How the supply chain can help you leverage the eCommerce boom
- Supply chain optimisation for eCommerce demand
- Taming data
- The unhappy customer
- What about inventory?
- How do you know if your supply chain is efficient for eCommerce?
- Article contributor – Paul Trudgian
This is a guest blog post by Paul Trudigan, a specialist in inventory planning, logistics network design, logistics outsourcing and demand planning and owner of Paul Trudgian Supply Chain & Logistics Consultancy.
The digital age has heralded the eCommerce boom, and it’s a trend that’s only gaining momentum. Research has shown that the eCommerce industry in the UK last year was valued at £133 billion. However taking advantage of eCommerce as a wholesaler or retailer requires a unique set of resources and skills. The relationships between supplier and consumer have never weighed so heavily in the consumer’s favour; consumers hold the power. They think it and want it and you need to be able to turn on a pin and deliver it – quickly and reliably.
This is an exceptionally big ask of wholesalers or retailers. The result is that profit margins are squeezed ever tighter and you need to take some steps to be able to meet those demands. The solution lies in your supply chain.
Supply chain optimisation for eCommerce demand
From warehouse to logistics and strategy to manufacturing, your supply chain needs to adapt and change to secure your place in the eCommerce marketplace. Any area of weakness will quickly show up.
There are a number of different solutions; however the part of your supply chain that you need to be looking at most closely is your warehouse. It needs to run like a well-oiled machine. With tight margins you can’t afford to waste space, not use space, or be inefficient. Ideally, you need a warehouse operation that can flex and adapt according to moment-by-moment need.
Additionally, you need to have a complete overview of each particular order. Are you able to see exactly what’s going on and when? Are you tracking an item not only when you send it out to the customer but on its journey through your supply chain? This bird’s eye view enables you to offer the customer service that the eCommerce consumer expects. However, if you haven’t got the appropriate systems and technology in place, it’s near impossible to do.
Closely related to this is the need to get data under control. You can streamline your warehouse process and gain insight, but if you don’t manage that data it’s fairly meaningless. In fact, data collection and utilisation can very quickly become an all-consuming task which hinders the process and slows it down.
The unhappy customer
Unhappy customers have always been a problem. It’s a tale as old as retail itself. However, there has been a fundamental shift in the behaviour of that unhappy customer.
An unhappy customer in the world of eCommerce is likely to do two things differently from before: firstly, not only tell you, but tell the world of their experience via social media. Secondly, they’ll return products directly to the supplier rather than the retailer.
Not only do customers have more options when it comes to returning items, but they will also intentionally order more items for options, knowing in advance that they will return things. You need a pretty flexible supply chain to cope with this.
The supply chain that is fit for the eCommerce customer is really quite different from the traditional customer of a retail store. Businesses cannot get this wrong however, because reputational damage is easy to cause and can spread like wildfire.
What about inventory?
Closely tied into warehousing and meeting customer demand is the need to optimise inventory – another tricky task in the eCommerce marketplace. You can’t sit on too much inventory; this leads to tied up capital and obsolete inventory. However, being able to access inventory as and when you need it can be hard. It takes exceptional relationships with your suppliers, as well as multiple relationships – you cannot rely on one source.
There are a few different ways to manage inventory effectively for eCommerce business, and what works best for your business may be different for another. It depends on a wide range of factors from your size, to your target market, to the products you sell.
How do you know if your supply chain is efficient for eCommerce?
Well, there’s the rub. Without careful examination you won’t. If your figures don’t add up, then that’s a red flag, but even if you’re profitable you could still be operating with a less than optimal supply chain. Things could be even better if you get your supply chain under better control.
You also cannot assume that your supply chain is fully functional because it mirrors that of another business. Even a direct competitor’s needs will be slightly different from yours – there is no one size fits all approach in the eCommerce supply chain. You need to consider some different questions and then assess the efficiency of your supply chain. These are the five questions you should ask yourself:
- Am I a supply chain expert?
This is important because the eCommerce one is a global one. You need to have the expertise at your fingertips to know the Chinese systems, or American, or elsewhere. It’s a specialism of its own.
- How’s my sales forecasting?
Are you frequently holding too much inventory? Are you struggling to shift products? Are you facing the opposite and frequently out of stock? In eCommerce you need to have exceptional sales forecasting.
- Do I have a backup plan?
With tight deadlines you need to ensure you’re not just relying on one avenue of supply or you risk unhappy customers.
- Have I got the right technology on board?
Is your technology helping you handle the data rather than simply creating it? Is it giving you insight? Does it allow for both supplier management and order processing?
- Are you toeing the line?
In the world of eCommerce, corporate social responsibility is becoming increasingly important. Are you following best practices and staying within applicable legal frameworks?
Article contributor – Paul Trudgian
Paul owns and manages Paul Trudgian Supply Chain & Logistics Consultancy. He is a specialist in inventory planning, logistics network design, logistics outsourcing and demand planning. Paul is an experienced program leader with a proven ability to design, manage and drive critical reductions in operating costs and capital investment. He has delivered in excess of 60 consulting projects in the retail, defense, automotive, food, utilities and mining sectors for both major multinationals and SMEs.