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While primarily participating in online sales, ecommerce businesses still have to overcome challenges related to an age-old complication — the supply chain.
Understanding the intricacies of the supply chain is a must for businesses, as you need to know how to get your products from the manufacturer to the customer, with limited interruptions and in a way that improves the customer experience.
With the ecommerce supply chain, this process is even more complicated. Now, there are the added logistical elements of procuring raw materials, managing online interactions and overseeing rapidly shifting demands in the online marketplace. Not to mention, the role of distribution and fulfillment centers is often more complicated, with many businesses operating without a brick-and-mortar location.
To succeed as an ecommerce store owner in the modern marketplace — especially post-pandemic and with competitors from other ecommerce companies like Amazon — you will need more than a fantastic product or an incredibly designed website.
By knowing how to operate within the ecommerce supply chain, you can get your products to your customers, all while improving profit margins and reducing operational costs.
How an Efficient Ecommerce Supply Chain Boosts Business
An efficient, transparent ecommerce supply chain can help to determine whether your business is functioning at its optimum potential. It can lead to significant benefits, including:
Cost savings.
Reduced delays.
Greater transparency and visibility across the board.
Effective multi-channel selling.
Improved customer relations.
Accurate forecasting.
Insight into stock availability and inventory visibility.
Ecommerce’s role in the supply chain — as well as the use of software solutions — can make it easier for companies to collaborate with suppliers, procurement and customers, streamlining each decision-making aspect of the supply chain process.
Stages of an Ecommerce Supply Chain
Each stage of the ecommerce supply chain is valuable and can help play a crucial role in operating a successful ecommerce business. These stages involve:
Market supply and demand.
As in most industries of business, supply and demand significantly impact how a company institutes pricing and how efficiently they can fulfill customer orders.
To succeed within this stage, businesses need to find a middle ground for their product selection, where supply and demand are equal — leading to a situation in which your goods and services match the consumer demand for them.
Flexibility is also critical here, as it is in your best interest to be able to react and respond to market fluctuations.
Warehousing and inventory management.
Warehousing is an integral part of the supply chain process, involving functions ranging from housing goods to packaging physical orders. It is the centerpiece for all of your receiving, storing and distribution tasks.
To manage warehousing and inventory tracking, many companies use a warehouse management system (WMS) along with an inventory management software program that helps to bolster their operations, monitor inventory levels and keep things running smoothly.
Order entry and management.
Order entry is the process of recording an order slip into an order handling system, which in turn reclassifies it as a sales order. With this process completed, businesses can schedule necessary tasks to fulfill the order, whether by procuring supplies, setting up specific shipping policies or reviewing invoicing.
Order management is slightly different, referring to a process that interacts with almost every stage of the ecommerce supply chain. It helps businesses to coordinate their fulfillment tasks, from order collection to service availability.
A dedicated order management system (OMS) can assist businesses by simplifying the order lifecycle, providing automated capabilities and generating real-time insights.
Distribution, delivery and returns.
Distribution and delivery focus on product movement from the original point, supplier or manufacturer, to the final point of sale. Distribution management involves actions including packaging, warehousing and shipping.
Returns are the other side of the coin, where products reverse the course listed above — going from the final point of sale back to the seller.
Understanding where items are located and in which direction they’re proceeding is critical to limiting disruptions and maintaining supply chain efficiency.
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Ecommerce Supply Chain Challenges to Watch Out For
When learning how to navigate the ecommerce supply chain, make sure to consider the following challenges:
Inventory management.
Inventory management is challenging for any business, whether knowing which items you have on-site or which are out for delivery. This process will only grow more complicated as your business grows, from maintaining an increasing amount of SKUs and barcodes to managing replenishment.
With a dedicated inventory management system, you can take out much of the hassle of day-to-day logistics and move your focus to different business needs.
Warehouse sorting.
Handling multiple channels and warehouses can be a headache, particularly as your company scales and you have to legislate where warehouses are to be located and which one to choose for specific products.
By using a top-of-the-line warehouse management system, you can move away from spreadsheets with a solution that makes tracking inventory levels and distribution channels simpler and more efficient.
Transportation logistics.
It is one thing to have your warehouses and inventory in order — it is another to have transportation and shipping logistics set up. The final piece of the puzzle, transportation logistics involves ensuring that the products in your warehouses can make it to where the customers are.
Transportation is complex and, depending on the size of your business, can be quite expensive. You will have to manage delivery times, pay truck drivers and ensure that products are delivered on time and in shape even up to the last mile.
If you can master transportation — whether on your own or with the help of a management solution — you will be able to take better command of the market.
Tips for an Effective Ecommerce Supply Chain
For a greater optimization of your ecommerce supply chain strategies, consider the following tips:
Audit your current supply chain.
Review your supply chain to better understand the current state of your product, data and cash flow.
Is what you’re currently doing profitable? Are there any issues with the data available? Are there any gaps between shippers and distributors?
Look for inefficiencies in the operations, spending and process in order to uncover things that can be changed and tasks that need to be fulfilled.
Implement automated order processing.
Automated order processing can help improve your supply chain operations' efficiency and day-to-day effectiveness, even at the service level. It allows you to process orders faster by eliminating manual work, reducing lead time and expediting your shipping and fulfillment tasks.
There are dedicated automated order processing solutions available that integrate with multiple sales channels and apps to automate, verify, process and implement orders as they come in — bridging the gap between supplier and customer.
Consider a shipping service provider.
Instead of dealing with the everyday complications of managing shipping costs, many businesses opt to use third-party logistics providers, whether in the form of traditional delivery services or newer methods like dropshipping.
By outsourcing inventory and order fulfillment, you can leave the hassle of inventory management and reverse logistics to the experts — giving you more time to focus on different tasks.
Map out your warehouse and distribute inventory strategically
Keeping your warehouse inventory organized while utilizing all available space is critical to managing an effective ecommerce supply chain. What happens too often is that items get misplaced, products are put in the wrong location or the warehouse operations as a whole are not as efficient as they should be.
Through the use of tools such as a warehouse management system, you can better organize inventory, dictate where items and containers are located and establish location-specific distribution patterns.
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The Final Word
An optimized, cost-effective supply chain is one of the most essential parts of any successful ecommerce business, reducing operating costs and working to improve customer relationships.
With the help of available omnichannel solutions and a management view of the ecommerce supply chain, your business can better understand each stage of the journey to ensure that products get to your customers satisfactorily and on time.