In the wake of the eye-opening COVID-19, people started to rethink how they do business. E-commerce retailers are beginning to look into their supply chains and focus on building more resilient processes.
Not only did the global disruption of everyone’s lives shift perspectives, but a recent event in the Suez Canal had business owners reconsidering their supply chains, too. Back in March this year, a massive cargo container ship became lodged in between the narrow water passageway, leading to the disarray that caused significant delays for several businesses.
From health problems to transportation issues and everything in between, our global supply chains are not as foolproof as people thought they were. E-commerce retailers are opening their eyes to the many ways supply chains can be improved, and they are starting to fix the problems by building more resilient supply chains.
But how are they building resilient supply chains? What does that mean exactly? Let’s explore the many ways e-commerce retailers are building more resilient supply chains in 2021.
The Weaknesses Of Supply Chains Exposed By The Pandemic
The outbreak of COVID-19 made us view many aspects of life in a different light. This is especially true when it comes to e-commerce supply chains. The pandemic caused a major scarcity.
Many different necessities were sparse and difficult to find, from toilet paper and N95 masks to cleaning supplies and healthcare-approved gloves. There wasn’t enough of everything to go around, and this reigned true for businesses as well.
For companies that were lucky enough not to shut down entirely during the pandemic, scarcity was a significant problem. Without enough products or materials to work with, manufacturers faced difficulties as they attempted to meet impossible targets and deadlines.
These delays started with manufacturers and trickled down the pipeline, ultimately affecting business owners and e-commerce retailers. Additionally, the demand for items was altered drastically. As a result of lockdown orders and stay-at-home restrictions, people had to work remotely.
However, this wasn’t an option for everyone, and many people lost their jobs as well. With fewer people working and bringing in income, fewer sales were being made, which reflected a significant drop in demand.
The closure of many businesses, whether temporarily or permanently, didn’t only affect employees. Employers faced hardships, too. For example, numerous warehouses had to close their doors, meaning they were not in business and couldn’t fulfill the orders of companies still in operation, further impacting the ability of e-commerce retailers to accomplish their own targets.
All in all, the pandemic not only caused serious setbacks for businesses but also exposed pre-existing weaknesses in supply chain management processes. Now, it’s time to focus on how to build resistant supply chains by applying what we learned from COVID-19.
The Definition Of Supply Chain Resilience
To understand how e-commerce retailers are building more resilient supply chains, it’s best to first look at the definition of supply chain resilience. In essence, the resilience of supply chains refers to how readily a supply chain can recover from unforeseen or unexpected circumstances, most notably delays.
If the debacle in the Suez Canal has taught e-commerce retailers anything, it’s that supply chains are susceptible to mistakes and accidents that lead to long-term effects and disruptions in business. So, as a way of growing from experiences and bettering their procedures, these retailers are taking measures to enhance their supply chain’s ability to bounce back faster.
The three ways that e-commerce retailers are building more resilient supply chains are as follows:
- Improving the demand planning process
- Spreading their total inventory across various distribution sites
- Working with more than one supplier at once
Improving The Demand Planning Process
One of the best approaches to building more resilient supply chains is to improve the demand planning process. In business management, demand planning refers to making predictions about the demands companies can anticipate for various inventory. It’s essentially a way of understanding the relationship between supply and demand.
By forecasting the demand their business is projected to experience, e-commerce retailers can plan accordingly. It enables them to order enough supplies to satisfy customers, but not too much to the point of drowning in excess inventory.
E-commerce retailers can make predictions about the anticipated demand they’re about to experience and forecast demand accurately by reviewing data they have collected over time. By looking at data in real-time and analyzing inventory levels, e-commerce retailers can review these data points and figure out how they can best optimize their inventory.
The inventory logistics provide e-commerce retailers with insight on whether they should carry buffer stock, which has shown to heighten the resiliency of supply chains. However, you wouldn’t want to order buffer stock to the point where you are no longer making profits because this will negate your efforts in the first place.
Essentially, e-commerce retailers should review data surrounding supply-and-demand values. From there, it is important to maintain a balance that prevents stock from running, thus, risking the company’s ability to supply products in relation to demand. However, remember not to cut into your profit margins.
Spreading Total Inventory Across Various Distribution Sites
As you plan the inventory process and start thinking about expanding your list of suppliers, it’s to make sure you always have enough—not too much—supply on hand at all times, and it’s also essential that e-commerce retailers don’t rely on only one distribution site.
The pandemic is not the only possible issue that could threaten to damage your supply chain process. It could be anything. Consider natural disasters as a more typical example of problems that can affect supply chains.
Imagine storing all of your company’s inventory in one place, and that one place happened to be a warehouse along the coast of a southern state in the United States. What would you do if a tsunami struck the warehouse and destroyed the building along with everything inside of it?
The effects would be catastrophic because all of your inventory would be gone, which could very easily translate into your business being completely destroyed. Therefore, instead of putting yourself in a position where your inventory is collectively located in one place, spread your total inventory across various distribution sites. Do not rely on one location to hold, protect, and house your inventory.
Look into setting up inventory in multiple fulfillment locations around the country. You could even venture into a more global market and seek out international fulfillment locations all around the world. With more than one warehouse or distribution center, your business will be able to adapt much more easily.
Also, shipping delays in one part of the world or other disruptions in the flow of business will not be as impactful because you could simply turn to one of your many other fulfillment centers in the meantime.
Working With More Than One Supplier And Carrier At A Time
Similar to spreading inventory across multiple locations, e-commerce retailers can build more resilient supply chains by working with more than one supplier and carrier at a time. There’s an expression that says you shouldn’t put all of your eggs in one basket, and the same idea applies to e-commerce retailers.
As the Suez Canal catastrophe has shown, issues with a supplier can arise in many instances. Imagine all of your stocks being piled on a cargo ship that spent six days trapped within a passageway. That’s nearly an entire week’s worth of a delay, which can cause serious adverse effects for e-commerce retailers.
To circumnavigate this possibility due to circumstances outside of your control, start by working with multiple suppliers and carriers. On a smaller scale, individual suppliers can run into their own internal issues, which will negatively impact your business down the line.
It’s reasonable to have a primary supplier you rely on for most of your stocks, supplies, or anything else you keep in inventory. However, it’s wise to refrain from depending on one supplier just in case said supplier cannot fulfill your needs on time.
While a pandemic only happens once in many decades, hundreds of possible delays could arise from completely different situations. For instance, holidays abroad can delay shipping times and schedules in your home country.