7 Ways to Improve Your E-Commerce Supply Chain
Growing a successful e-commerce business requires more than just making quick decisions to offset issues that arise without warning.
A well-thought-out strategy that represents a company’s long-term goals needs to be put in place while building solid customer relationships. This applies to almost every aspect of an e-commerce brand, especially its supply chain management. An optimized supply chain gives a business a proper foundation and ensures that its customers return time and time again.
The secret to success in e-commerce is building a seamless strategy for product development and distribution through a well-optimized supply chain.
In this guide, we will be looking at seven ways in which you can improve your e-commerce supply chain systems to ensure that your business remains profitable for years to come. Before we dive deeper into how you can improve your supply chain to maximize your profits, we will first cover some basics with regard to what an e-commerce supply chain consists of.
What Is an E-Commerce Supply Chain?
An e-commerce supply chain includes everything from product development, the sourcing of raw materials, and manufacturing to shipping logistics and information systems. All of these touchpoints should then be combined to maximize customer value and establish a competitive advantage for your product within a given niche or industry.
A well-optimized supply chain recognizes the fact that every product that is produced reaches the end user through the cumulative effort of multiple vendors and manufacturers. These alliances make up the supply chain and are interconnected through the flow of goods, services, and information.
The e-commerce supply chain consists of five sections that, when fine-tuned, create a better customer experience and improve your brand’s reputation. These sections are listed below:
The e-commerce supply chain represents the complete start-to-finish process of transforming your product idea into a physical item that addresses your customers’ pain points.
Online Shopping’s Impact on E-Commerce Supply Chains
Compared to the traditional supply chains for brick-and-mortar businesses—which are considered stable and predictable with regard to demand—e-commerce supply chains are far more inconsistent due to the fact that anyone, from anywhere in the world, can now order your product with the touch of a button.
Thanks to the internet and online shopping, such inconsistency has become more commonplace, as there can be a sudden drop in shopping trends or a sudden spike in sales almost overnight.
While brick-and-mortar brands might experience growth in the sales of a given product on its launch day or during a special holiday promotion, it is far less common to see a stock-out during normal operations.
The opposite can be said when we consider the impacts that the recent pandemic has had on e-commerce buying trends. For example, while doomsday prepping might have been a small niche 5–10 years ago, almost overnight, this industry experienced unpredictable growth, and many brands in this niche were unprepared to run out of stock without warning.
Why Is Having a Good Supply Chain Strategy Important in E-Commerce?
As mentioned in the example above, having a well-optimized supply chain will limit the risk of your products going completely out of stock should you find yourself in a similar situation without warning.
How well you optimize your supply chain will determine whether your business is functioning at the optimum level or whether it is on the verge of reaching a critical point of failure.
Nothing is more frustrating to a potential customer than landing on your product’s listing page after hours of research only to find out that the item they were determined to purchase is no longer available or in stock. To safeguard your brand’s reputation, let’s cover some of the ways in which you can improve your supply chain to prevent these issues occurring with you.
1. Lower Shipping Costs and Delivery Speeds
The fact that Amazon offers same-day and next-day delivery to 72% of the total U.S. population puts smaller e-commerce brands under a ton of pressure. In order to compete, e-commerce brands need to meet or exceed these expectations to stay relevant in the eyes of their customers.
For those who are just starting out, you may be asking yourself, “How can I compete with one-day shipping while keeping costs low?”
One of the best ways for an e-commerce business to expedite their shipping times while maintaining low costs is to utilize a third-party logistics (3PL) service.
Given the volumes that most 3PLs ship, they have relationships with shipping carriers that entail special pricing that most e-commerce brands don’t have access to. These 3PL providers will often pass these savings down to their customers.
In addition to lower shipping costs, a 3PL has multiple fulfillment centers, which can be used to ship your products from multiple locations that are closest to your customers. With fewer shipping zones come lower costs, and, by distributing your inventory to multiple locations, you can provide lower shipping times, which, in turn, will help you stay competitive with Amazon’s fulfillment centers.
2. Rethink Your Sourcing Strategy and Manufacturing Partners
When sourcing product manufacturers, you will most likely consider who has the lowest prices, the highest quality of goods, and the shortest lead times. Of course, it’s hard to find a manufacturer that can provide all three together.
Most e-commerce businesses will need to decide which of these three characteristics is the most important to their consumers and determine which factors will help them maintain their brand’s reputation. Below are a few questions that you should ask yourself:
Do you want to produce best-quality products?
The best-priced products?
Do you want to get your products to market fast?
Answering these questions will help you determine whether you should plan on sourcing from within the United States or overseas. If you happen to be sourcing from abroad, check whether other manufacturers lead the pack in one of the areas that you are the most concerned with. This will help you make decisions regarding which partners match your brand’s goals the best.
3. Consider Using 3PL Providers
We touched upon this in the shipping and delivery section above, but it is worth separately mentioning this here, as using a 3PL service is often a guaranteed way to improve your overall supply chain strategy.
While there are many great ways to improve your overall supply chain approach, often, one of the most beneficial changes for any e-commerce brand is to use a 3PL provider. In addition to giving you more control over shipping times and logistics costs, these providers will usually offer you far better storage options than what Amazon fulfillment centers alone can provide.
By using a 3PL service to help streamline your supply chain management, you can not only save money on storage and shipping costs but also reduce shipping lead times, which is the amount of time from when your customer orders a product to when their items reach their front door. This goes a long way in the eyes of your customer, so using these services can help improve your brand’s reputation and maintain customer satisfaction and loyalty.
4. Automate Your Paperwork and Inventory Management
If you have not already taken the leap of automating simple business processes, you may start to fall behind the curve. Most e-commerce brands that we come in contact with say that they have adopted procure-to-pay systems and artificial intelligence (AI) supplements to help transfer manual tasks to machines from humans. By freeing up your employees from redundant tasks, you give them the ability to focus on more important aspects such as customer service, returns, and other features that customers often prefer human assistance on.
Implementing automation means that product invoices can be generated and sent from the supplier’s system to the purchaser’s finance department automatically. This can be seen as an elevation of the procurement function and not a scaling-down of your back-end operations.
Moreover, AI can be used to run expenditure analysis reports before, during, and after sourcing. It can also provide demand breakdowns, market analysis, and supplier performance metrics in real time using internal and external data. This will not only help you streamline your business operations but also give you better insight into the weakest link in your supply chain and which specific aspect needs to be improved upon.
5. Maximize Your Warehouse Capacity
According to Supply Chain Dive, e-commerce sales will comprise a third of all retail sales in the next three years, as more brands (including brick-and-mortar businesses) embrace omnichannel sales. This entails an increase in demand and that competition for warehousing space will continue to grow in all types of distribution centers as well.
The ability to maximize your warehouse capacity is a must-have for any e-commerce business looking to prevent storage limitations. A few effective ways to maximize your warehouse space include seasonal storage (which is a useful method for storing products that only sell during a specific season), increasing space efficiency by extending your storage racks and reducing the width of aisles, and implementing a warehouse management system (WMS).
Adopting a WMS is a great option for those looking to maximize their storage space by using technology to suggest the best routes to pick out or store products. A WMS can also provide employees with automated pick lists that help reduce the number of errors and the amount of time wasted when collecting product orders to be shipped out to customers.
6. Implement New Technologies such as AI
As an e-commerce business, it’s important to keep up with new trends in technology, as the industry is constantly evolving. While larger brands are adopting automation through chatbots and AI to speed up certain processes, these options might not always be the right fit for you based on your products or budget.
For those who are still looking for ways to streamline their business model using technology, other relatively inexpensive tools are emerging for startups and small businesses, such as inventory scanner systems and barcode scanning technologies.
WMSs, as mentioned earlier, also offer transparency in the supply chain and help ensure that your products and materials move through your supply chain in the most efficient and cost-effective manner. A good WMS takes in consideration warehouse design, inventory tracking, picking and packaging of products, shipping, labor management, warehouse and dock management, and reporting. Many of these AI technologies are cloud-based solutions, which also integrate well with most 3PLs.
7. Focus on Client-First Customer Support
When first starting out, many business owners wouldn’t consider customer support a part of the supply chain. The simple truth that customer support is, in fact, a part of the supply chain can be seen when you consider that the sales process is not finished until the customer successfully receives their product. A recent survey conducted by Super Office reveals that 86% of customers are willing to spend more money on a product if they receive good customer service.
This is an important metric that shows why building an excellent customer support program is critical to driving your business forward.
Besides improving communication with your customers, establishing a client-first support system entails that you should also consider your customers’ feedback. This feedback can give you in-depth insights into what you’re doing right or wrong within your supply chain.
This can lead to improvements in various aspects—your website design, the product itself, or the start-to-finish shipping process—and in how the associated experience resonated with your customers.
Collecting data for analysis using surveys, interviews, and complaint reports will give you the ability to pinpoint where you need to improve your supply chain to enhance your brand’s overall performance and build a lasting reputation for years to come.
Leveraging Your Supply Chain for Exit
Regardless of whether you are just getting started with launching your first product or have been selling products for years in a brick-and-mortar store and are looking to build an omnichannel presence online, we hope that this guide will help you optimize your supply management processes.
The first step when building a successful e-commerce brand is to ensure that your supply chain strategy is well optimized, which, in turn, will give you a more stable foundation to continue to scale your business for years to come.
If you already have an e-commerce brand that you plan to fine-tune using some of the tactics we’ve covered in this guide, you may be surprised to learn that thousands of investors would be willing to pay you a large sum of money to acquire your business.
To check what your business is worth in today’s market, you can use our valuation tool to see how much you could walk away with if you choose to make an exit.
Not quite sure if now is the best time to exit your business and still looking for new ways to improve your brand before listing it for sale? Schedule an exit planning call with one of our business advisors today, and they will guide you toward improving your supply chain systems to get the most out of your business exit when the time comes.