Ecommerce companies live and die on their supply chain management. Getting products efficiently from manufacturers to customers is the lifeblood of any ecommerce business. Effective supply chain management leads directly to happy customers and healthy profits. When leveraged effectively, sound supply chain management practices directly strengthen the backbone of any ecommerce operation. Our blog will provide an in-depth look into supply chain management definition, supply chain management process, and objectives of supply chain management – unpacking a step-by-step playbook for managing the behind-the-scenes product flows fueling the front-facing customer experience.
Master these fundamentals, and sustaining an efficiently-run, rapidly-scaling ecommerce empire becomes well within reach. Miss the mark operationally, and even the flashiest marketing loses luster once customers get hit with lack of inventory, shipping delays, or incorrect items. Use the insights ahead to avoid such missteps and set your ecommerce venture up for supply chain success.
Supply Chain Management Definition
Supply chain management encompasses the strategy, execution, and oversight of all activities involved in sourcing products and materials, converting them into sellable goods, and delivering to end customers. For ecommerce, it also includes managing returns and providing great customer service. The global, interconnected nature of modern supply chains contains many variables, requiring coordination across a network of partners to optimize efficiency.
Think of the supply chain as an ecosystem that enables your ecommerce business to function. It is composed of all the partners that help you run your operations behind the scenes.
These partners typically include:
Raw Material Suppliers: The firms that extract, grow, or manufacture the initial inputs for your products. For a clothing business, this may be cotton growers or textile producers.
Component Manufacturers: Companies that assemble your products. Clothing firms work with garment factories, for example.
3PLs (Third-Party Logistics): The warehouses and transport partners that store and ship your finished, packaged goods to customers.
Sales Channels: How you sell products directly to customers, like your ecommerce site and marketplaces such as Amazon.
This end-to-end sequence of parties collaborating to source, build, distribute, market, sell and deliver your products to meet consumer demand is the essence of the supply chain. Effective supply chain management coordinates the tasks and hand-offs between these partners to minimize costs and maximize speed.
The goal is keeping operations running smoothly so customers simply see your product delivered as promised. Supply chain mastery prevents hiccups externally while accommodating customer needs.
Supply Chain Management Process
While supply chains differ across industries, the core chronological steps involved are surprisingly similar. Understanding this central process is key to properly managing each phase in your ecommerce supply chain.
The 5 main stages of the Supply Chain Management Process are:
This involves using historical sales data and market research to predict upcoming demand for your products. You determine what items, quantities, and variants customers will want so you can prepare accordingly.
Next you contract with suppliers and manufacturers to procure the raw materials and production capacity needed to create your products per demand forecasts.
At manufacturing facilities, your products get assembled by transforming raw materials into finished goods ready for sale. Quality control checks ensure defects are minimized.
Once produced, merchandise moves to storage warehouses or directly gets shipped to customers. You manage freight forwarders, carriers, warehouse staffing, and inventory levels to guarantee items arrive on-time.
For online retail especially, a significant volume of goods come back as returns. You handle refunds and process returned inventory back into saleable stock.
This sequence constitutes the core supply chain process, but optimal management actually requires collaboration across these domains. Adjustments must cascade up and down based on changing constraints and new data in real-time.
Objectives of Supply Chain Management for Ecommerce Business
Running an ecommerce operation introduces unique supply chain complexities with immense seasonal peaks, vast product varieties, and nationwide delivery needs. Mastering management across long supplier networks is mandatory to succeed.
The Core Objectives Include:
- Accurately Forecast Demand Trends: With endless options online, predicting which items will sell in what volumes, sizes, and colors is perpetually challenging. Planning budgets around precise forecasts limits waste.
- Maintain Lean Inventories: Holding excess stock ties up cash while risking markdowns. Carefully calibrating lean yet flexible inventory targets enables meeting demand fluctuations.
- Perfect Order Fulfillment: Customers expect flawless experiences – correct items shipped complete and undamaged to the selected location by the estimated delivery date. That’s a “perfect order”. Supply chains coordinate to drive this metric as close to 100% as possible.
- Guarantee Stock Availability: Nothing hurts worse than finding your desired product out of stock. Diversified supplier bases and strategic safety stock levels prevent stock outs during peaks or supplier issues.
- Support Omnichannel Operations: Modern customers buy across channels – online, in-store, via mobile. Supply chains must seamlessly integrate to enable flexible fulfillment options while tracking inventory centrally.
Acing supply chain management equates directly with ecommerce success. The above objectives steer firms away from disappointing customers and losing sales.
Importance of Supply Chain Management in Ecommerce
Mastery of supply chain management directly enables ecommerce success by:
- Maximizing Customer Satisfaction: Products arriving on-time and as expected is vital for positive customer experiences, word-of-mouth referrals, and repeat business.
- Improving Cash Flow: Smooth operations puts less cash upfront for inventory and materials, freeing up capital for growth efforts. Shortened collection terms also aid cash flow.
- Boosting Competitiveness: Increased efficiencies in producing and delivering products allows setting more competitive pricing.
- Expanding Flexibility: Adaptable supply chain relationships and processes permits adjusting to changes in consumer preferences.
- Mitigating Risks: Diversified manufacturing and logistics partners prevent over-reliance on a few suppliers that increases vulnerability.
Tips for Supply Chain Management Courses
For ecommerce professionals seeking to level up their supply chain management knowledge, the following course categories provide immense value:
- Lean and Six Sigma – Optimizing processes
- Logistics and distribution
- Strategic sourcing and procurement
- Inventory modeling and management
- Supply chain digitization – Leveraging future technologies
- Change management – Ensuring adoption of improvements
Combining hands-on simulated assignments from these courses with real-world supply chain exposure prepares current and future ecommerce leaders to elevate their business’ supply chain capabilities.
In today’s ultra competitive, increasingly transparent ecommerce landscape, providing customers exceptional products rapidly and reliably depends wholly on supply chain dominance – making it central to strategic visions. While complex with many interconnected elements across a multitude of partners, the supply chain management frameworks outlined empowers ecommerce owners to maximize control and value. With robust supply chain capabilities lowering costs while delighting customers, sustained growth and profitability follows.