Supply Chain Management in ecommerce is essential for ensuring operational efficiency, consumer satisfaction, and business profitability. It involves managing the entire flow of goods and services from suppliers to customers.
Businesses must assess the right Key Performance Indicators (KPIs) and develop effective strategies that enable them to attain success and optimize their entities within the supply chain industry.
This guide explores the significance of supply chain management in ecommerce, lists key KPIs, and shares 10 tested ecommerce supply chain strategy to streamline your processes.
What is Supply Chain Management in ecommerce?
Supply Chain Management in ecommerce is a systematic process that coordinates different activities such as procurement, inventory management, order fulfillment, logistics and returns management. The goal is to optimize the delivery of products to customers in an effective, efficient, and cost-effective manner while maintaining a focus on quality.
Ecommerce Supply Chain Process
- Procurement: The acquiring of raw materials or finished goods.
- Inventory Tracking: Keeping track of stock levels to meet demand without excess inventory
- Order Fulfillment: Picking, packing, and shipping customer orders
- Logistics: The transportation of goods and services through the supply chain.
- Reverse Logistics: Process of return, exchange, and refund.
The Importance of Supply Chain Management in Ecommerce
- Enhances Customer Experience: Quick deliveries and correct order processing enhance satisfaction.
- Cost Efficiency: Minimize waste, storage costs, and operational inefficiencies
- Scalability: Allows for easy growth and expansion in the market.
- Competitive Edge: An optimized supply chain helps businesses differentiate themselves in a competitive market.
Top Ecommerce KPIs to Track
Tracking ecommerce KPIs is essential for measuring the performance of your supply chain. Here are the most important ones:
1. Order Fulfillment Cycle Time
- Definition: The time from when you receive an order to when you deliver it.
- Why It’s Important: Impacts customer satisfaction and operational efficiency.
2. Inventory Turnover Ratio
- Definition: How often you sell and replace stock over time.
- Why It’s Important: Indicates how well inventory is managed.
3. Order Accuracy Rate
- Definition: The percentage of orders delivered correctly.
- Why It’s Important: Mistakes lead to returns and diminished customer satisfaction.
4. On-Time Delivery Rate
- Definition: The percentage of orders delivered on time.
- Why It’s Important: Fosters trust and customer loyalty.
5. Shipping Cost per Order
- Definition: The average shipping cost per order.
- Why It’s Important: Affects profitability and pricing strategy.
6. Return Rate
- Definition: A proportion of orders that the customer returns.
- Why It’s Important: Returns running high indicate potential issues with product quality or descriptions.
10 Ways to Improve Ecommerce Supply Chain Strategy
This important part of this guide lays out 10 actionable ecommerce supply chain strategy to help improve supply chain management in ecommerce. These strategies enable you to streamline operations, meet changing customer demand, and achieve sustainable growth. These are useful for all businesses, from small online stores to large enterprises, aiming to optimize their operational costs and maximize profit.
1. Leverage Advanced Technology
- Automation and tracking of the process with tools like warehouse management systems (WMS) and enterprise resource planning (ERP), etc.
- Make use of Artificial Intelligence (AI) for demand forecasting.
2. Focus on Last-Mile Delivery
- Work closely with local delivery partners for fast and accurate last-mile delivery.
- Utilize a real-time tracking system to keep customers updated.
3. Optimize Inventory Management
- Minimize Holding Cost By Implementing JIT: Implement just-in-time (JIT) inventory systems to minimize holding costs.
- Employ predictive analytics to ensure that stock levels match demand predictions.
4. Build Strategic Partnerships
- Identify shipping partners or suppliers that you can rely on so that you can continue to fulfill orders while minimizing interruptions.
5. Enhance Reverse Logistics
- Have stand-alone processes for handling returns and refunds.
- Track return reasons to improve when necessary.
6. Prioritize Sustainability
- Go for environmentally friendly packaging materials
- Make delivery routes more efficient to minimize carbon footprints.
7. Expand Your Supplier Network
- Diversify your risks by building relationships with more than one vendor—don’t put all your eggs in one basket.
8. Train Your Workforce
- Invest in new training programs so that your team can adequately take advantage of modern tech and continue to evolve with supply chain trends.
9. Use Data-Driven Insights
- To consistently review KPIs for insights into flaws and opportunities to optimize.
10. Continuously Monitor KPIs
- Conduct regular performance reviews to monitor progress and adapt strategies as necessary.
FAQs: Ecommerce Supply Chain Strategy
Why is timely deliveries a big deal?
Timely deliveries improve customer satisfaction and increase trust in your brand. Timely deliveries improve customer satisfaction and increase trust in your brand.
How do I lower my shipping costs?
Negotiate with carriers, utilize regional warehouses, and streamline delivery routes.
How does ecommerce supply chain strategy impact the customer experience?
An effective ecommerce supply chain strategy directly enhances the customer experience by ensuring faster delivery, accurate order fulfillment, and seamless returns. It builds trust and loyalty by meeting customer expectations for reliability and efficiency.
What is reverse logistics?
Reverse logistics involves managing returns, refunds, and exchanges efficiently.
What tools make inventory management easier?
ERP tools, warehouse management systems (WMS), and predictive analytics software.
Is there a better way to mitigate order confusion?
Things like quality checks and automated systems for order picking and packing.
Why is supplier diversification needed?
It mitigates risks from supply chain disruptions.
How does Sustainability play a role in SCM?
Sustainability practices will help reduce the impact on the environment and also help create a better brand image.
Inventory turnover ratio: what is it?
A key performance indicator (KPI) that gauges how fast stock can be sold and replaced during a certain period.
What metrics should I use to measure supply chain performance?
Keep track of relevant KPIs like order accuracy, fulfillment speed, and shipping cost per order.
What is the role of automation in supply chain efficiency?
Automation minimizes manual errors, speeds up processes such as order picking and inventory updates, and helps with real-time data to make informed decisions.
Conclusion
Ecommerce supply chain strategy holds the key to providing great customer experiences and driving operational efficiency. This helps businesses streamline their supply chain processes in an efficient manner to scale at minimal costs when monitoring the right KPIs and implementing these 10 strategies.
By investing in technology, emphasizing sustainability, and always having an eye on performance, you can maintain a competitive edge in this busy market.
Start today — review your current supply chain processes with Qodenext and make improvements using data.
