E-Commerce Supply Chain Management

E-commerce supply chain management is one of the most important segments of any e-commerce business because it manages every part of the business which is from sourcing of products from the suppliers to transporting them to customers. Businesses can reduce their delivery time and overall cost by establishing a well-managed e-commerce supply chain.

In this article, we’ll learn about the definition of supply chain management in e-commerce, why is it important and the challenges faced by the business in doing so.

Table of Contents:

• What is Supply Chain Management in E-Commerce?
• Importance of Supply Chain Management in E-Commerce
• Components of E-Commerce Supply Chain Management
• Strategies for E-Commerce Supply Chain Management
• Stages of E-Commerce Supply Chain Management
• Challenges in E-Commerce Supply Chain Management
• Role of Technology in E-Commerce Supply Chain Management
• Conclusion

What is Supply Chain Management in E-Commerce?

What is Supply Chain Management?

Supply Chain Management(SCM) is the process of managing the complete supply chain of the business from sourcing of raw materials to delivery of finished goods. Supply chain management is used in businesses to make sure that the products reach their customers on time and in a cost-effective way. 

The main objective of Supply Chain Management or SCM is to maintain smooth communication between the suppliers, storage units and product retailers to improve efficiency and reduce cost and delays.

E-Commerce Supply Chain Management Definition & Meaning

Supply Chain Management in E-commerce is the process of managing all the operations, like logistics and delivery, of an online business. The E-commerce supply chain includes managing inventory, processing orders, transporting goods and handling returns. The E-commerce supply chain needs to be faster as it is different from traditional retail; customers expect faster deliveries in e-commerce.

In order to keep their customers satisfied, a good e-commerce supply chain must keep sufficient goods in stock so that orders can be shipped on time.

Importance of Supply Chain Management in E-Commerce

Supply chain management in E-commerce is important for various reasons:

• Multiple Suppliers: Working with only a single supplier can result in delays. An optimized supply chain allows to work with multiple suppliers which provides backup options.
• Customer Satisfaction: Improved Supply chain offers quick deliveries and correct order shipment, which keeps customers happy.
• Reduced Cost: A well-managed e-commerce supply chain helps keep track of inventory and logistics, which reduces the overall cost of the goods.
• Inventory Management: Supply chain management in e-commerce offers better inventory management, which can avoid inventory issues such as overstocking and product shortage.
• Better Profit: An optimized supply chain in e-commerce reduces the cost of storage and logistics, which results in higher profit margins.

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Components of E-commerce Supply Chain Management

Following are some of the components of supply chain management in e-commerce:

1. Returns and Refunds: Managing return logistics is also very important as it provides customer satisfaction.
2. Suppliers: Suppliers in a supply chain provide raw materials for production or finished goods.
3. Storage Units: Warehouses are storage units that provide space to store finished products before shipping to the customers.
4. Logistics: The selection of a suitable carrier for the shipment of goods is very important for running an optimized supply chain as it reduces overall cost.
5. Tools and Technology: Use of Tools for inventory management and tracking customers’ orders or shipment of the product.
6. Customer Support: Providing 24/7 customer support to assist customers with their queries and concerns.

Strategies for E-commerce Supply Chain Management

To manage an e-commerce supply chain, businesses need to plan and follow some strategies for efficient working of the supply chain. Following are some of the strategies that businesses can follow:

Use Multiple Suppliers and Warehouses

Businesses should not rely on a single supplier as it can cause delays in shipments or failure in demand fulfilment. Collaboration with multiple suppliers can provide backup options during the festive seasons when the demand is high. 

Similarly, businesses should not keep all of their inventory in a single warehouse as it may get destroyed by any natural calamity. Also, having warehouses in various locations, especially close to the high-demand areas, can support faster shipments and can ensure cost reductions in e-commerce logistics.

Use of Supply Chain Software for Online Stores

The role of technology in the e-commerce supply chain is very beneficial for businesses using an optimized supply chain. Supply chain software optimizes the order tracking and shipment process, which leads to quick deliveries. Automated warehouse systems can keep track of inventory and can alert businesses in case of low stocks. ERP systems can help in managing the financials of the business.

These tools and technology provide real-time updates on the operations and can help businesses make quick decisions on the supply chain.

Keep Clear Processes and Clean Documents

Businesses can ensure smooth operations by keeping a clear documentation of all the processes. These include proper inventory documentation at the warehouse, which can keep track of stocks, shipping details to ensure best practices in e-commerce logistics, order details for customer satisfaction, etc.

For example, digital invoicing systems can be used to track order details and keep records efficiently.

Cost-Cutting and Better Shipping

Businesses need to implement strategies for better shipping to reduce costs. Cost reduction in e-commerce logistics can be achieved through bulk shipping, multiple suppliers, warehouse locations, and by choosing optimized delivery routes. 

Better shipping can avoid e-commerce last-mile delivery challenges and can provide delivery optimization in e-commerce. Businesses can offer free shipping to customers if they choose better shipping options, which will encourage customers to spend more.

Real-time Tracking of Shipments

Real-time tracking in e-commerce logistics can avoid unexpected delays and provide insights to customers regarding the location of their products. This enables businesses to feel more secure in their shipments as it reduces most of the risks.

Tools like GPS and RFID tags can help track shipments and offer supply chain visibility. By implementing all the supply chain management optimization strategies mentioned above, e-commerce businesses can reduce the flaws in their processes and attain operational excellence.

Stages of E-Commerce Supply Chain Management

There are multiple stages in an e-commerce supply chain that are to be optimized by the businesses for a sustainable supply chain:

• Return Logistics: Returns need to be handled efficiently for customer satisfaction.
• Sourcing: Raw materials or finished products are acquired for the production of goods.
• Inventory Management: Keep sufficient stocks to meet customer needs.
• Warehouse Management: Selection of warehouse location and management of inventory stocks.
• Order Processing: Keeping sales records and handling online orders.
• Transportation: Shipment of goods to be handled efficiently to reduce overall costs.

Challenges in E-commerce Supply Chain Management

There are various challenges that businesses face while managing an e-commerce supply chain:

• Change in Demand: During festive seasons, there is an increase in demand that can result in a shortage of stock.
• Transportation Delay: Delays in logistics result in customers loosing trust in the brand.
• High Transportation Cost: Rising Toll and fuel prices can affect the profit margins.
• Return Logistics: Handling return orders can be expensive as it is a loss in profits.
• Global Supply Issue: Cross-border e-commerce supply chains are difficult to handle as they involve multiple regulations.

Role of Technology in E-commerce Supply Chain Management

The importance of the role of technology in supply chain management is known to every business. The E-commerce industry is no exception; below are some of the critical areas where technology has revolutionized e-commerce supply chain management processes:

• Using Inventory Management Systems, businesses can manage their stocks efficiently.
• Tools like Warehouse Management Systems alert businesses when the stock in the storage is low.
• GPS and RFID Tags can provide Real-time Tracking of shipments.
• With the help of Artificial Intelligence and Machine Learning, businesses can predict customer demand and keep their stocks accordingly.
• Security and Transparency of an e-commerce supply chain can be managed using Blockchain.

Conclusion

Supply Chain Management in E-commerce is important for businesses to work smoothly by managing operations and transportation of goods. The main objective of an e-commerce supply chain is to provide customer satisfaction and to provide higher profit margins to businesses. Working with multiple suppliers, selecting optimized delivery routes, and managing inventory and warehouses by using technology are key components of an E-commerce supply chain. Upgrade your skills with our supply chain management course online and enroll today.

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