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Make your e-Commerce supply chain an opportunity not an issue

Covid 19 empty shelves with a sign saying customer limits of essential items like bread and water

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Why read this? : We explore the opportunities and issues around the e-Commerce supply chain. Learn how to positively reframe the challenges and make your e-Commerce supply chain an opportunity not an issue.

Over time, some words appear together so often that it’s like they’ve been joined at the hip. Political scandal. Heated debate. Right-wing nut job. 

In recent years, another woeful word combination has joined this sorry bunch.

“Supply chain issue”. 

Remember the toilet roll fights when the pandemic started? The $30+/kg price of certain veggies when floods hit and crops were ruined?

Covid 19 empty shelves with a sign saying customer limits of essential items like bread and water

Even those saddos who queue outside Apple stores overnight to get the latest model in case they sell out and they have to wait a few days for the next delivery. Why? Because there might be a supply chain issue

Supply chain is particularly relevant for e-Commerce. If you sell physical products online, you need a supply chain plan to source, make, store and ship products. But supply chain is a little like IT in e-Commerce. You don’t think about it much when it’s working. But setting it up from scratch, or fixing it when something goes wrong means you need an e-Commerce supply chain plan. Which is our focus this week. 

What is supply chain?

The term “Supply chain” became prominent in the late 1970s and early 1980s.

It took a more holistic view of what businesses would previously have called “purchasing” and “logistics”. Buying materials to make products, then getting them out to customers. 

Supply chain thinking aims to optimise all steps in the “flow” of a product’s life. From raw material sourcing to what happens after the product has been sold and used.

Woman wearing a check shirt, yellow hard hat, protective goggles and gloves in a factory setting working on a piece of metal equipment

Some business models need very little supply chain input. For example, digital products like software or apps and certain services. Plus, if you’re only the “front end” of a sales offer like Print on Demand or drop shipping, you outsource most supply chain tasks.

However, let’s assume you sell tangible products that you make yourself.

Larger businesses typically already have a supply chain team. They handle “goods in” to your operational team and “goods out” to your retail customers. They’re often banished to some distant corner of the office (as they seem to specialise in noisy phone calls). The rest of the business only tends to interact with them when, yes, you guessed it, there’s an “issue”.

Smaller businesses may not have a dedicated team for this, but someone will look after those “goods in” and “goods out” tasks. 

Creative and operations “modes”

As per our creative thinking guide, most businesses have two working “modes”. 

“Creative” mode is more future-focused. It generates ideas to experiment with and drives innovation. Its goal is to improve the business’s effectiveness by improving what it does. 

“Operations” mode is about managing the current business by optimising processes and systems. Its goal is to improve the business’s efficiency by optimising how it works.

Creative and operations - diagram showing differences between two different ways of working

Supply chain’s day to day way of working is to support operations mode. However, as online selling is still new for many businesses, e-Commerce supply chain teams find themselves having to tap into “creative” mode. They have to deal with more variety and create and experiment with new ideas.

Variety and routine

The idea of variety versus routine has important implications for how you run your e-Commerce supply chain.

Variety has connotations of excitement (good) but also unpredictability (bad). Routine has connotations of predictability (good) but also of dullness (bad). 

The reality is you need both, but it all depends on context. Variety is good in certain situations. But routine makes large parts of our lives easier and better. Let’s look at some examples.

Example 1 - At the supermarket

Say you go to the supermarket to buy milk. You know where to find it from the last time you were in, right? (Usually at the back of the store so you have to walk past tempting offers on other products).

If they suddenly move it to another aisle, you’re annoyed, right? It takes you longer to find it. In that case, “routine” (the milk is where you expect it to be) is better than “variety” (they’ve moved it)

But let’s say you get to the milk section, and there’s a new milk on the shelf.

Supermarket central aisle with lots of displays and signage on view

It claims to give you stronger bones or shinier hair or whatever the latest claim the dairy industry has come up with. In that case, “variety” from the product’s innovation might interest you enough to change from the “routine” of buying your normal milk.

Example 2 - Brushing your teeth

Let’s take an even more everyday example.

When you brushed your teeth this morning, how much thought did you put into it? Very little, right? 

Turn the tap, wet the toothbrush head, squeeze the toothpaste on, brush your teeth, spit and rinse. That’s such an ingrained “routine” that your brain doesn’t waste much thought power on it. It just does it, right?

You don’t want variety here, that would be annoying.

For example, imagine you turn the tap and it’s lemonade, not water. And your toothbrush head is on a bendy spring so it moves when the liquid hits it. Plus, you get a random toothpaste flavour in the style of Bernie Bott’s Every Flavour Beans from Harry Potter. All this would add lots of “variety” to your teeth-cleaning experience. But is that what you want? No. You want an easy “routine”. 

The e-Commerce supply chain challenge

This brings us to where most challenges come with the e-Commerce supply chain. E-Commerce is naturally full of variety. It takes a long time to establish e-Commerce routines. Key examples include :-

  • Unpredictable sales forecasts.
  • Manual intervention – reducing touches.
  • Customer complaints. 

Unpredictable sales forecasts

New online sellers have to forecast sales with no historical sales data on which to base predictions.

Initial forecast accuracy is usually terrible.

You forecast too high and have stock gathering dust in the warehouse. Or you lowball it and go out of stock. (See our e-Commerce post-launch issues article for more on this). 

Supply chain teams hate inaccurate forecasts.

Person holding up an illustration of an angry face

It affects their planning and they usually cop the flack for it as a “supply chain issue”. They’re then pressured into getting rid of stock to reduce storage costs or cutting corners to get products out the door faster. Neither of these helps unless you’ve actively planned to make your products deliberately scarce. (See our advanced e-Commerce techniques article for more on scarcity).

Manual intervention - reducing touches

A common supply chain objective is to reduce the number of “touches” that happen to a product as it flows through the system. 

A “touch” is every time a person or part of the process interacts with the product.

Move the finished product to the warehouse – touch. Get the finished product off the warehouse shelf onto a palette – touch. Get the palette onto a truck and on the way to the customer – touch. And so on. 

Inside a courier delivery van, many different types of packages in cardboard boxes stacked up for delivery

Every touch adds cost from a supply chain point of view. That’s why supply chain teams try to eliminate and reduce touches. For example, shipping from one central warehouse to all customers is usually cheaper than moving products to regional warehouses and then shipping to customers. Fewer touches. Less cost. 

Every touch also increases the chances of something going wrong. It’s why supply chain teams love automation as machines are more reliable than people at doing repetitive tasks.  For example, a warehouse worker is more likely to pick the wrong product for an order than an optical reader machine is. 

In traditional supply chain models, trucks delivering to centralised warehouses know where they’re delivering to and that someone will be there to receive them. That’s not always true for the e-Commerce supply chain when you deliver to individual customer households. This inefficiency is a challenge for supply chain teams.

Customer complaints

When anything goes wrong in the e-Commerce supply chain, someone has to deal with it. That’s usually someone in supply chain. 

If it’s an issue shipping products to an online retailer, the supply chain manager responsible for that retailer is usually the first point of contact. 

For Direct-to-Consumer (D2C) businesses, it’s the customer service team who bear the brunt. In most cases, that team is part of the supply chain function.

Man in a suit sitting at a desk holding a phone and angrily shouting into the mouthpiece

You can mitigate some issues by adding FAQs to your website to answer common questions and by setting up processes for the team to handle common complaints.

But there are always exceptions. It’s having to deal with these (which distracts them from their goal of driving efficiency) which makes many supply chain managers wary when you rock up with your “let’s launch e-Commerce” plan.

The e-Commerce supply chain opportunity

It’s unlikely you’ll ever get supply chain teams to jump for joy about e-Commerce.

It’s always going to be more complex to handle and bring more challenges. 

However, there are a few things you can do to get them more on board with your e-Commerce plan.

These are based on framing it as more of an opportunity than an issue.

lady with arms up in the air and happy smiley face

E-Commerce drives future growth

You should plant the seed in your supply chain team’s heads early that e-Commerce helps deliver future growth

E-Commerce won’t ever completely replace traditional retail channels. But with the big boost it got during the pandemic, it’s solidified its place as a significant commercial battlefield for customers. 

Shoppers buy into e-Commerce because they want the ease and convenience it offers. Much of that comes from supply chain capability.

Small leaf growing in sandy earth

The capability to stock larger product ranges to sell online. The capability to deliver products directly to the customer’s doorstep. And the capability to promptly and efficiently handle any issues. 

So massage the supply chain team’s egos a little. Stress the importance of supply chain’s role in delivering the business’s e-Commerce competitive advantage. For example, Brad Stone’s biography of Jeff Bezos, The Everything Store, talks about how it was Amazon’s supply chain capability in delivering products reliably that put them ahead of competitors. (Rather than their expertise in web design or marketing).

Focus on the people opportunity

As we said earlier, supply chain teams are often forgotten until there’s an “issue”.

So, another fertile seed worth planting is that e-Commerce can help them raise their profile within the business.

It allows them to be part of an initiative where they can show their more creative side, solving future problems and bringing new solutions (and new growth) into the business.

It also gives supply chain team members opportunities to interact with functions they might not otherwise regularly interact with. To stretch themselves with new challenges and learn new approaches to areas like creative thinking and creative problem-solving. Rather than constantly dealing with day-to-day pressures, it’s a chance to shape what the future supply chain should look like.

You should highlight that the e-Commerce supply chain way of doing things doesn’t replace traditional supply chain routines. It should run in parallel, like a turbo booster for the business’s main engine.

E-Commerce and Supply Chain shared goal - delighted customers

Your e-Commerce and supply chain goals should come together to drive growth by winning more customers and making those customers happier. This common goal of delighting customers is key.

Share this customer-driven ambition with your supply chain team during the early stages of e-Commerce planning.

Land the message early that you’re not doing e-Commerce to disrupt their efficiency plans, but because there’s a genuine customer need for it.

Close up of a delivery driver handing over a cardboard box delivery to a customer

Recognise that it will cause issues, but these can be planned and prepared for. Show them the bigger opportunities to go after in terms of business, functional and personal growth. Get them excited about what e-Commerce can do for them. 

Position e-Commerce as an opportunity for supply chain, and people may, in time, stop worrying so much about supply chain issues.

Conclusion - e-Commerce supply chain

Our how to start selling online guide outlines 3 core requirements to do e-Commerce. Something to sell. Somewhere to sell it. And a means of handling payment and delivery.

If you sell tangible products online, you need supply chain support on each of these. 

Supply chain covers all elements from sourcing a product’s raw materials to that product landing with customers. If customers want to order online, it’s the supply chain team’s job to support that.

Covid 19 empty shelves with a sign saying customer limits of essential items like bread and water

The main business benefits of e-Commerce are that it drives a stronger customer connection, opens up new commercial opportunities and gives the business more control over the customer’s journey. As we’ve shown, the e-Commerce supply chain plays a vital role in helping you realise all of these benefits.

Check out our order to delivery guide and our order processing and last-mile delivery articles for more on this. Or get in touch if you need help optimising your e-Commerce supply chain. 

Photo credits

Empty Shelves : Photo by Wesley Tingey on Unsplash

Factory Worker : Photo by Chevanon Photography from Pexels

Warehouse : Photo by Ruchindra Gunasekara on Unsplash

Surprised Monkey : Photo by Jamie Haughton on Unsplash

Supermarket : Photo by Hanson Lu on Unsplash

Angry face : Photo by Andre Hunter on Unsplash

Angry Man : Photo by Usman Yousaf on Unsplash

Happy woman : Photo by Clay Banks on Unsplash

Leaf growing : Photo by Jeremy Bishop on Unsplash

Delivery – driver handing over package : Photo by RoseBox رز باکس on Unsplash

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