Supply Chain Best Practices

As ecommerce businesses grow managing your supply chain can become one of the most important components of your business, which means having a robust management system in place is the best way to meet and exceed your customer’s needs. Without a well organized supply chain business owners open themselves up to delayed inventory, late shipments, and lost business. Having a well-managed supply chain will not only prevent these losses, but encourage overall growth as a result of reliability and availability.

Below I’ll discuss the best practices in supply chain management for a growing company of any size. These practices are all scalable and can apply to a company of one to thousands of employees.

Creating a team of vendors you trust: Choosing vendors can be a daunting task. When first starting out, a lot of buyers tend to go immediately for the lowest cost product with the largest markup without considering the hidden costs of these vendors. As many of us know from our own lives, cheapest is often not best. It is important to consider the quality of the product as well as the quality of the vendor. Are they able to provide you with references? Can they give you an exact timeline for delivery? Are there penalties for delays or options for you to recoup losses? Along with considering the quality of the vendor themselves, it’s important to include their locality into your decision. While vendors in China can offer a wide range of options, their location can have a significant impact on your bottom line. While ocean cargo rates have returned to pre-pandemic levels, the freight itself can still take weeks to arrive, be delayed by the dock or your own carrier, or be lost at sea. Considering vendors more local to your business removes a lot of these inbound barriers while also opening up the relationship for more collaboration. It can be much easier to work with vendors who’s business hours more closely align with yours. Through developing rapport with your vendors you also create a trusted network that can help provide new opportunities or solutions as you grow.

Clearly defined processes and roles: Whether you’re a team of one or 100 nothing will be accomplished well without clearly defined (and documented!) processes. Often, as businesses grow, they run at that growth full speed, adding employees and responsibilities as they go. While growth is exciting it is really only sustainable if you can continue to execute and repeat your previous successes, and the only way to do that is to fully flesh out your processes. All businesses can usually benefit from an annual review and revision of their current processes. Typically, this is best done shortly after your busiest season, or the launch of a new product. Giving individuals or departments time to look back at the previous project and review what worked well and what didn’t for them can open up a wider discussion in the company for problem solving. This applies to all departments and roles, whether they directly impact your supply chain or not. Often customer service managers are able to call out issues your logistics team wasn’t even aware of and are able to fix themselves. Process ownership encourages employees to collaborate and solve their own problems instead of the individual company silos that so often plague eCommerce companies.

Leverage technology: There is an app for everything these days and the same is true for the supply chain. Depending on your company’s needs there is a likely a tool in your price-range that can help streamline your business. Many of these tools can be provided for free from your logistics vendors, or a comparable low cost version can be found online. Supply chain technology can include everything from shipping software to a full Warehouse Management System (WMS). The first step in finding what technology can help your business is identifying your current pain points in your supply chain. Technology can be leveraged to improve inventory accuracy, track outbound deliveries or inbound shipments, and even monitor employees productivity. Systems should be put in place to safeguard areas of concern or to make data more accessible for those monitoring success.

Optimize inventory: Without inventory you have no sales. With too much inventory you have a cash drain. Optimizing your inventory on hand can be a constant battle that should be greatly improved by implementing the best practices we’ve already reviewed. Establishing solid vendor relationships will help prevent stock outs. Having clearly defined processes that include reorder points for products and outline responsibilities. There are a wide variety of inventory management platforms that will help you understand the velocity of your products and when exactly you will sell out. The other key to inventory optimization is staying on top of demand planning and forecasting. Tracking sales metrics can provide insights like which days of the week and month are the busiest, the impact of promotions or sales, or the success of a new product launch. All this data can help you forecast your sales moving forward and prevent stock outs. It will also help you save room on shelves or lower your storage costs in a 3PL warehouse.

Establish regular reviews based on data:

Supply chain leaders need to be data driven. All of the best practices we’ve discussed depend on robust internal data that is reviewed and discussed regularly. Data is what holds both vendors and internal stakeholders accountable. Vendor contracts should be negotiated to include specific data verified SLAs (service level agreements) that you are tracking against internally. Quarterly, or at a minimum, annually, it is best practice to meet with these vendors and review their performance against your contract. This gives both the vendor and you the opportunity to review what is and is not working, discuss your roadmap moving forward and work together as partners to meet your goals. All of these best practices can be applied to any size business. Whether you are going it alone or have a team of people reporting to you, it’s important to take the time to slow down and review your current supply chain practices. The world is constantly changing, you don’t want to be left behind.