[Infographic] E-commerce Supply Chains Explained

Posted by Benjamin Meskin on Dec 10, 2020 9:00:00 AM
Benjamin Meskin

The supply chain plays a vital role in today’s hectic e-commerce industry. With more consumers expecting to receive their packages faster than ever before, your e-commerce business must have a strong supply chain in place. If you aren’t clear on the basics of supply chain management, you could end up facing many struggles along the way.

The dos and don’ts of the e-commerce industry are continually changing, and the impact of new logistics technology on the supply chain can also affect your business’s overall survival. Therefore, it is essential to learn as much as you can about supply chains and how to manage them correctly.

Cabrella - Supply Chains Explained - Infographic

What Is a Supply Chain, and How Does It Work?

A supply chain is defined as creating and selling goods, including supplying the materials used to manufacture the goods, distributing the product, and then selling to the customer. Supply chains encompass all the activities necessary to get a company’s product out to the consumer. The chain begins with gathering raw materials and ends when the product is delivered to the customer. A successfully managed supply chain is something all brands hope to have.

people looking at online product inventory

The Three Pillars of a Supply Chain 

There are three main pillars associated with supply chains. They are the strategy, service, and cost.

 

Supply Chain Strategy

To stay relevant in the e-commerce industry, your company will need to regularly adjust your supply chain strategy. If it is not up to date with the changing times, such as new supply chain technology, it could misalign your supply chain service and cost. This would leave your business vulnerable. And while it’s essential to ensure your strategy is always up to date, it is also equally critical that the process is clear to everyone involved, including your lower management team and general workers.

 

Supply Chain Service

Supply chain service helps make sure all your customers receive the optimal level of service at the right price. There are three things every e-commerce company needs to provide excellent service: 

  • Inventory: Ensure your business has the right amount of inventory to meet your customers’ high demands. But, you don’t want to have more stock than necessary because the cost of storing it will impact your operating costs and what your customers will ultimately pay.
  • Policies: Enforcing policies that are relevant to the management of your inventory and delivery must be consistent and straightforward for all of your customers.
  • Planning: Good supply chain planning should include demand analysis, the efficiency of the manufacturing process, and S&OP.

Inventory management using an app

Supply Chain Cost

To ensure this pillar of supply chain management is always aligned, you will need to take a closer look at the following elements:

  • Distribution Network Costs: These are costs associated with warehouse and transportation costs. They involve maintaining the right number of warehouses in the right locations.
  • Operational Costs for Warehouses: Ensure your company’s warehouse layout is optimized for efficiency in terms of speed and cost. If necessary, the processes for your warehouse should be changed to align with your company’s performance.
  • Transportation Costs: Decrease the cost of transportation for your company by enforcing a reliable transportation management system.

 

What Are the Roles of the E-commerce Supply Chain?

There are three prominent supply chain roles: The Chief Procurement Officer, the Chief Logistics Officer, and the Supply Chain Manager.

People working in a supply chain role

The Chief Procurement Officer (CPO)

The chief procurement officer, or CPO, holds the executive role in the supply chain. Their primary focus is sourcing, procurement, and supply chain management. They oversee the cost of keeping the supply chain running and look for ways to save the company money. They also ensure all procurement procedures are in place and certify compliance with all external and internal guidelines. Guidelines include the company’s initiatives and any government requirements that must be met.

 

The Chief Logistics Officer (CLO)

The chief logistics officer, or CLO, takes care of the company’s transfer of goods and services to smooth out the process. They ensure all the correct items are shipping out in the right quantity within the estimated timeframe. They also offer logistics support to senior management roles regarding any obstacles the company may face. Challenges like shortages with drivers or tariffs, such as those seen in the United States and China trade-war, are common issues that CLOs see each day.

 

The Supply Chain Manager

The supply chain manager works alongside all the company’s external partners and suppliers to create the product, and later sell it to other markets. They research suppliers and work out contracts with vendors to ensure the company gets the best possible deals without sacrificing any quality. The supply chain manager takes an internally-focused approach to all operations. They will create policies, take control of the company’s daily operations, and oversee all the general processes.

 

What is Supply Chain Management?

In basic terms, supply chain management is a position where a person manages the process that transforms raw materials into the final product, which ends up in the hands of the customer. This role includes all the processes involved in finding the right suppliers for high-quality raw materials at a reasonable price, manufacturing the materials to create products to sell, distributing the products to various markets, and shipping the product out to the customer.

 

The Importance of Supply Chain Management

E-commerce businesses rely on supply chain management to create networks that will help them meet their customer service goals at a price that stays within their budget. They can meet the customers’ demands in terms of product quality, delivery, and speed. Proper supply chain management can also help reduce  operating costs by looking into suppliers with high-quality raw materials at a more affordable price. When there is efficient supply chain management, a company has room to be more competitive.

Freight shipping

What Are Key Principles Needed for Strong Supply Chain Management?

Several fundamental principles are necessary for quality supply chain management.

  • Companies require a fast and efficient supply chain to ensure more profits. Managers must be able to identify and respond to all product demands quickly.
  • Communication is vital within all areas of the e-commerce supply chain. This is especially true when there are extraordinary circumstances that demand a change in the usual supply chain.
  • Stay motivated. It’s essential to keep your workers motivated and everyone involved within the supply chain up-to-date on any critical factors that could affect their workflow.
  • Eliminate elements that lag. There is no need for them in the supply chain. If a supplier continuously delivers raw materials behind schedule, they should be replaced with a more reliable and consistent supplier.
  • Flexibility is important. Supply chain management in the e-commerce industry is all about balancing the constant adjustments within the chain. Managers must always analyze their data and attempt to predict the customer’s demand. They need to make plans on how to deal with excess inventory and shortages and have the ability to think clearly while under pressure.

 

Final Thoughts

For more information on how the e-commerce supply chain works and how quality supply chain management can help your business, get in touch with our team here at Cabrella. To get started, call us at (844) 422-2735 or contact us online. Our professionals will be happy to answer any questions or concerns you may have.  

 

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