It wasn’t all that long ago that managing any supply chain was pretty easy. Most businesses operated on a smaller, more local scale than they do today, and if you managed to get a product to market, it would often stick around for a long time. Consumers didn’t have the scale of power and control they have today, either.
These days, however, planning the ins and outs of business fleets, deliveries, and supplies is a lot more complicated, thanks in the main to technology, consumer behavior, and global competition. A weak supply chain can see the enthusiasm for your product diminish almost overnight, or result in costs that become uncontrollable – while your rivals steal a march and claim your market share for themselves.
As you can tell, getting a grip on your supply chain – whether you are a small ecommerce store or a large-scale seller – is critical to your success. And avoiding the common roadblocks that can occur in your supply chain is the first step towards getting things right. But what are those obstacles, and how can you stop them from happening? Let’s take a look at the most common supply chain nightmares that could be affecting your business.
Misunderstanding your customer’s needs
The first step towards first class supply chain management is ensuring your business meets the needs of your clients. In short, it’s a question of giving them exactly what they want and avoiding the costs of giving them things they don’t care for.
Every business out there is probably guilty of doing this, whether they are in the service industry or are a seller of goods. Take delivery costs as an example. Let’s say you have an ecommerce store and promise next day delivery. The trouble is, you will expect your customers to pay for it in some way, either through raising your prices or adding on an expensive delivery charge.
The former will often result to you being undercut by your rivals. And the latter could see your shopping cart abandonment rates rocket upwards because your customers balk at paying over the odds for delivery. So the big question is – do your customers really need next day delivery? Or would they prefer a lower price? Unless you can guarantee your customers are demanding it, why bother giving it to them?
Failure to have a strategy
Once you understand your customer’s needs, you can start planning your objectives. And once you have your objectives, you can devise your business strategy. Both of these factors will combine with each other to inform your supply chain strategy that meets your goals and still meets your customer’s needs. But how can you tell if your plan isn’t working?
The good news is there are a few critical signs that should make it obvious. First of all, if you have no idea what your supply chain strategy is, or have it written down, you are likely to be doing the whole thing wrong.
Another aspect is that you view your supply chain as a simple combination of your purchasing and manufacturing/production, when it is actually so much more, including logistics, marketing, sales, and research. If you are getting regular complaints from your customers about the cost of your products and services, or just hear murmurings of dissatisfaction, it’s another big sign things are going wrong.
Finally, if your supply chain isn’t connected to the rest of your business, and played out as a separate department from anything else, it will be hard to adapt, fix, or evolve your business in any way whatsoever.
Long lead times
Now let’s get into the nitty-gritty of your supply chain – the relationship you have with your suppliers. This point is more relevant now than it ever has been, particularly if you are importing goods to sell in your country. For example, plenty of ecommerce businesses are importing goods from places such as China – Alibaba is a common resource – and then reselling them on Amazon.
On the face of things, this is a pretty good business model. You buy in cheap, sell on for twice the price or more, and take home a nice profit. But look a bit closer, and you will see that many supply chain issues involve long – and risky – lead times. You buy some stock, and sell out before you get a chance to order again.
But because it’s coming all the way from China, it could take anything up to 50 days to arrive – by which time you will have lost several customers, and desire for the product is waning. The trouble is, by the time you realize your problem, your orders are already on their way, and you cannot send them back.
Also, the further away you have to ship your goods, the more likely it is for something to go wrong. Piracy is a genuine concern, as are adverse weather conditions – and the end result is a business that doesn’t meet its customer’s primary needs. So, think carefully before going down the cheap labor route – it doesn’t always suit every business. The more local you can keep things, the more efficient your processes will be, if a little more expensive.
Failure to invest in new technology
Technology is there to make your life easier in business, so don’t overlook investing in new innovations for your supply chain. If a new piece of tech or software can help you save money without affecting your service levels, it’s worth it in the long-term.
You might find a piece of software which helps you drive down your customer returns, for example. Or, perhaps you might be eyeing up Amazon’s move into drone fulfillment that helps them improve their customer service by delivering products within a few hours.
In fact, some of the most exciting developments in the business world are occurring in the supply chain environment. It will almost never grab the headlines, but any company who uses transportation or suppliers should sit up and take notice. There is a lot of money to be saved, services to be improved, and better technology for your business needs.
Failure to outsource
A lot of companies – even those who specialize in pure logistics – are starting to cotton onto the fact that outsourcing particular activities can save a lot of time and money, and result in a leaner, more efficient business.
The trick here is to choose your partners wisely. Find third parties that can complement your business, and bring skills or efficiencies you don’t have to the table.
It could be outsourcing storage to a warehouse, for example, or using a particular delivery company to get your products out there. It might be handing over your invoicing to a specialist company that is more efficient and experienced in chasing payments than you are. The great thing about outsourcing is that both parties can benefit from a proactive partnership, and innovation and new ideas are never far from around the corner.
No measurement of performance
Of course, you can’t expect to improve your supply chain if you cannot measure your current performance. You will need to have an end goal in mind – as highlighted in your objectives – but also achievable and trackable targets to meet in every area of your supply chain.
Use key performance indicators – or KPIs – to see where things are going right or wrong. And finally, ensure that tracking those KPIs and consistently tracking them becomes part of your company culture.
As we discussed in the introduction, it’s easy for supply chain management to quickly become unwieldy, messy, and a nightmare to deal with. But with robust KPIs in place that are meaningful and relevant to your company goals, you will be able to keep your performance smooth and enjoy a better return on every supply chain investment you make.
Poor forecasting can cause an immeasurable amount of problems in your business, even if you are selling things on a small scale. We already mentioned the problems you might find when buying from countries or regions with long lead times, and it’s relevant in this case, too.
Robust stock control and reordering processes are absolute musts, or you could end up in a huge mess. For example, if your demand forecasting is too low, you will miss out on a lot of potential sales because you won’t have the right inventory. But if you estimate demand to be too great, you might be left with enormous levels of stock that never sells.
The trick to succeed in forecasting is to compare and track specific metrics, which should include historical data, availability of raw materials, product quality and delivery performance, for example. You should also ensure you are aware of market size and keep up to date with any changes – both will have an impact on your ability to control your inventory tightly.
As you can see, sound supply chain management can be a complicated beast, even for the smallest ecommerce businesses. But if you can put everything in place to test, track, and meet your overall business objectives, it will be the most important aspect of your ecommerce venture.
The tighter control you have over your supply chain, the lower you can charge your customers. And that results in a competitive advantage that will keep your company thriving for many years to come.