Extremely. Supply chain management helps you maintain optimum efficiency at all operational levels within your business. And it forms a key component of e-commerce which is why it’s so important. That’s the short answer.
For the long answer, keep reading this blog as we’ll break down some essential parts of the supply chain and discuss how e-commerce has changed supply chain management.
- Inventory management: A key component of the supply chain
- How e-commerce has changed supply chain management
- What’s required for effective supply chain management in the 21st century?
Inventory management: A key component of the supply chain
Traditionally, businesses would use their own warehouses to directly sell products to customers. Nowadays, many businesses adopt the risk-pooling strategy to reduce demand variability as demand is aggregated across different locations.
This helps with inventory management as the lower the variability in demand, the less safety stock is needed as a buffer for fluctuations.
The drop-shipping model is also a popular strategy, where you purchase products sold on your website from a third-party and ship it to the customer (rather than holding onto the products yourself).
Managing product availability and service level
Customer satisfaction is central for all businesses. In terms of e-commerce, you need to ensure customers can find and buy the right products at the right time. This includes ensuring your customers can always purchase in-stock items. Speed, ease of use and convenience are key.
If customers can’t experience these factors, they’ll likely go elsewhere - maybe to your competitors.
This is where efficient inventory management comes in. Invest in a Product Information Management (PIM) system as part of your overall commerce strategy and keeping product details (from imagery and descriptions to item and order status) up-to-date becomes a much easier task.
Monitoring customer happiness via reviews
Your business’ reputation can be measured by your customer reviews. When customers are researching products and companies, they often compare:
- Prices
- Product features
- Product quality
- Company reputation
The last two can be discovered via reviews which can often be the factor that sends customers towards your products…or sends them away. If you want great reviews, you need to ensure the right product (of the right quality) is delivered at the right time.
Keeping inventory at an optimum level
When your e-commerce business expands, so will your inventory. What you don’t want to do is increase your inventory levels to a point that you struggle to see what’s coming in (from suppliers and returns/exchanges), what’s going out and what you need more of.
Excess inventory can lead to dead stock and too little inventory can impact your customer satisfaction. Both scenarios can affect your cost efficiency and business overall.
So, the conclusion we’re drawing from these three points? Effective inventory management (which includes full visibility over stock) is essential for an efficient supply chain and the effective use of commerce.
How e-commerce has changed supply chain management
In the past, it was somewhat easier for brands to predict consumer demand, based on sales projections, reports, seasonal shifts and how much activity had been associated with auxiliary channels (e.g. the number of trade shows, events, catalogues etc) recently.
Because it was much easier to predict, it was possible to manually collect all this data.
Enter the internet and the rise of online shopping. Thanks to the internet’s (news outlets, social media etc) ability to amplify trends, volatility is now the norm. Plus, e-commerce has made it easy for consumers to buy anything at any time and any place.
Additionally, the ever-changing search engine algorithms can have a huge impact on your brand visibility. One day you’re showing up in the first page of search engine results pages and the next, you’re on the second, third or fourth page.
What we’re trying to say is that technological advances have dramatically changed the commerce landscape and will continue to do so. And that’s without considering the non-tech factors that can impact your supply chain like political changes, natural disasters, weather and pandemics.
What’s required for effective supply chain management in the 21st century?
So, effective supply chain management is essential for thriving in this new, increasingly unpredictable world. But what does that involve?
- Visibility - from supplier reliability to how your assets are performing on the shop floor, full visibility over your supply chain is crucial. The right supply chain management software can give you access to real-time data which helps you monitor supply and demand
- Automation - the bigger your e-commerce business, the less efficient your manual data collection process is. Consider swapping your hard copy books and spreadsheets for an integrated ERP that allows you to manage all that critical data in one location
- An e-commerce-ERP system integration - the right ERP can integrate with your e-commerce platform, creating a true centralised hub of critical business data. An ERP-commerce integration can lead to improved efficiency, productivity and more
There’s more to succeeding in the e-commerce landscape as a manufacturer
The points covered in this blog post are just a snippet of the bigger picture. From what the modern-day B2B customer expects to tips on creating the perfect e-commerce strategy, check out our guide to e-commerce for manufacturers below.
If you'd like to see a real-life example of a manufacturer embracing e-commerce and seeing huge benefits (improved efficiency, better sales and marketing efforts and more), click here.