E-commerce and SCM Integration

It’s fair to say that we live in a period when everything moves online. Technologies are taking over various industries (even those we expect the least) and literally turning them upside down. The way businesses are run has changed recently – and it has changed a lot. We believe that soon there won’t be a single operation one cannot digitalize. 

You may like it or you may hate it but the truth is that the global digital transformation has already started. And usual things will be changing drastically. 

As the commerce sector has moved online, customers have taken a more significant role in how businesses operate. Consumers used to go to stores to make purchases and now they have the merchandise brought to them. And the greater is yet to come. 

Even though e-commerce simplifies the customer experience, it still challenges business owners. In this blog, we will figure out why running an e-commerce business is not a piece of cake and what things will make you take your rose-colored glasses off. Well, we don’t mean to make you frustrated, disappointed, or whatever. We just want to make sure you are well-prepared and aware of all the potential issues. Ok, let’s get down to business. 

E-commerce supply chain in simple terms

Running an e-commerce business is not just about building an awesome website, adding a large product catalog, and selling goods. If only it were so easy. But the reality is different – with some boring and tedious yet important tasks. E-commerce also requires managing a whole lot of other essential components such as logistics, product configuration, infrastructure, secured payment gateway, and supply chain management. 

What is an e-commerce supply chain?

Basically, a supply chain encompasses resources, a system of activities, organizations, information, and the people involved in the process that starts with the procurement of raw materials and continues to the delivery of a product to a customer. Furthermore, an e-commerce supply chain typically oversees supply and demand, inventory tracking, and various distribution schedules. 

Let’s take a look at a simple example. You order delivery from your favorite restaurant. The supply chain starts with the people providing various products and ends up with the delivery person bringing your order right to your door. 

The supply chain formula looks as follows: production + sales + distribution + fulfillment process. A seamlessly working supply chain is essential. The maximum value can be obtained providing everyone involved in the chain coordinates and completes their tasks efficiently. This is when we move on to the notion of supply chain management and its importance. 

The role of an effective SCM

It goes without saying that the efficiency of your supply chain management (SCM) is a determining factor in your company’s growth and overall success. However, building a strategic supply chain takes a clear understanding of its every step as well as the key metrics.  

SCM is the process of managing the flow of goods and services, including the movement and storage of raw materials, work-in-progress inventory, and finished goods, from the point of origin to the point of consumption. It involves coordinating and collaborating with suppliers, manufacturers, distributors, retailers, and customers to ensure that the right product is delivered to the right place at the right time while minimizing costs and maximizing efficiency.

The central goal of SCM is to create a smooth and efficient supply chain network that can respond quickly to changes in customer demand and market conditions. This requires careful planning, monitoring, and optimization of every aspect of the supply chain, including procurement, production, inventory management, transportation, and distribution.

SCM consists of several stages which all play a pivotal role in operating a successful product-oriented business. 

1. Analyzing the demand and providing the required supply
2. Warehousing unites all aspects of receiving, storing, and distributing goods
3. Inventory tracking 
4. Customer’s order entry
5. Order management
6. Distribution, delivery, and returns handling

How your e-commerce business will benefit from SCM management

Addressing the resource, there are an estimated 12 million – 24 million eCommerce sites across the entire globe, with more and more being created every single day. Such great numbers explain why the market is highly competitive these days. 

According to Nasdaq, by the year 2040, it’s estimated that 95% of all purchases will be through e-commerce. Considering this statistical data and the well-known fact that now more people prefer easy shopping from the comfort of their homes, we can make a logical conclusion that efficient SCM with further regular improvements is a must-have. It’s crucial for a business’s long-term success. To prove this, we’ve compiled a list of several significant benefits of SCM. Take a look at them.

• Transparent operations. An optimized SCM system provides visibility and real-time data on your entire supply chain.
• Increased efficiency. E-commerce SCM can improve the efficiency of the supply chain by streamlining processes, reducing manual interventions, and increasing automation. This can result in faster order fulfillment, improved delivery times, and reduced operational costs.
• Minimized delays. Delivery delays, holdups, and logistic errors can affect a brand’s reputation negatively. An efficient SCM system ensures coordination and proper execution of all the activities and therefore on-time delivery. This boosts customer loyalty and leads to revenue growth.
• Seamless multi-channel selling. Having enough visibility into your supply chain, you can choose the most effective ways to combine different vendors, warehouses, and fulfillment centers to reach out to your customers wherever they are.
• Accurate demand forecasting. Your customers’ needs, warehouse’s capacity, product life cycles, and logistics capacity – all these factors are to be constantly monitored in order to understand the required demand and provide a sufficient supply respectively. 
• The immediate reaction to changes. Transparency is an integral part of an efficient SCM. This provides for smooth communication between every person involved in the supply chain – vendors, manufacturers, dealers, producers, and suppliers. A well-established contact and effective interactions enable quick responses to any fluctuations in demand.
• Permanent stock availability. Optimizing your supply chain means you always have full stock to meet your customers’ demands. This, in turn, adds up to the quality of your services and customer loyalty. 
• Business expansion. If you look forward to entering a new market, you first must analyze your business from the inside and make sure it is properly set up with all the operations running seamlessly. Powerful SCM is a crucial factor to consider here. 

A few smart techniques to optimize SCM

When it comes to e-commerce supply chain optimization, you may get overwhelmed with tasks that must be covered. There are so many aspects to focus on – how not get confused or completely lost? There’s no place for panic! If figuring everything out step by step, you will be able to cope even with the most challenging tasks. 

We also recommend you follow the basic instruction on how to build an efficient SCM and logistics.

Evaluate your current supply chain state

Conduct a thorough analysis to determine even minor inefficiencies in your processes, operations, and spending. This way you can uncover issues to figure out which of your vendors are causing holdups or delays.

Keep the essential indicators under control

KPIs do matter! These key performance indicators give you valuable insights into your supply chain’s cycles. The 5 KPIs you should focus on are 

• The fill rate indicates how well a company can meet customer demand for a particular product. It is typically expressed as a percentage and represents the number of units of a product that are shipped or delivered compared to the number of units that were ordered by customers.
• Inventory turnover shows how quickly inventory is completely sold and replaced. A high inventory turnover ratio indicates that inventory is selling quickly and efficiently.
• Supply chain cycle time indicates the time necessary to fulfill customer orders from the time the order is placed to the time it is delivered to the customer. The important condition is zero inventory. This indicator helps to assess your supply chain speed and flexibility.
• Cash-to-cash time measures the time required to convert inventory into cash. A shorter cash-to-cash cycle time indicates that the supply chain is generating cash more quickly and efficiently.
• The perfect order index measures the percentage of orders that are delivered without error or delay. A high perfect order rate indicates that the supply chain is operating smoothly and efficiently.

In case your KPIs require improvement, begin with developing a good strategy to fill all the gaps and make sure every indicator corresponds to the desired rates. 

A powerful strategy is everything

Based on your assessment, design a robust strategy. This will be your action plan on your way to optimized SCM and logistics. We’re not saying it’s going to be easy and fast. It rather demands a good deal of resources, time, and effort. However, the final result;t worth it. 

So when you’re at the point when all the essential information is gathered and a general evaluation is done, move on to implementing the following supply chain and logistics optimization strategies:

• Concentrate on your customers’ needs and expectations. Analyze what people want and give it to them. You can conduct surveys, study the current trends and the market state, examine your competitors’ offerings, etc.
• Prioritize total supply chain visibility. Make sure you can monitor inventory across warehouses without disruptions. Integrate your inventory management system with your order and supply management system to obtain insight into inbound and outbound logistics.
• Enhance your inbound and outbound logistics by reducing expenses and eliminating delays.
• Consider drop-shipping. Let a third-party cover such tasks as inventory and order fulfillment so you can free your time for management decisions like choosing reliable partners, and so on. 
• Ensure flexibility. That’s important to be able to quickly and easily adjust to the constant market changes. The industry always develops, and so should your business. 

Implement top-notch software solutions

You can take your business to the next level with the right software. Provided implemented properly, such advanced software solutions like an ERP, an OMS, or others will completely reshape your e-commerce supply chain. Optimize operational tasks through inventory and order management systems automation and cut your expenses. Besides, you can use the data you get 24/7 from inventory management software to maintain inventory control and optimize reordering processes. 

In the new realities, investing in software becomes not an option but a necessity. Ingenious technology and tools help to automate numerous monotonous tasks within inventory and warehouse management and logistics.

SCM digitization

As we have already pointed out, digital transformation is no longer taken as an advantage of market leaders but as an industry standard. If you want to stay afloat – you have to make sure your business meets the requirements. 

Emerging supply chain technologies fuel the digital transformation of logistics and supply chain processes. This is not only about streamlining workflows – bringing digitization to your business helps to withstand tough competition. Oh, and it’s not as daunting as it may first seem. 

Supply chain digitization is the process of using digital technologies to enhance and automate supply chain management activities. In layman’s terms, this process is focused on replacing manual or analog processes throughout the e-commerce supply chain with advanced digital solutions. 

Supply chain digitization is achieved primarily with software – whether it’s out-of-the-box, custom-made, or a combination of both. This includes the use of IoT, AI, ML, blockchain, and data analytics to streamline and optimize the flow of goods, services, and information throughout the supply chain.

Referring to a 2022 report by the APQC (American Productivity & Quality Center), the SCM digitization predominant driver is the demand for planning and forecasting followed by analytics and measurement. 

What aspects SCM digitization covers

SCM optimization always starts with addressing the key challenges. Of course, there is no solution suitable for every business – it varies according to numerous factors. Still, we can highlight 3 core areas involved in supply chain digitization: data management, process integrations, and the use of digital tools in manual processes.

Perks of SCM digitization

SCM digitization is the key to many businesses success. We’re not saying it’s a magic wand that can solve all your problems but it considerably impacts your bottom line. Transform your supply chain and logistics and enjoy the pleasing bonuses!

• High flexibility level. Predictive analytics or automating stock management processes help to timely identify upcoming challenges and therefore respond promptly. This allows for managing supply and demand fluctuations better.
• Automation. Reduce monotonous manual tasks as well as human errors through automation. This way you can free time for other important operations requiring particular attention. Additionally, automation speeds up working processes and thus adds up to operational productivity. 
• Connect your systems. Don’t say you still rely on ​​spreadsheets and email threads to reach the necessary information. It’s so time-consuming, and, to be honest, it’s silly to stick to this instead of digitizing and connecting all your systems and creating a single source of information every team member can access.
• Better decision-making. Often you have to make quick on-the-spot decisions, and guess what? Technology can assist you here! If selected and implemented appropriately, the supply chain tech stack can provide valuable insights for better decision-making. The data you obtained and analyzed from your digitized supply chain helps to better plan inventory levels, improve delivery times, cut expenses, boost sales, and reduce waste.
• Enhanced financial management. You must be looking for ways to manage your finances in order to avoid losses and increase your revenue. Digitization helps with this, too. You can get real-time visibility into inventory activity to avoid high stockout costs, or accurately plan inventory filling to lower inventory carrying costs and the risk of dead stock.
• Strong competitiveness. Digitization can be your life preserver in case of recessions and economic slowdowns. Numerous studies have shown that companies adopting digital solutions can not only cope with economic uncertainty better but also end up flourishing. 

Final thoughts

Digitization is the best way for companies to create more agile and resilient supply chains, optimize logistics, better able to respond to ever-changing market conditions and customer demands. A few years ago digitization was a favorable option for the market’s first movers and now this is a must-have for businesses looking forward to growth and expansion. There is no point in listing all the advantages again and again – we believe all the facts we’ve gathered and presented here proved the SCM and logistics optimization via digital solutions benefit. However, choosing the shortest road to your objectives is up to you. You should carefully consider all the specifications and weigh the pros and cons in order to choose the strategies, tactics, and tools that fit perfectly. Last but not least – it’s important to find experienced and seasoned professionals to guide you through the entire digitization process.