We’ve all learned how seemingly small changes to supply chains can have enormous economic effects.
Product and manufacturing shortages have brought entire industries to a standstill. Customers and retailers have had to change their expectations of product availability and delivery timelines. To manage your ecommerce business effectively and deliver a great customer experience, you’ll need to review and optimize your retail supply chain management processes.
Start by developing a thorough understanding of your current operations and business needs. Then, improve relationships with your suppliers and customers. As you go through these steps, you can uncover alternative supply options while continuing to focus on market demand and business goals.
Learn what defines retail supply chain management, what separates it from other aspects of your ecommerce business, the common challenges businesses face and how to improve your processes.
What is retail supply chain management?
The supply chain includes all processes related to your products’ flow from supplier to warehouse to its final location. Supply chain stages include procurement, warehousing and order and inventory management, as well as any other required systems or processes.
In retail, supply chain management can refer to everything from handling raw materials to the final delivery of the product. Ultimately, sound management allows your company to control inventory costs, maintain optimal stock levels and provide a positive customer experience. Quality supply chain management improves your business performance and creates competitive advantage, even if there are challenges along the way.
What are the challenges of supply chain management?
Managing your supply chain is not a simple task. Not only does it require careful attention to internal procedures and policies, but it calls for coordinated effort across vendors, suppliers and partners.
External factors such as shortages and rising expenses can present challenges. Companies can also face internal obstacles, such as poor inventory management or inaccurate demand planning. Business processes can be improved to address internal concerns, while careful planning and a thoughtful strategy can mitigate external issues that can’t be fully controlled.
Here are some of the common challenges retailers face with supply chain management.
Supply chain diversification
The pandemic made it clear that successful retailers can no longer afford to rely on one or two key suppliers to always meet demand. Delays in raw materials, manufacturing and shipping might be a problem for your usual suppliers, but having access to alternatives can help sustain inventory and provide a competitive advantage for your business.
A challenge within this challenge, however, is finding suitable alternative suppliers in a timely and cost-effective manner. Primary suppliers are usually the first choice for a reason, and other options will likely mean making sacrifices with pricing, fulfillment or product availability.
Accurate, timely forecasting is essential for ecommerce, especially when demand can change rapidly. Unreliable supply chains, slow production and other shortages can also limit your supply, making forecasting even more important.
In the past, demand forecasting could be based on a combination of real-time and relatively stable historical data, but widespread disruptions across industries have forced many retailers to replace data-driven decisions with intuition and guesswork. This change in approach can lead to inadequate inventory levels and missed opportunities for online orders.
Overselling can be a common issue for brands experiencing supply chain disruptions. Unexpected changes in demand, problems with supply or inaccurate forecasts can all leave businesses short on inventory. Once a stockout occurs, recovering to the appropriate level of inventory becomes an even greater challenge as typical sales cycles are disrupted and selling opportunities are lost to competitors.
Manufacturing and supplier delays
Most industries have been affected by manufacturing and supplier delays in the past few years. Some of these disruptions have been caused by systemic issues, such as factory shutdowns and shortages of material and labor. Even when suppliers address these problems to the best of their ability, they’re often falling short of previous capacity.
Remember that increasing cost is almost certainly going to be a factor throughout your supply chain. Higher commodity prices cause increases in the cost of raw materials, while labor, transportation and logistics adjustments can also drive up costs. Larger-scale financial considerations to consider include central bank interest rates and currency fluctuations.
In addition to rising costs, many product categories and industries are facing shortages, making it difficult to get raw materials or finished goods. Industries such as construction, automotive and furniture have been hit especially hard by labor and supply shortages and increased freight costs. Semiconductor shortages, for example, have affected manufacturers and sellers across the economy.
How to optimize your supply chain management process.
Optimizing your supply chain management process can improve your business operations, customer service and your relationships with suppliers. Here are some ways to improve your supply chain management.
Supply chain visibility
It’s important to have a broad and deep view of your supply chain and ecommerce operations, ideally from one integrated platform. This allows you to have a single view of your current state, make more informed inventory decisions and improve efficiency throughout your business.
Use an inventory management system to analyze stock levels, looking out for high levels of underperforming products or deadstock that is taking up valuable warehouse space and incurring associated costs. These software systems can also help you plan for strategic inventory storage in the event of future delays and track the effectiveness of your delivery and fulfillment practices.
Replace manual processes with a more efficient automated inventory management system. Transitioning to automated processes can bring significant and nearly instantaneous advantages. Not only are manual workflows time-consuming and inefficient, but the time and resources involved can be costly, too. Automation reduces the risk of error and the time and money spent resolving such issues.
When you automate and streamline processes, you can make the entire business more efficient, which can help offset potential supply chain disruptions. With an effective inventory management system, warehouse costs can be optimized for cost-effectiveness, and stock levels can be automatically set. Such a system can also help with demand planning, ensuring that you’re able to place orders at the right time and in the right volume.
Product and supplier analysis
It’s important to analyze the performance of individual products in addition to your sales channels and suppliers. When you can diversify your products and supply chain, you create opportunities to optimize your process and reduce costs.
Review product performance to find opportunities to expand top-selling products or categories with adjacent offerings. This helps you retain customers and even expand their buying with you. This calculated risk can add new inventory and attract a new audience while providing ongoing insight into consumer demand. At the same time, you can move lower-value inventory to focus on new avenues for growth.
There are a number of ways to reduce business costs and increase your profit margins. In fulfillment, this includes optimizing or consolidating processes and renegotiating rates. In warehousing, improved stock management processes can reduce costs through more efficient picking methods or getting rid of unsold stock. Other ways to control expenses include signing new or renegotiated supplier relationships, limiting overstocking and returns, and improving operational efficiency.
Whether dealing with unanticipated expenses, business inefficiencies or any other potential financial obligations, it’s imperative that you control expenses without sacrificing performance.
How to prepare and manage supply chains for the future
Improving the efficiency of your supply chain is an ongoing process. Regularly review your operations to find additional areas for learning and improvement. Use your supply chain strategy as a framework to measure progress and make appropriate adjustments.
Using an inventory management system to manage and automate your products enables you to scale your ecommerce business. It’s also an important step toward optimizing your supply chain. A total commerce solution that also includes aspects like order management, shipping options, multichannel listings and data-driven insights can jump-start growth and profitability.
Having a high-level perspective of your ecommerce business allows you to identify process gaps and unrealized opportunities. You can gain insight into each level of your business and continue optimizing workflows for the greatest return on investment.
No one has full control over every aspect of the supply chain. However, companies that regularly review and update their retail supply chain management strategies will be ready to anticipate and mitigate challenges. As you evaluate your current processes, learn more about overcoming supply chain challenges.