Global ecommerce sales continue to show signs of solid growth, with this market predicted to expand by 50% by 2025.
While this represents a massive opportunity for your ecommerce business, it also comes with particular challenges.
Both retailers and suppliers are challenged with massive amounts of volatility and uncertainty across the supply chain. As markets adjust to the effortless economy, the efficiency of your supply chain is a vital piece of the puzzle.
That’s because improving your supply chain operations has the potential to enhance the customer experience in addition to saving you money. While taking strategic steps to optimize your supply chain helps sustain business growth, sometimes it can be hard to know exactly what those steps should look like.
In this article, discover some best practice tips for improving your supply chain operations as you overcome challenges and maintain the healthy growth of your business.
What are supply chain operations?
Supply chain operations encompass all the actions needed to allow the flow of goods from your supplier to your warehouse. This includes the systems, processes, and structures that you and your supplier have implemented to let this happen.
These operations have been under significant pressure, which has led to a range of challenges for ecommerce businesses.
Supply chain challenges
While consumer demand for online shopping soared to an all-time high, those inside the business know that significant supply chain challenges have accompanied this. From raw material shortages to port closures and increased shipping costs — it has sometimes seemed like a never-ending battle for ecommerce retailers to balance their supply with consumer demand. Let’s take a look at some of those challenges in more detail.
Diversification of suppliers
Any reputable ecommerce site will list the price, availability, and shipping times of their products. Even with this level of clear information, your business may sometimes be struck by supply chain delays that mean you can’t meet customer expectations. Before the COVID-19 pandemic, most retailers could rely on one or two key suppliers who could always meet product demand. These days, that’s a very risky strategy.
Delays in ports or manufacturing cities combined with increased shipping costs mean supply chains can fail at short notice. The goal now is to move towards an agile supply chain that’s flexible enough to offer stability and leeway simultaneously. Diversifying your supply chain to meet that goal is a crucial strategy for growing ecommerce businesses. Increasing the number of suppliers you rely on decreases the risk of backorders or extended shipping times if one supplier cannot meet your demand. This helps you meet customer expectations for convenience while also maintaining high levels of customer service.
Supply chain diversification also offers a cost-benefit because you can choose suppliers that meet your current budget. With manufacturing and shipping costs seeing a substantial rise throughout the pandemic, it’s essential to reassess your suppliers to see if any cost savings can be made.
Predicting future demand
Supply chain disruptions create significant challenges for retailers as they struggle to balance these with surging demands from customers. Many businesses are finding it difficult to maintain adequate stock levels. In addition to unreliable supply chains, factory production of key items, including furniture, appliances, and electronics, isn’t increasing at the same rate as demand. This is partly due to labor shortages and limited factory inventory combined with factory shutdowns
These challenges aren’t going away anytime soon, but ecommerce retailers can mitigate their effects. Forecasting tools to help predict future demand are one such strategy. Historical sales data from your order management system can be used to assess products that may be in high demand in the future. These can then be prioritized in your supply chain. Some suppliers may be able to increase your order size for any top-performing item, allowing you to maintain adequate stock levels even with fluctuating supply chain conditions.
Overselling and overpromising
When it comes to customer experience, one of the worst things a retailer can do is oversell its products. Yet, this scenario is increasingly likely with surging orders and supply chain disruptions. With 58% of consumers stating that a poor customer experience would reduce the chance of them placing future orders, it’s vital to reduce the risk of overselling and overpromising if you want to protect the reputation and success of your brand.
If you know a product isn’t available, communicate with your customers as soon as possible. Don’t wait until someone has added it to their cart, but be proactive and send out a notification or email informing of the delay.
Implementing overselling prevention tactics is one way to prevent the risk of overselling, especially considering the current instability of the global supply chain. Strong inventory management is necessary, including establishing fixed standard stock levels to prevent selling out of your most popular items. You may also increase order sizes for your most popular products to maintain a healthy inventory when order numbers are higher than usual or when supply chain delays occur.
Five ways to improve supply chain
Despite current challenges, there’s plenty that ecommerce retailers can do to improve their supply chain operations. We’ve rounded up five top strategies you can implement right now to help optimize your supply chain operations as your business expands.
Cultivating good supplier relationships
Let’s face it, ecommerce businesses are nothing without their suppliers. Taking the time to develop strong relationships with your best suppliers is a sensible course of action. At the same time, remember that you’re not beholden to a specific supplier. Carrying out an audit looking at each supplier’s performance will help you drill deeper into the effectiveness of these relationships.
At a Linn Academy session on supply chain, Troy Graham, VP of Business Development at Descartes, shared these insights:
“What we’re seeing is a lot of creative thinkers really analyzing what’s happening in their business. They’re analyzing the supply chain itself. Think about who your suppliers are? Who’s reliable? Get serious about who can perform at what pace for you.”
Knowing which suppliers are reliable and can perform at pace helps you plan to avoid delays or shortages. Good suppliers will also be happy to update you if their own supply chain of raw materials is adversely affected. This kind of full supply chain visibility is vital if you’re trying to plan for or absorb unforeseen events.
Once you identify reliable suppliers who are flexible but can meet your expectations — let them know how valued they are! Good relationships with your trusted suppliers are vital, so prioritize developing solid relationships with them based on open and honest communication.
Having full visibility of your supply chain
In this age of uncertainty, knowledge is power. Optimizing your ecommerce operations can be a lot easier if you expand your strategies to cover the entire supply chain. Inventory management software can help achieve exactly this. Once you have the right software in place, you can gain a broad overview of your supply chain from one integrated platform.
Increasing your supply chain visibility brings several benefits, including:
- Improving your overall efficiency
- Reducing costs by removing deadstock
- Allows you to store inventory in case of delays strategically
- It helps you make better business decisions
At the end of the supply chain, increased levels of online buying have led to local carriers becoming overwhelmed. By choosing an inventory management software that can integrate with major carriers, fulfillment centers, and Fulfilled by Amazon (FBA), you can easily track the effectiveness of each individual delivery or fulfillment method.
Implementing automation solutions
As your ecommerce business grows, it’s no longer enough to rely on tracking your supply chain manually. This can lead to problems like overselling or human errors like forgetting to process a manual purchase order. Transitioning to an automated inventory management system can help scale your growth by removing operational complexities.
Minimize warehouse costs but maintain adequate stock levels for maximum cost-effectiveness. Automation allows you to set fixed stock levels for specific products, reducing the risk of you selling out before your next shipment arrives. They can also help you predict supply and demand, making it easier to place orders with your suppliers at the optimum time.
Consumer values are changing — and if you don’t start integrating sustainability into your supply chain operations, you may find your customers begin to look elsewhere. There’s very little point in creating a company-wide sustainability strategy if you’re not going to take positive action. This puts you in danger of being labeled as “greenwashing.” This involves companies making impressive statements about sustainability when they’re not actually making any meaningful changes.
Research from PwC found that 50% of consumers consider the environment before making a purchase. The good news is that there are plenty of areas where adjusting your supply chain operations can make tangible differences to your sustainability strategy. In our whitepaper, ‘The Great Ecommerce Acceleration,’ we found that companies who are already achieving sustainable operations did the following:
- Increased the number of electric vehicles used in their supply chain
- Partnered with sustainability-focused suppliers
- Prioritized ethically sourced materials or ingredients
- Reduced packaging materials
Analyzing your product catalog
When was the last time you checked the performance of individual products within your ecommerce store? This can be a valuable exercise for many reasons, with Troy Graham expanding on this when talking at the Linn Academy 2021:
“Look at your product catalog and decide if maybe you need to expand to look at adjacent products that are available from good, credible suppliers. And sometimes that even includes stepping out into some slightly far-off markets that aren’t your core competency.”
Offering products adjacent to your best-selling products can help you maintain healthy business growth by offering your customers what they’re looking for. Using surveys and asking for customer feedback can also give you valuable insights and help you discover if there’s anything else you could offer your customers.
Linnworks helps improve your supply chain operations
If you’re looking to grow your ecommerce business — one of the most important steps along this path is to optimize your supply chain. Implementing a total commerce solution encompassing inventory and order management, shipping, multichannel listings, and data-driven insights is one of the most intelligent business decisions you can make.
While 76% of ecommerce businesses have struggled to absorb the impacts of supply chain disruptions, it’s still possible to maintain healthy growth. But, this relies on developing and implementing more robust supply chain operations. Achieve this, and it’s possible to transform your retail business and accelerate your growth as we move into a new era of ecommerce.