Why Supply Chain Management is Fundamental to eCommerce

Anyone with their finger on the pulse of the supply chain industry can sense we’re on the brink of a seismic shift: eCommerce. What once may have been viewed as a passing trend is here to stay, and supply chain managers have been quick to adapt to the changing tides. With eCommerce, many of the tried-and-true methods for organizing logistics are flipped upside down. Rethinking, evolving, and reinventing often factor into a company’s process as it makes the leap to digital. 

The importance of supply chain management to a slam dunk eCommerce business simply cannot be overstated. It’s mission critical. As companies drive forward into digital, they rely upon each spoke of the wheels beneath them to keep all flowing smoothly and efficiently. 

If keeping pace with the trends and opportunities of 2021 matters to you, then you’ll want to take note. eCommerce offers fresh possibilities to supply chain managers in spades, especially when recognizing just how central to eCommerce the supply chain really is. How does supply chain management play out in the eCommerce world? 

With an eye for Demand Driven methodology and resilience-building, we’re unraveling the connection between this red hot trend and the supply chain that keeps it burning strong. 

The Lay of the Land

Let’s take a quick look at the customer touchpoints along the eCommerce supply chain. 

Whether it’s procurement of raw materials, manufacturing, warehousing, inventory tracking, order management, distribution, or delivery, the supply chain is instrumental to the success of eCommerce businesses. At the same time, supply chain managers need to keep tabs on the future, constantly balancing supply and demand, making cost-effective decisions, and managing risk by taking proactive steps. Among those actions, prioritizing customer experience is of crucial importance. 

The traditional brick & mortar business transaction involves a customer walking into a store, browsing products in-person, perhaps interacting with employees, and then checking out at a register. The customer will unbox their purchase at home and make any returns by going back to the retail location.

The supply chain offers a whole different set of contact points with customers during the eCommerce shopping experience. The setting is now a website, in which the customer browses, clicks, and performs checkout with an online cart. After receiving an email confirmation with shipping information, a package is delivered to the customer and unboxed at home. Any returns are made through the shipping carrier. 

With eCommerce, customers engage with companies online via a website, but also during the delivery process. This means supply chain logistics are elevated in an entirely different way, and customer experience can be impacted at every point. 

Inventory Management Matters

eCommerce operates on a different wavelength than the traditional brick & mortar structures that we’re accustomed to. Supply chain management involves carefully outsourcing inventory to large wholesalers, rather than using company warehouses. 

Fulfillment centers have to be strategically placed near customers. Supply chain managers can determine where to locate FCs so that shipping is fast and free. These two adjectives hold a lot of weight in the eCommerce universe, and savvy supply chain planning involves allocating resources intelligently, so that inventory is accessible to those that want it most.

The ability to buy the right product at the right moment is central to digital retail success. If inventory isn’t properly allocated, customers will set their sights on a different company with the click of a button. An eCommerce company with staying power prioritizes supply chain management to ensure a service level of at least 95% of products at any given moment. 

Additionally, success means knowing where to draw the line. Excess inventory leads to waste of resources. When a Demand Driven approach is applied to supply chain planning, optimizing product inventory while cutting costs is much more attainable. 

The big picture: it’s all about finding that sweet spot between holding risk and stockout risk. Since eCommerce businesses are typically well tuned into data, they are often better able to find that happy medium. 

Never Underestimate the Power of Delivery 

Finally, consider the impact of the delivery experience in eCommerce.

There are four major elements that come into play:

• Speed 
• Communication
• Transparency
• Cost.

Supply chain management is integral to the success of the business overall, since delivery is a major customer touchpoint with the brand. Providing consumers with the option to exchange or return their goods or services is a given for eCommerce stores, which leads to an increased need for logistics.

How the rise of ecommerce has shaped supply chain management

Previously, businesses were able to manually collect data to predict consumer demand. This data was based on sales projections, seasonal shifts, reports, and auxiliary channels. However, as internet shopping became the new norm, this data was much harder to collect and use to make predictions. 

The abundance of eCommerce sites means consumers can easily buy goods and services anytime, anywhere. Moreover, the volatile nature of search engine algorithms can impact the supply chain by increasing or decreasing your brand visibility from day to day. Technology isn’t the only thing that can impact supply chain management processes for eCommerce stores. There are plenty of non-tech-related factors like natural disasters, politics, and pandemics (as the Covid-19 pandemic has demonstrated). 

Demand Driven for eCommerce

It’s never been more valuable to possess a Demand Driven skill set. With eCommerce ramping up, supply chain managers need to utilize all the tools in the toolbox to build strong, resilient networks. Make sure you’re prepared for all that the digital world has to offer.

You’re invited to connect with Demand Driven expert Patrick Rigoni today to schedule a free consultation!