How Supply Chain Management Can Make or Break Your E-Commerce Business


One of the most challenging aspects of running an e-commerce business is managing your inventory. Many startups, particularly those who are building a company for the first time, try to be the jack of all trades and handle processing on their own. However, as the business grows, keeping track of fulfillment becomes of a full-time job. Having a supply chain management firm is essential to operational efficiency, and going without one could be one of the most detrimental mistakes you could make as an e-commerce company.


A Deloitte study found that 79% of supply chain leaders reported “significant revenue growth” that was beyond industry standard. SCM best practices continues to evolve, and firms are coming up with better ways to drive profits, increase efficiency, and go greener. E-commerce businesses rely heavily on suppliers, and the need to manage supplier relations, contracts, and other information can make or break your business. Here are a few ways SCM can make your e-commerce business before you break it:


Supply Chain Management Boosts Customer Service

SCM can dramatically increase your customer service reputation. They ensure the right product and quantity is delivered in a timely fashion, every time. This strengthens the relationships you have with your customers and demonstrates your reliability as a company.


According to a RightNow survey, 89% of shoppers will stop buying from an online store if they have a single bad experience. This absolves you of repeat customer business, which make up the bulk of sales for e-commerce companies. Logistics and real-time visibility allow SCM to catch potential problems, quickly diagnose it, and come up with a quick solution that maintains high customer satisfaction.


Improves Your Bottom Line

Supply chain managers are valuable because they decrease the use of larger fixed assets like warehouses, plants, and transportation vehicles in the supply chain. Additionally, if product delivery can be expedited, cash flow will also increase and profits will be received quickly.


SCM knows one language: metrics. Manufacturing and logistical data will allow all of your business units to align. Standard metrics include inventory turns, total landed costs, sell-through projections, and other measurements that gauge customer satisfaction. Data is everything in the world of commerce because provides detailed insight into your company and ways you can improve.


Shipping Benefits

As e-commerce business continues to expand globally, buyers are able to order more products than ever. Shipping options should be able to keep up with the demand. Supply chain management systems use current logistics technology to help companies find the best ways to ship, while maintaining the lowest costs possible. New technological developments are constantly underway, making the process even more efficient.


Inventory Management

One of the quickest paths to failure for an e-commerce business is their lack of proper inventory management. Too much inventory could cripple cash flow, and too little could mean you miss out on important sales.


Tech startup Lumos experienced this firsthand. They were forced to pull their plug on their startup, and documented their failure, saying, “We had underestimated the work that goes into making a market-ready hardware product. We had overestimated the demand and utility of our product.”


Without supply chain management, e-commerce businesses may have to pay additional money to produce products quickly if inventory falls too low, causing them to lose customers in the process. SCM keeps track of shipments and maintain optimal inventory levels, ensuring you’re never too low on a particular product. Additionally, vendors are never easy to predict. A reorder from one supplier could take a few days, while another supplier could take a few weeks. This means orders would need to be placed at very different times and at different inventory levels.


Risk Mitigation

One of the key responsibilities for an e-commerce business is to manage risks responsibly. Supply chain management systems are able to identify critical risk factors with their suppliers or organizations. These risks could include compliance with operational safety and other applicable laws, or product quality. SCM organize risks and the potential internal and external failures. With this, companies are vulnerable and exposed to legal risks and liabilities. By planning ahead, you increase the chances of success, minimize expenses and maximize profits.