Last week, we shared some tips on how to take your marketing dollars and productivity further during the current budget blizzard many businesses and consumers are facing. This week, we thought we’d expand our insights even further and address another obstacle many online retailers are dealing with right now: Supply chain challenges.
The e-commerce supply chain can create a lot of problems that affect a customer’s overall experience and a business’ bottom line. Recognizing these issues is only half of the equation. In order to fix them, e-tailers must understand how to eliminate any hurdles to keep shoppers happy and continue generating revenue. That’s where we come in.
In this article, we’ll break down five common supply chain challenges and how you can solve them to keep your business operating at optimal performance.
Challenge #1: Operational Inefficiencies
Supply chains are made up of a complex network of interconnected processes that make it easy for efficiency issues to occur along the way. Whether it’s a lack of visibility, inefficient transportation, or delays in delivery, supply chain issues can have a significant impact on a company’s bottom line.
Solution: Optimize your workflow.
Improving your supply chain is all about eliminating bottlenecks to make things run as smoothly as possible. E-commerce retailers can elevate their warehouse efficiency by implementing manufacturing procedures that simplify operations and reduce overhead costs. By maximizing your workflow, your finances can flourish. In fact, 79% of companies with high-performing supply chains achieve revenue growth greater than the median.
Here are some strategies for optimizing your e-commerce supply chain:
Identify problem areas.
The first step in supply chain optimization is pinpointing any deficiencies. Is your shipping process too complicated? Are order fulfillments taking too long? Is too much documentation causing delays? Engaging in a thorough overview of your entire fulfillment process and documenting the time spent at each makes it easy to detect any bottlenecks.
Once weak spots are identified, the next course of action is to streamline processes to lower costs, enhance the customer experience, and gain a competitive advantage. Plus, by detecting and addressing issues in a timely manner, you’ll be able to mitigate larger obstacles from arising later on.
Come up with a game plan.
Recognizing hurdles in your supply chain is one thing. Planning to rectify them is another. Ignore the problems, and you’ll be setting yourself up for future headaches, including a lot of disgruntled customers and unwanted expenses.
Instead, create a plan that will help you limit any risks and ensure that your products and any relevant information are always on hand when they’re needed. Not only will this alleviate any potential supply chain delays, but it will also ensure shoppers are left satisfied–which goes a long way to building your customer loyalty.
Some distinct areas where planning ahead can significantly increase supply chain efficiency include:
- Accurately forecasting product demand to ensure your online store has enough inventory to meet your customers’ needs
- Anticipating future capacity needs so you have all necessary resources to fulfill orders
- Making sure you have an efficient process for receiving and storing inventory that keeps access to all products accessible
- Having a contingency plan in place for quick responses to unexpected disruptions that could negatively impact the supply chain
New technology in e-commerce is unavoidable, which is why implementing it into your supply chain management is imperative. Today, 25% more retailers are investing in new systems to increase end-to-end visibility of their entire supply chain. This includes facilitating their employees ability to be able to focus on other high-priority tasks that need their attention.
To stay ahead of the competition and keep your customers happy, here are some areas where technology can be employed to increase efficiency:
- Centralized management software integrates across the various departments of your e-commerce business so they work together more proficiently. It also allows you to store important information in a central database that any department can access, increasing productivity throughout your organization.
- Automated order processing reduces the time required to fulfill orders, and can include automated picking, packing, and shipping systems, conveyor systems, and robotics. These systems are so effective, they can increase picking accuracy by a whopping 99.99%!
- Data analytics provide valuable insights into warehouse operations and help optimize your supply chain costs. By evaluating data on inventory levels, order volumes, and shipping costs, you’ll be able to identify areas for improvement in your warehouse operations.
- Automated barcode technology significantly reduces any delays and inefficiencies of manual documentation by identifying and tracking products and inventory. By scanning a barcode reader to retrieve information stored in the database, you’ll be able to increase accuracy, fulfill orders faster, and track inventory levels in real-time.
Leverage Third Party Logistics (3PL)
Many digital retailers overextend themselves by attempting to handle everything internally. This can lead to a lot of time wasted on mundane warehouse tasks that are redundant or arduous (or a bit of both). If your mission is to streamline your supply chain processes, outsourcing can make a big difference.
Working with 3PL providers helps optimize your supply chain by capitalizing on external assets and expertise. This can help reduce operating expenses associated with retaining and operating resources like warehouse and transportation fleets. Some common areas to outsource to 3PL in your e-commerce supply chain are:
- Inventory storage and distribution, including order fulfillment and return handling
- Order management, including order entry, invoicing, and payment processing
- Packaging services, including assembly, packing and product bundling, and labeling
- Transportation and freight management, including routing, tracking, and delivery
- Technology and integration services, including warehouse management systems (WMS), transportation management systems (TMS), and e-commerce platform integration
Challenge #2: Inaccurate Inventory Levels
Many digital stores struggle to manage their inventory efficiently, leading to stock-outs, overstocking, or inaccurate forecasting. Large brands, in particular, face more complications from having to keep up with a growing number of SKUs and barcodes.
According to Marketing Alternative Inc., US-based retailers sit on approximately $1.43 in inventory for each $1 of sales they make, tying up their capital which could be allocated to other valuable uses. With US retail operations having a supply chain accuracy of just 63%, finding solutions to manage inventory level successfully is paramount to maintaining and even surpassing customer expectations. (Source: PR News Wire)
Solution: Streamline your inventory management.
Improving inventory management protocol is key to reducing expenses associated with storing and managing merchandise. In fact, studies show that minimizing stock slip-ups can lower the overall cost of inventory by up to 10%, which is significant savings for any business. (Source: Supply Chain Digest)
Start by revisiting your inventory management processes. Do you have a thorough system in place? If not, create demand forecasts to estimate the amount of certain products your customers want to buy over a specific period. This calculation is determined by market trends and historical sales data, and will allow you to have enough stock of what’s popular while avoiding excess inventory of items that are less likely to sell.
Optimize your inventory management further by using inventory management software to monitor stock levels in real-time and provide insights that prevent you from wasting money on excess inventory or losing out on sales due to product shortages.
Challenge #3: High Supply Chain Costs
If you’re finding it difficult to keep your supply chain expenses down, you’re not alone. Whether it’s outrageous inventory costs, rising shipping rates, or packaging price hikes, everything seems to cost more these days. And the more your supply chain operations cost, the less likely you are to achieve your targeted profitability.
Solution: Implement cost-reduction strategies.
When it comes to reducing supply chain costs, there are two main areas to focus on:
Negotiating with suppliers.
Like all aspects of the digital retail world, suppliers and shipping companies are always adapting to attain, and retain as many customers as possible. Take advantage of this by negotiating better rates with them.
The best way to get the lowest rate possible from a supplier is by building a strong relationship with them. The better the partnership, the more likely you’ll be rewarded with the latest products and the best discounts. You can achieve this by communicating clearly and removing any potential confusion to ensure expedient order fulfillment.
Utilize an automated order management system.
Order management systems help e-commerce businesses elevate efficiency, abate errors, and improve customer satisfaction, all by simplifying the order fulfillment process. These systems typically integrate with your online store, brick-and-mortar stores and other sales channels to provide a centralized platform that enables you to identify potential opportunities for reducing inventory costs and managing stock levels more efficiently and affordably.
Challenge #4: Infrastructure Insufficiencies
Warehouse infrastructure is vital to the success of your e-commerce operations, but can be a huge pain in the pocket-book as your company scales. Choosing the right spot for your warehouses and then which warehouse to use for particular products can be the difference between quick-turnaround delivery times and an abundance of frustrated customers impatiently waiting for their orders.
Solution: Maximize your warehouse space.
When it comes to a well-managed warehouse infrastructure, these three approaches can keep things running smoothly:
Visibility allows you to view and track products within your warehouse at any given time. This empowers your managers to make informed decisions to refine inventory levels, reduce waste, and improve order fulfillment times.
By providing real-time insights, warehouse managers can identify potential issues before they become problems. Visibility also enables better communication between warehouse personnel, management, suppliers, and customers by providing live updates on inventory, order statuses, and shipment tracking.
Being able to adapt your warehouse infrastructure is critical to accommodate changing customer demands, order volumes, and delivery schedules. It also helps warehouse managers simplify processes by automating routine tasks to cut down on excess inventory and improve order fulfillment times.
Another way flexibility matters in your warehouse is within the physical space itself. By rearranging merchandise and adding or removing equipment, you’ll be able to expand your storage space, improve product visibility, and curtail the need for an expensive expansion or a pricey move to a larger location.
When your crew is able to access inventory and equipment easily, and perform tasks without being constrained, they’re more likely to perform their tasks better–and more safely.
The use of mobile technology can also improve accuracy and reduce errors by enabling workers to scan to barcodes and RFID tags on inventory items, verifying that the correct items are being picked, and automatically updating their status in the system. This greatly reduces the risk of errors and makes it easier than ever to get orders out the door and on their way to customers.
Challenge #5: Transport and Shipping Logistics
Even if your warehouse and inventory are set up perfectly, it won’t mean much if your products don’t get to your customers. Transportation is a complex piece of the supply chain puzzle that can also be quite expensive. Many e-commerce retailers fail to manage this properly because of a lack of logistics transparency. This can result in late deliveries and strained relationships with transportation providers who won’t view your business as a high priority.
Solution: Get your transportation logistics in order.
One of the most common logistic issues online retailers face is delayed shipments. If you’re also facing this problem, here’s what you can do to fix it:
- Partner with credible transportation providers with reliable track records of timely deliveries and excellent customer support.
- Establish clear communication channels with these providers that include regular check-ins and shipment updates.
- Add in some buffer time in your estimates to customers to account for unexpected obstacles, which will help you evade eleventh-hour dashes.
- Use GPS tracking to monitor the progress of shipments and identify potential delays.
Two other technologies are also recommended for managing your transportation and shipping logistics:
- A Transportation Management System (TMS) optimizes transportation operations by helping retailers plan and execute shipments, optimize routes, and track deliveries.
- An Electronic Data Interchange (EDI) streamlines communications between retailers and transportation providers by exchanging business documents, such as purchase orders and invoices, electronically.
Combined, these technologies can help retailers improve their transportation and shipping logistics, reduce costs, and improve customer satisfaction.
Supply Chain Reactions You’ll Want to See
The supply chain is an anchor in the stormy world of e-commerce. Without a strong sense of warehouse and inventory stability or security, you could be setting yourself up for a sea full of problems. Fortunately, you are now equipped with an abundance of strategies to optimize your supply chain and continue running a successful e-commerce business.
Remember, at the end of the day, it’s all about ensuring your customers’ needs are well-taken care of. Invest in your supply chain, and you’ll be committing to the success of your business through increased efficiency and customer loyalty, which all translates to higher revenue.
The Cherry on Top of the Supply Chain Sundae
From tailored product recommendations that increase conversions to personalized messaging delivered at the perfect moment, we can help you delight shoppers and generate more revenue–leaving you plenty of time to focus on other areas of your e-commerce business. While we’re not in the business of supply chain management, we do know a thing or two about keeping customers happy.
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