How e-commerce is changing supply chain management
Supply chain strategy is now more complex than ever. For some companies, the supply chain is even more complicated once they start doing e-commerce.
The struggle is one of efficiency and fulfillment. If you don’t know what to expect, a deluge of orders could see you scrambling to make shipments and meet customer demand. Or, demand for a steady seller could plummet as consumer focus shifts to a trending item, leaving your warehouse overstocked and under-prepared. Either way, you’re faced with internet consumer trends that can dovetail with traditional commerce or diverge from it.
Traditional supply chain management
The traditional model of supply chain management was relatively straightforward. If you were a distributor, your fulfillment process was predicated on demand generated by brands and brick-and-mortar stores. Many brands had well-established models for determining consumer demand based on tried-and-true advertising channels, seasonal shifts, sales projections, and retailer reports.
If you were a brand operating under the traditional supply chain management paradigm, volatility was relatively low compared to what it is today. Word-of-mouth and acts of God were the biggest variables.
You told manufacturers and warehouses to maintain a baseline supply to account for volatility and sales projections in your primary channel. Then, additional supply depended on how much work you put into cultivating a customer base through auxiliary channels such as trade shows, catalogs, and live events. Any software you used was siloed, meaning programs didn’t necessarily communicate. Spreadsheets and hard copy books underpinned the whole process.
Online shopping’s impact on supply chains
Once the internet and online shopping entered the picture, volatility became more commonplace. The internet can amplify word-of-mouth and e-commerce makes it relatively easy to order anything, any time, from anywhere. Moreover, search engine algorithms can wreak havoc on your brand’s visibility.
The landscape has shifted and is still changing dramatically. When it comes to retail supply chains, Amazon leverages a cost of shipping 20% lower than that of multichannel retailers. This allows Amazon to dominate e-commerce, while multichannel retailers may lose out on products that consumers want to purchase online.
For example, the electronics supply chain was one of the first to see customers migrate to digital consumption. According to McKinsey, consumer purchasing of electronics was mostly digital by 2011, with over 65% of people ordering electronics online, a jump of over 10% from 2010. To supply electronics directly to consumers via e-commerce, the average multichannel retailer faced an uphill battle against Amazon, which had them beat by about 500 basis points, in terms of cost.
In 2020, the COVID-19 crisis underlined the volatility of supply chains. Sales of certain consumer-packaged goods, such as oat milk, jumped as much as 305% due to “pandemic pantry” preparations. Brands were not able to foresee this demand. Thankfully, e-commerce was a boon to retailers, because some suppliers provided them with mobile apps for sourcing orders. These apps rely on data sharing so that suppliers can view the retail stock and make quick orders to manufacturers.
How data sharing is creating supply chain transparency
Data sharing can decrease volatility for all nodes in the supply chain. Essentially, real-time data access allows your brand to visualize the entire picture of supply and demand.
With access to retail data from POS systems and inventory apps, you can see how much stock is on shelves and in stockrooms. You can also view trends in your niche by looking at retail reports.
When consumers share their data via surveys, questionnaires, social media platforms, and cookies, your brand is able to make product-demand projections. Analytics solutions, such as Google Analytics, allow you to understand your audience from a demographic and locational perspective. Data from your e-commerce store can further inform customer service at the point-of-sale online.
In turn, with supply chain management software, you’re able to see where manufacturing, warehousing, and shipping are in the fulfillment process. Then, you can be transparent with the customer about when their order will arrive.
Automation’s effect on supply chain efficiency
With access to data, brands need automation — it’s nearly impossible to overstate the impact that automation has on supply chain efficiency, and therefore, customer satisfaction. In 2011, Amazon was already on top of automation innovations with features such as 1-Click checkout.
Amazon’s e-commerce platform automated the process of placing orders. Combined with product suggestions and fast shipping due to integrated supply chain management software, Amazon’s service captured an American Customer Satisfaction Index score of 87. Through continued automation and breakneck efficiency, Amazon’s valuation went from $100 billion in 2011 to $1 trillion in 2020.
Automation isn’t just for an e-commerce titan like Amazon. Any brand that wants to automate their supply chain can do so easily. All you have to do is integrate an e-commerce store with your enterprise resource planning (ERP) software, which includes supply chain data and process automation. Doing so can increase your order processing efficiency by 53% and boost sales by at least 8%.
Supply chain strategies for e-commerce businesses
Managing your supply chain with an integrated e-commerce shop is difficult if you don’t have a strategy in place to satisfy the influx of customers and orders. This being the case, consider the following strategies for streamlining your e-commerce operations:
- Increase warehouse capacity and customer proximity: The closer your warehouses are to customers, the faster you can fulfill orders directly to consumers or brick-and-mortar retailers.
- Lower the cost of shipping: Since you’ll likely be saving money through automation and increasing warehouse capacity, offer shipping deals for orders over a certain price, as well as incentives to bundle items, such as price discounts and free shipping.
- Integrate an order management system: Your OMS should be integrated with your e-commerce store, physical locations, and ERP. This way, the end-to-end order management process is automated, working hand-in-hand with each link of the supply chain to guarantee customer satisfaction.
- Kit items: Kitting items is the process of automatically manufacturing and storing bundled items together. This way, when customers bundle items online and place an order, you won’t have to spend extra time putting the bundle together and shipping it out.
- Automate invoicing: With online invoicing, your customers can pay online and access all important payment documentation whenever they need to. With faster invoice processing, orders will move more quickly through the supply chain.
All told, streamlining your supply chain through automation has a surprise effect: it allows you to focus more on listening to your customers. With ERP-integrated e-commerce software, you can work to give your customers what they want and need, right when they click a button.
For more insight read our blog on how supply chain management and e-commerce create new business and revenue opportunities for B2B organizations, or download our Guide for Manufacturers, Distributors, and Wholesalers.
Supply chain e-commerce guide
The essentials guide for manufacturers, distributors, and wholesalers