the COVID-19 pandemic, retailers who dealt with just a few or possibly one sole supplier didn’t consider the risk of not meeting customer expectations. Now, decreased rates in container shipping operations and outbreaks in port and manufacturing cities have caused many supply chains to come to a halt. As the international supply chain endures challenges across the board, ecommerce business operators may need to adapt by expanding on their supplier efforts.
Supply chain diversification is a strategy ecommerce businesses can adopt to increase their range of suppliers. More suppliers mean you can reduce the risk of backorders and extensive shipping times should one company fail to meet your demand. This means you can commit to quality customer service and more adequately meet customer expectations, even in the midst of uncertainty.
Likewise, supply chain diversification helps boost cost efficiency by allowing ecommerce business owners to choose from a supplier that meets the current budget. This is especially important during the pandemic, as surging demand coupled with supply chain disruptions have caused manufacturing and shipping costs to significantly increase worldwide.
2. Have enough stock when demand is increasing
Despite supply chain disruptions impacting manufacturing and shipping operations worldwide, demand is only continuing to increase—meaning businesses are struggling to have enough stock.
A recent Institute for Supply Management (ISM) survey discovered that factory activity has minimally increased between May and April of 2021, specifically impacting industries like furniture, electronics, and appliances.
This slight increase in activity has only partially opened the door for increased supply requests, barely making it easier for eCommerce businesses to input orders. As the pandemic continues and Delta variant-related shutdowns continue to impact operations, supply chain capabilities will only continue to fluctuate. At the same time, limited factory inventory and widespread labor shortages will maintain impacts imposed on manufacturers and suppliers.
With these lingering concerns, ecommerce business owners must implement or improve methods of demand forecasting or predicting the future demand for products using historical sales data. Consider tapping into your order management system to assess which products deserve the highest order priority. If supplier conditions allow, increase the order size of these top-performing products to ensure inventory remains solid as supply chain conditions continue to fluctuate.
3. Navigate unexpected challenges
Over the past year and a half, previously unexpected challenges practically have become the new normal for industries across the board. Although ecommerce business owners have always been advised to plan for the unpredictable, the ongoing impacts of the pandemic have outlined the true importance of developing a contingency plan—especially in times of high sales volume.
When unexpected challenges like unforeseen sales volumes or limited suppliers stand in the way of ecommerce businesses, operators should be able to turn to their contingency plan to address the problem head-on. If your eCommerce business does not already have a contingency plan drafted, now is the time. Start by categorizing your business’s critical functions — such as order fulfillment — and designate a continuity worker group that will address any issue that arises.
Once drafting your contingency plan, acknowledge how you will navigate potential disasters. For instance, in this mid-pandemic world, ecommerce operators can anticipate unexpected sales volume and supply chain disruptions. Construct the steps that will need to be taken to address these issues, whether it’s contacting multiple suppliers or expanding internal operations to accommodate the unexpected. Factors including the cost to implement these steps and the downtown a business may possibly face should additionally be calculated into a contingency plan.
4. Avoid overselling and overpromising
With ecommerce businesses facing record-breaking order rates and supply chain challenges on a global scale, the last thing business owners want to face is overselling a product. According to Microsoft’s Global State of Customer Service Report, 58% of consumers would choose to stop doing business with a company following a poor customer experience, such as losing out on a product they ordered due to mislabeled inventory.
Instead, acknowledge that the current state of the global supply chain creates an elevated need for overselling prevention tactics. With a lot of uncertainty surrounding the global supply chain, including a supplier’s ability to provide the inventory you require, it’s important to begin by practicing strong inventory management to avoid overselling, particularly during the holidays.
Try establishing a fixed standard level of stock with each product, especially historically high-performing items, to identify the minimum amount of inventory you should carry at all times. This will help you identify restock needs before completely emptying your inventory and allow for a bit of wiggle room in the event a product sells out online. Likewise, if you’re selling products through channels other than your main website, ensure inventory levels are updated accordingly.
In the event of overselling a product, be sure to thoroughly communicate with customers as soon as the issue comes to your attention—do not wait to let a customer know that their order will not be fulfilled by the holidays. Explain how challenges with the global supply chain are affecting your business and that you value their continued support, even in times of crisis. To soften the blow of an oversell, also consider offering incentives like a discount code to ensure customers return for a second try.
5. Anticipate manufacturing and supplier delays
Over the course of the pandemic, disruptions in the global supply chain have created massive issues for industries across the board. In a late 2020 Ernst & Young LLP survey that polled more than 200 supply chain executives from companies of various industries, only 2% of companies claimed they were prepared for the pandemic. A whopping 72% claimed they were negatively affected by the pandemic.
Large industries including furniture, home construction, and automotive have been hit particularly hard as global manufacturing labor and supply shortages and skyrocketing freight costs continue. A Q3 statement by Salesforce projected that costs across the retail supply chain would continue to increase by $223 billion in the second half of 2021 because of challenges faced by logistics companies, manufacturers, and stores.
With manufacturing and supplier delays negatively affecting most industries, companies will need to become scrappy to overcome the burden of manufacturing and supplier delays. As previously mentioned, practicing supply chain diversification and inventory forecasting is an excellent way to mitigate issues caused by supply chain delays. However, these methods are not foolproof.
Rather, ecommerce businesses will need to actively anticipate manufacturing and shipping delays. Now is the time to tighten up all sales channels and streamline inventory levels to ensure your business knows exactly how much product it has to sell and how long it may take to replenish inventory. Burdens on the global supply chain will continue to fluctuate, so remain nimble over the coming months.
It may take years to repair the damage the pandemic has inflicted on retail supply chains worldwide. Rather than waiting for things to change, it’s best for ecommerce businesses to adapt and implement new practices to handle this rollercoaster of a market.
Now more than ever, it’s imperative for ecommerce business owners and operators to remain flexible—even when it seems as though these issues may never resolve themselves. Trusted tactics, such as supply chain diversification, inventory forecasting, and contingency plans can help mitigate supply chain challenges to help your business overcome manufacturing delays and product overselling. Though not easy, it is possible to overcome supply chain challenges with confidence.