We now live in a ‘borderless’ world thanks to the Digital age or as I like to put it ‘the internet age’. This is definitely changing the way you and I live, socialize, work and even consume. With such extensive reach, it comes without saying that businesses have shifted the way how they promote and sell their goods and services which lead to a huge increase in e-commerce in the last decade.
Maybe you’ve heard the term supply chain management (SCM) before and don’t know a whole lot about it and your search brought you to this article for answers. Or maybe you’ve been doing SCM for your e-commerce business but want to improve. Just like you, I was looking for answers to cut supply costs and grow my e-commerce business. What I am about to outline in this article will help you whether you’re using Shopify, Amazon, eBay or your own website to run your e-commerce business. But before we get to that, it is important to understand how everything works and how it all ties in.
An Overview of Supply Chain Management (SCM)
SCM is the management of the chain of supplies, covering everything from sourcing raw materials, product development, production, and shipping as well as information systems that are used to analyze the data to predict buying patterns. Take for instance the supply chain of Apple’s iPhone. Apple purchases raw materials such as processors, screens, batteries, etc., from companies all over the world that go into making the iPhone. All these raw materials are gathered and shipped to China where they are assembled, packaged and shipped to FedEx and UPS to be mailed. They then go directly from these fulfillment centers to consumers who bought their iPhones online. A large part of the assembled phones also goes back to the US in Apple’s warehouse, of which, some are redistributed to retail stores where customers can purchase them. When the customer wants to upgrade his iPhone, he can send it to the closest Apple retail store or recycling facility.
The velocity of the supply chain is driven by the consumer market who expects to receive their products quickly. Customers are now expecting to get their products within 24 to 48 hours and at the same time still get it cheaper than before. As a result, e-commerce business faces challenges when they buy things, make things, move things, sells things and service things. A lot of e-commerce businesses have started using fulfillment services all over the globe to lower business costs and increase service levels; maintaining good product delivery time and at prices to match their customers’ needs.
7 Steps for Better SCM
Let’s look at 7 steps that will give you better SCM and the best part is, you don’t have to be a corporate giant to implement them. These steps are easy to understand and are especially useful for persons who are just starting off in SCM for e-commerce businesses. These steps will help you to cut costs, increase profits and get your products in the right place, at the right time and at prices that make your customers happy. Most of all, they will help you stay in business for a long time.
1Provide great customer service
Each e-commerce business has a different target audience, so first understanding your customer base and their needs are important in order to implement a fitting supply chain. Give customers what they really want, not what you think they want. For instance, if you were to offer all of your customers overnight shipping even when all of them didn’t need it, then you would incur additional costs.
2Source your products
As soon as you understand the products that your customers demand, sourcing them becomes very important. There are many places and ways to source products that your customers want such as: attending trade shows and industry markets, doing drop shipping, checking overseas, checking locally and sourcing directly from manufacturers.
3Do proper inventory management
This is one of the most important parts in the SCM for an e-commerce business; screwing this part up can be costly to your business. Having real-time information on your inventory will help you to avoid overselling or ordering more products than you actually need. Overselling can lead to delays in the delivery of products to your customers which can cost you a few customers. Hence, having proper inventory management is a crucial part of the supply chain for both you and your customers.
4Outsource some tasks
Outsourcing can grow your brand way beyond its current borders. It is about connecting your e-commerce business with the best talents available in the market at quite affordable costs. As your business grows, you find that you become busier each month and so certain tasks often go undone. Outsourcing can help you with tasks such as customer support, inventory management, staffing, etc. This allows you to cut costs, yield higher profit margins while still delivering quality products to your customers.
5Use fulfillment services
Shipping orders is often a tedious task, especially when you are doing your own order fulfillment. Fulfillment service companies can help you to take care of that issue. They help you with inventory storage, tracking inventory, printing shipping labels, processing returns, processing orders, handling shipments, etc.
6Measure your performance
I’ve often been told that whatever gets measured gets done. This holds true for your e-commerce business as well. What you really need to measure is the end result of your supply chain’s primary objectives. This will assist you in setting realistic targets and develop better strategies. You can then implement key performance indicators (KPI) to measure your performance vs your targets.
7Focus on the overall costs of the fulfillment
While you’re in business to make a profit it is also important to recognize that you’re in the people business, so focus on making decisions that will meet your customers’ demands at the lowest costs. This should be taken into consideration at every stage of the supply chain; an expensive decision will lead to price increases if you’re to be profitable. The e-commerce space is quite competitive so keeping costs low will allow you to have a competitive advantage.
Several e-commerce businesses focus on different aspects of the supply chain. In my experience, implementing these 7 steps will help you to have a better SCM. You may have already implemented a few of these steps and at the same time, not all areas of your supply chain may need fixing. These steps are here to guide you if you do not have a working system or to improve upon what already works. I wish you all the best in your e-commerce business!