Key Points:
- Supply chain management is coordinating the movement of all goods, services, materials, and information involved in your business operations
- The main goal of supply chain management is cost reduction
- Inventory management is important because it lets you mitigate the dual risks of overstocking and under-stocking
Supply chain management is coordinating the movement of all goods, services, materials, and information involved in your business operations. This includes everything from the procuring of goods to managing inventory to fulfilling customer orders.
In other words, supply chain management is anything that enables you to stock, sell, and ship products to the customer (or back, in the case of returns).
The main goal of supply chain management is cost reduction. Your aim is to operate as cheaply and efficiently as possible, yet still provide customers with a transparent, reliable, and repeat-worthy experience. Optimizing your eCommerce supply chain helps to improve long term business performance in key areas, including:
- Customer satisfaction
- Conversion rates
- Customer retention
- Repurchasing
Third-party logistics providers (3PLs), warehouses, and fulfillment centers exist to help eCommerce merchants ace their supply chain. Easyship has helped thousands of merchants connect with our trusted eCommerce supply chain partners and cut costs around logistics management.
Today we outline the 10 key factors in supply chain management to watch as you grow your eCommerce brand.
Table of Contents
10 Key Factors in Supply Chain Management
Below are the key factors to keep in mind so that you know how to create an optimized supply chain management system.
1. Customer Satisfaction
The eCommerce supply chain ends at your customer’s doorstep. And these days, every online brand gets compared to Amazon. This means that speed, convenience, and availability of products are top of mind with ever-more demanding shoppers.
In fact, more than half of supply chain managers say that appeasing customers is a top priority. Considering these trends, your supply chain management strategy must end in a quality customer delivery experience.
This means you'll want to avoid stock-outs that frustrate buyers. You should be proactive about sharing tracking information. And after unboxing, your returns policy and process should be seamless so customers will return to your store. Ultimately, just look for ways to meet or exceed customer expectations when it comes to fulfillment.
2. Cost Reduction
The main goal of supply chain management is to save money. Doing so allows you to reinvest ‘money saved’ into parts of your business that can differentiate you from competitors.
Common areas to save money in the eCommerce supply chain include:
- Lowering your shipping rates
- Cutting labor costs (for receiving product, stocking, and filling orders)
- Avoiding loss from stock-outs or holding excess inventory
- Reducing product costs
- Negotiating with warehousing partners and fulfillment centers for better rates
Over the years, supply chain management done well leads to improved business performance. For example, if you save money with pre-negotiated discounted shipping rates – you could perhaps afford to offer free shipping. This would, in turn, raise your conversion rates and help you scale into more cost-effective operations.
3. Inventory Management
Inventory management is all the decisions you make around inventory. Buy less of a certain item? Buy more in a different size? Should that SKU be moved to a different warehouse to lower fulfillment costs?
Inventory management is important because it lets you mitigate the dual risks of overstocking and under-stocking. After all, you lose money on inventory you don’t sell. You also lose money when people can't buy an item you don’t have in stock.
A quality shipping platform doubles as an inventory management system. This is because a completed shipment will automatically update your inventory, helping you maintain perfect visibility of your stock. This allows you to make the best-informed decision on what to buy, when, and at what quantity.
4. Demand Forecasting
Demand forecasting is when you use historical sales data to estimate the future demand for a product. This gives you a sense of how much of a certain product you need to stock in your store.
If done well, forecasting demand ensures you stock enough of a certain item for a given period without overbuying. This way, you sell what you have but never take a loss on what doesn’t move
Use demand forecasting to help you make the best decisions around purchasing inventory.
5. Delivery Experience
The eCommerce supply chain ends in the delivery experience (unless you have returned). The more reliable your deliveries, the less likely you are to run into costly customer issues like returns, replacements, or support requests.
Here are five areas to pay attention to when it comes to deliveries:
- Speed: Customers today want and expect fast delivery. This means you’ll want packages to arrive in 2-3 days, or you risk upsetting your buyers.
- Notifications: Customers want to be updated about their orders in real-time. Implementing branded post-purchase communications lets customers stay informed, change delivery details, and keep your brand top of mind at every step of successful delivery (read: customer loyalty goes up).
- Cost: Free shipping is top of mind with online shoppers these days. Your business will need to offer free shipping or find appealingly affordable alternatives. Most brands who offer free shipping do so above a certain order value threshold.
- Transparency: Customers today want the ability to view every detail of their shipment. This includes delivery time, shipping costs, plus any duty and tax. Cart optimization tools like Rates at Checkout allow you to offer accurate rates with delivery times in your eCommerce store.
- Choice: People want to be able to choose their delivery options. According to Accenture, 2 in 3 online shoppers pick a retailer based on the availability of their shipping and delivery options. It’s best to give customers the option for cheap shipping as well as expedited delivery.
6. Packaging
Packaging is a significant cost center for merchants. It also has a direct influence on the customer experience. How you spend on packaging should align with your brand goals and customer expectations.
Many merchants use generic free shipping boxes. Others opt for custom but costlier packaging that enhances the unboxing experience. If you need to dazzle shoppers to get ahead, custom packaging might be right for you.
Meanwhile, sustainable packaging is creeping into the public consciousness. You may want to consider green packaging options as an alternate way to differentiate yourself from ideals-driven shoppers.
7. Inventory Placement
Courier shipping rates are largely determined by the distance to delivery. Meaning, the closer your inventory is to the customer, the less you pay for shipping.
Growing eCommerce brands use fulfillment centers (FCs) and third-party logistics providers (3PLs) to reduce fulfillment costs. This is especially important for international merchants who face greater shipping distances.
Allocating inventory to different warehouses via your suppliers is a great way to reduce shipping costs. For best results, forecast item demand by region and allocate accordingly. You can use your store analytics to evaluate your target geographies, then look for reliable 3PLs in these regions.
Aside from improving your supply chain management overall, diversifying helps to reduce the impact of common supply chain disruptions.
8. Fulfillment Centers and 3PLs
For merchants looking to scale growth, the right partners are essential.
Fulfillment centers (FCs) are facilities that coordinate fulfillment activity on your behalf. Simply route your inventory to these locations instead of your current operations space. When an order comes in, your FC takes care of everything. Supply chain management gets infinitely easier for growing merchants with the right fulfillment partnerships.
Keep these points in mind when searching for fulfillment partners:
- Find a 3PL who specializes in your product offering. For example, some 3PLs are set up to handle large items, while others specialize in smaller products or certain item categories like apparel.
- Make sure your warehouse management system integrates with your shipping platform. This way, you can monitor every shipment in real-time, and every shipment updates in your store inventory. Unless your order system can talk to your partner’s fulfillment system, you’re in for headaches.
- Choose a 3PL with a returns program that suits your needs. Since returns are inevitable in eCommerce, it’s best to partner with a 3PL who won’t gouge you for handling this essential process.
For help finding a trustworthy fulfillment partner, you can contact the international shipping experts at Easyship. We’re happy to connect you to our trusted global network of fulfillment centers at no charge.
9. Returns (Reverse Logistics)
Returns are increasingly common and costly for eCommerce merchants. This is because many customers expect the merchant to pay for returns. Meanwhile, more than 4 in 5 customers say that they’ll never buy from a retailer again if they’re asked to pay for a return.
Returns are a margin-munching headache in the world of supply chain management. The best approach is ensure returns are inexpensive for you, and seamless for customers. Here are a few ways to improve your returns process:
- Provide free shipping on returns
- Don’t charge for restocking
- Announce your returns policy on your website and post-purchase communications
- Include a prepaid return label in your package
- Make printing a return label easy
10. Cheap Shipping Rates
Shipping rates are a major cost center in supply chain management. To get the cheapest shipping rates, compare the rates from all available couriers. To ensure accuracy, come prepared with your average shipment weight, delivery destination, and delivery speeds.
Research is time-consuming but made much faster with a free shipping rate calculator to compare rates in seconds.
The best way to save on courier rates is to use shipping software like Easyship. By doing so, you get instant access to our pre-negotiated discount rates from all couriers like USPS, UPS, FedEx, and DHL.
Alternatively, you can try to negotiate with couriers directly. However, couriers only offer discounts to businesses that ship thousands of parcels per month. With Easyship, you never have to meet order minimums or create a contract with the courier. Instead, just access our discounted rates and ship instantly at up to 70% off.
Additionally, our fully integrated shipping platform saves you time on fulfillment with key shipping automation. Plus, our software integrates with all top warehousing management software. Supply chain management is much improved by using the right tools.
Supply Chain Management For eCommerce
Supply chain management sits at the junction of product availability, cost reduction, and customer service. The upstream processes of supply chain management trickle down to the customer. This means that while you try to slash costs around procurement and supply, movement and storage, and operations management – the customer experience should always be in the back of your mind.
Looking for a reliable supply chain partner to scale your eCommerce brand? Get in touch with Easyship’s team of global supply chain experts. We’re here to answer all your questions and connect you, free of charge, to your best-fit fulfillment partner.
If you haven’t created your free Easyship account, you can do so here.
If you found this article valuable, you might want to check out the following:
