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Logistics & ops
/ 4 mins
Nov 7, 2023
Stressed by market shifts, changing consumer demands, or disruptions with your supply? Struggling to keep the right amount of inventory?
A good supply chain profitably delivers quality products while ensuring customers are satisfied. Here’s how to optimize yours and bridge the gap between supply and demand.
I consulted David Reifschneider, a supply chain expert with 20+ years of experience in managing supply chains, fulfillment, and transport operations for the likes of Amazon, Walmart’s e-commerce offering, and now for OpenStore’s 50 e-commerce brands and storefronts.
What is supply chain management? It’s the processes and partnerships that enable your business to meet the demands of your customers.
Depending on your business, supply chain management (SCM) involves manufacturing, sourcing, procurement, warehousing, inventory management and tracking, fulfillment, and distribution.
Supply chains are particularly sensitive in e-commerce if you don’t have a physical location for manufacturing, warehousing, or inventory management.
More than just logistics, supply chain management touches on every aspect of a product’s journey.
SCM ranges from anticipating product demand and assessing material needs, to evaluating costs and the potential of manufacturing, shipping, or third-party logistics partners:
Suppliers are responsible for procuring raw materials or finished goods that are then sent to the manufacturing facility or directly to the warehouse.
Warehouses are where inventory is housed and managed until ordered by customers. Effective inventory management is vital at this stage to ensure optimal stock levels and efficient order processing.
Fulfillment centers receive products when an order is made. Items are packaged and prepared for shipping. Warehouses can also double up as fulfillment centers.
Carriers like FedEx, DHL, USPS, or UPS transport goods to customers.
Customers are the final stage of the e-commerce supply chain. Here, there's always a chance of returns and the need for reverse logistics.
More on providers for each later.
A strategic and functional supply chain enables you to react quickly to market fluctuations and customer demands and grow your business.
Reduced operational costs over time with even minor cost savings in packaging, flexible warehousing, or bulk shipping discounts.
Greater revenue growth against competitors.
Fewer delays and higher customer satisfaction, loyalty, and conversions. Most online shoppers expect products to reach them in two to three days.
Better decision-making from visibility across all processes.
Ability to sell on multiple platforms.
More accurate sales forecasting based on market needs.
Clearer insight into stock availability.
Forecast product demand based on seasonal and market trends to reduce the chances of shortages or overstocking.
Audit your supply chain. Gather your inventory, sales data, your balance sheet, and your cash flow, profit and loss statements. Are your operations profitable? Are there any disconnects between carriers and distributors? Highlight any areas of improvement you notice. Understand the cash flow required for your supply chain operations.
Consider inventory management software to understand real-time stock levels, track SKUs as you scale your business, product locations, and to manage replenishments. Track your inventory diligently to know when to restock to avoid stock-outs or a surplus.
Plan for reverse logistics to allow for the flow of goods from customers back through your reverse supply chain for customer satisfaction and retention. Returns are inevitable, but you can turn them into upsell opportunities.
Organize your warehouse methodically for efficient stock tracking. “Use space as needed and resolve slow-moving SKUs since you usually pay for space at 3PLs. Manage labor strategically,” David shares.
Stay flexible with your supply chain strategy. While planning is crucial, preparing for unforeseen disruptions like production halts or global crises is not always possible. The same applies to any holiday season inventory preparation.
Consider dropshipping for new product launches to decrease your financial risk and time to market.
Automate order processing with apps to send real-time confirmation emails, update inventory, and forward orders to suppliers or fulfillment centers. Eliminate manual tasks to cut down lead time and speed up shipping and fulfillment.
Think about investing in a warehouse management system for smooth product identification (with a barcode system) and dispatching, especially if you operate from multiple warehouses.
“Consider a fulfillment center instead of a warehouse if your needs have evolved beyond simple storage or pick and pack. Many fulfillment partners can handle more complex processes like kitting, subscriptions and other value added services,” David offers.
If you meet the requirements, you may want to outsource to a third-party logistics company (3PL). Whether you leverage traditional fulfillment or dropshipping, 3PLs can handle most supply chain stages including inventory management, shipping cost negotiation, and reverse logistics, freeing up your time for other essential business operations. "All parcel contracts are negotiable, so never accept commercial pricing or the first iteration of a proposal," David advises.
Save time with a comprehensive e-commerce management service for all your SCM needs. Most companies will manage fulfillment, cross-selling, your catalog, customer support, webstore improvements, and marketing.
If you use Shopify to run your business, then consider handing off your store’s management to OpenStore Drive and receive guaranteed passive income payments for a year, while you take time off.
Turn your Shopify business into passive income
OpenStore analyzes your store’s performance to calculate your monthly payments.
42 years of logistics experience to enhance your Shopify store's fulfillment process. Comprehensive guide of Shopify 3PL options —...
Without the hassle of complex fulfillment, dropshipping is a common choice among early entrepreneurs.