This is a guest post by Nathan Resnick of our partner Sourcify, a Product Sourcing School that teaches people how to source, manufacture, & sell their first product
No matter what type of eCommerce product you plan to sell, you must have a reliable supply chain. It doesn’t matter how innovative or exciting your products might be. If you don’t have a strong supply chain, your customers won’t be happy.
We live in a world of instant gratification, and sometimes, the simple ability to deliver a product faster than your competition is what makes the difference in whether or not you make a sale.
Unfortunately, while many eCommerce brands devote a lot of time to fine-tuning their website and marketing materials, the supply chain is often an afterthought. This can lead to several “newbie” errors that keep the company from operating as efficiently as it should.
When the supply chain becomes an afterthought, everything from manufacturing to order fulfillment can be negatively impacted. The end result is dissatisfied customers and a floundering eCommerce business.
The good news is that many of these mistakes can easily be corrected.
1. Not doing your due diligence when picking a vendor
When launching your eCommerce brand, you need to carefully evaluate manufacturers based on criteria like proof of production capabilities, consumer protections, market locations, certifications and experience.
Depending on the scope of your startup, you will also need to consider factors like the factory’s minimum order quantity and lead time. A vendor could seem like the perfect match, but if they require a larger order than you need (or can afford) or will have excessive lead time for an order, you won’t be able to get your products out on time and on budget. A low price may seem appealing, but you should never sacrifice quality for what looks like a great deal.
Even seemingly small details can significantly impact a potential vendor’s processes and delivery timelines. Factors like the number of production lines a location has or how many shifts are worked each day will have a direct impact on production capabilities.
Cultural factors could also come into play. For example, during Chinese New Year, there is an official public holiday that lasts for seven days. However, many factories in the country remain shut down for two weeks because employees live in villages far from where they work. Some factories remain closed for a full month.
Being aware of such seasonal closures will help you better plan orders so that you don’t experience unexpected shortages at critical times of year.
You should also make sure that potential supply chain partners operate in an ethical manner. You don’t want to find yourself in a situation like Nestle did in 2015, when the company admitted after a lengthy internal investigation that the fish for its cat food had been sourced using forced labor. Doing your due diligence now will keep your operations running smoothly, and help you avoid a potential PR disaster later on.
2. Working with too many vendors
In the long term, working with multiple vendors can help mitigate some of your supply chain risk. However, when you are first starting out, trying to navigate multiple vendors can actually create more problems for your product launch.
Even after choosing a manufacturing partner, your work isn’t technically done. You still need to take a proactive role in monitoring the supply chain process, ensuring that your orders are filled properly.
Product quality testing and other tasks must be given careful scrutiny to ensure that your product launches on time and that it lives up to the promises you’ve made to customers. This requires frequent communication with vendors.
Working through this process with multiple vendors is more complicated than simply doing the same thing twice. Different vendors have different systems in place, which will make things more complex (and potentially confusing) on your end.
Some manufacturing partners could feel slighted if they discover that you are using another vendor to produce the same item as them. This could undermine what would otherwise be the start of a strong partnership. When a vendor feels like they aren’t a priority to you, you’ll become less of a priority to them. Launching a product with poor vendor relationships is hardly a foundation for lasting success.
Instead, do your homework to find one vendor you feel you can rely on, and do what you can to cultivate a strong relationship with them. This will help your product launch go according to plan.
So when should you begin working with multiple suppliers? Generally speaking, it is better to wait for situations such as needing to increase production beyond what your current vendor can manage, or when you want to introduce a different product. Your business should also be in a stable position itself, where you can handle the additional overhead and resources that will be necessary to manage multiple vendor relationships.
Working with multiple vendors will give you greater flexibility if natural disasters or other issues create problems with one supplier. Comparing the output of two manufacturing partners based on criteria like defects, returns and delivery speed could also help you improve your products by shifting production to the higher-quality partner.
Even so, don’t go overboard. Too many suppliers will become increasingly challenging to manage, complicating your supply chain to a point where it becomes less efficient.
3. Neglecting customer service
Your company’s supply chain doesn’t end once your product has been delivered to the customer. Unfortunately, many startups assume that they completely understand what the customer wants, and that once a product has been delivered, they won’t need to interact with them again (except maybe to make another sale).
This is rarely the case. According to data from Statista, 62 percent of customers in the U.S. reported that they had contacted customer service within the last month. Obviously, this isn’t going to happen with every order that a customer places, but it still indicates just how frequently shoppers feel like they need extra assistance at some point in the buying process.
Quite often, these issues are directly related to the supply chain. In a time when many companies offer 2-day shipping or even same-day delivery, customers expect full transparency regarding the status of their orders. If a delay occurs, they want to know.
Of course, customer service can also come into play after an order is fulfilled. No matter how good your quality control processes are, there will always be customers who decide to return an order. Data from Invesp indicates that roughly 30 percent of online shoppers will return their products for reasons such as receiving a damaged product or even getting a product that looks different from what they expected.
You must have a solid customer service framework in place to manage this important part of the logistics process. Give customers multiple ways to contact you (such as email, phone or online chat). Make the returns process as easy as possible. Train your support staff to identify and resolve common pain points.
When you prioritize customer service as part of your supply chain management, you’ll maintain a better relationship with your buyers. Partner with delivery vendors who make the returns process easy with features like printable return labels. Make sure you have inventory management systems in place to track returns, order delays and other customer-facing supply chain issues.
4. Inadequate risk management protocols
If there’s one lesson everyone can take away from 2020, it’s that you should expect the unexpected. In a perfect environment, your supply chain would never experience any interruptions or setbacks.
But in reality, any eCommerce brand runs the risk of supply chain-related issues that can significantly disrupt operations if you aren’t prepared. You could experience product quality problems with your current vendor. Prices for raw materials could go up. Supplier issues could lead to production delays because the parts and materials needed to manufacture your products are in short supply.
Or, you might encounter a global pandemic that shuts down manufacturing facilities and changes operating hours and procedures for delivery services.
Despite being better prepared for a situation in which customers could no longer shop at brick and mortar stores, many eCommerce brands have struggled because of COVID-19. With many people losing work, customer spending changed overnight. People cut back on “non-essential” purchases like clothing to save for necessities like food.
In fact, an analysis from eMarketer notes that while the total eCommerce sector is expected to grow 16.5 percent in 2020, this represents a deceleration in growth, and is less growth than was initially anticipated before the pandemic.
Not all eCommerce risks are necessarily negative. A sudden spike in demand could also be viewed as a supply chain risk for brands. Once again, the COVID-19 pandemic provides a perfect example of this. Increased demand for items like toilet paper, hand sanitizer and cleaning wipes led to widespread product shortages as companies struggled to address changing customer needs.
eCommerce brands must evaluate the potential for these and other threats, and operate in a manner that will allow for a swift, effective response. There is no one-size-fits-all solution to risk management. Rather, eCommerce businesses must approach each issue on a case by case basis. Quite often, this will require implementing a series of short-term solutions until the crisis is abated and a “new normal” has been established.
A proactive approach to risk management will help your team better identify and respond to threats in a timely manner. An agile approach that allows you to adapt operations as necessary will help you weather potential storms that might otherwise sink your eCommerce store.
5. Assuming you can ‘set and forget’ the supply chain
After going through all the work of setting up their supply chain, startup founders can be tempted to kick back and relax, thinking that their work is done.
Like just about every other aspect of running a business, however, you can never just “set and forget” your supply chain. This is an area that requires consistent tracking and routine evaluation. Doing so will help you mitigate problems before they get out of hand, and even find ways to make your operations more efficient.
For example, while a vendor may do a good job fulfilling your needs initially, what happens if they start lagging in delivery time? Alternatively, if you store products in your own warehouse, you might find that changes in demand have resulted in a lot of empty, unused space. Or maybe you could face the opposite problem, and start running out of warehouse storage.
Identifying and making changes when needed will help you become more efficient and ensure that your supply chain is able to continue meeting the expectations of your customers.
Naturally, you must keep your costs and revenue in mind when making supply chain decisions. This requires making use of the data that affects your bottom line.
There is more to supply chain data than knowing current inventory levels in your warehouse. Raw materials and manufacturing costs, social media engagement, website traffic and buying trends are just a few of the factors that could impact your profitability and supply chain efficiency.
You cannot afford to silo your data, assuming that one area does not affect the other. All aspects of your supply chain are interconnected, and you must evaluate decisions accordingly. For example, if you decide to switch manufacturers for your products, be mindful of how ramp-up time could lead to temporary stock shortages.
Tracking data with your supply chain in mind will put you in the right mindset to proactively address any deficiencies in your current system. Using your data to know when to make changes — or when not to make changes — will help your business thrive in the long run.
Work Smarter for a More Efficient Supply Chain
Your eCommerce business will ultimately live and die based on the strength of its supply chain. So don’t let it become an afterthought.
By prioritizing your supply chain before, during and after product launch, you can have confidence in the quality of your products. You will be better positioned to fulfill customer orders in a timely manner. Ultimately, you will create the foundation your business needs to thrive — not just on launch day, but for years to come.