Ecommerce Supply Chain Optimization in the Current Crisis

5 actionable tips to better prepare for the coming quarters

• Supply Chain

The COVID-19 pandemic brought the world to a stand-still and disrupted supply chains across the globe. With societies adjusting to a “new normal” and global economies gradually making a come-back, the path to achieving full recovery is a long and hard one. Businesses witnessed tremendous set-backs in their BAU activities, with 94% of Fortune 1000 companies reporting supply chain disruptions due to the pandemic. The impact of the virus will continue to have repercussions on the supply chain, as long as certain economies continue to suffer under lockdown regulations.

The pandemic is not a short-term crisis, and business leaders will have to have to take smart decisions to help their business adapt to the challenges and continue with their business operations. COVID’s impact is being felt the most in countries where the value chains are closely associated to outbreak epicenters. Lockdowns and transportation disruptions are having a major impact on the supply chain, leading to shortage of products and services delivered, a consequent rise in prices. The situation is getting worse because of consumers hoarding products, due to limited access and uncertain market conditions.

Businesses are being and will continue to be judged on how they respond to this global disruption, and how they serve their investors, consumers, and communities. Ecommerce was greatly impacted by the on-going COVID crisis, and brands are having to adapt to changing market conditions. Reshaping the supply chain and restructuring business processes around it, will be key to businesses surviving these unpredictable times and unprecedented changes. Your business too can minimize costs, upgrade business performance, and enhance your customer satisfaction, by optimizing your supply chain and improving efficiency.

First, let’s get a clear understanding of what the concept entails, before we delve into the process of optimization and how it can benefit your business.

What is Supply Chain Optimization?

A supply chain is a complex network of individuals, organizations, resources, activities and information, which work in sync with one another for the production and sale of products and services. The chain starts off with raw materials being transformed into finished products and ends with the sale and delivery of the finished product or service to the end consumer.

The process of optimizing the supply chain enables brands to minimize operational expenses while maximizing the gross profits. The goal is to offer premium customer experiences by delivering what the customer requires, within the projected timeline, at the specified location, while maintaining the lowest possible costs and generating the highest possible profits. Businesses also have to ensure that the profits balance the overhead costs for manufacturing, inventory, distribution and transportation.

The process of optimization is not a sprint, but a marathon. Disruptions and fluctuations within the chain can impact the chain as a whole and alter investment-profit ratio over time. A simple increase in the cost of raw materials or a change in consumer demographics can require major changes in the optimization activities. Hence the complexities brought about by the pandemic necessitates Ecommerce brands to rapidly adapt to the changes, and optimize their supply chain for gaining ideal financial returns.

The process usually starts with an in-depth analysis of the demand forecast, succeeded by product development and inventory planning to meet the predicted demand. The analysis also considers the raw materials being used, manufacturing processes, inventory and warehousing, and the transportation and distribution of finished products. Optimizing the supply chain also offers brands an opportunity to seamlessly integrate their Ecommerce operations into an Omnichannel model, and further optimize the customer experience delivered.

How to Optimize your Supply Chain Network

Optimization activities require the use of high-end statistical and analytical software. The software analyzes historical customer data to forecast future demand trends and market conditions. Accurate insights help brands adjust their value chain, and in-turn impact the supply chain in a positive way. The better you are prepared to meet the predicted demand with enhanced inventory, the better the profits your brand shall turn even during trying times.

Software solutions for logistics optimization can enable you to design, plan and execute your supply chain processes at every stage. The software solutions can help you forecast demand and balance supply, manage inventory and organize delivery, to seamlessly maintain the predicted stock requirements in real-time. Techniques of Standard Deviation and Mean Absolute Deviation can also be applied, to account for additional stock requirements that need to be maintained in the inventory for addressing an unpredictable or sudden rise in demand due to external factors.

You can empower your brand with an optimization solution that seamlessly integrates with your business processes. A platform that enables your analysts and supply chain managers to access end-to-end visibility of operations; while leveraging AI and ML technologies to help automate, standardize, and synchronize business process and insight gathering. Let automation analyze your business, your analysts can chart the optimal course of action, and your brand can optimize the supply chain based on real-time actionable intelligence to provide customer with the best experience possible.

Benefits of Supply Chain Optimization

Some of the advantages of successful optimization are as follows:

1. Minimal surplus inventory
2. Reduced costs for logistics
3. Lesser time to react to market disruptions and supply chain complications
4. Reduced lead time
5. Easier onboarding of suppliers and subsequent collaboration
6. Minimized time, cost and risk when assessing and managing new suppliers
7. Increased ability to predict risks, mitigate said risks with agility, and maintain business continuity
8. Enhanced customer service and subsequent satisfaction from improved prediction and mitigation

A Silver Lining to the COVID Crisis

Ecommerce had been steadily growing in popularity over the past decade, but traditional retail was still the most dominant. The Coronavirus outbreak completely turned the tables, when the world went into lockdown and social distancing was implemented. Online sales became the retail-process of choice for millions, quite simply because it was the only choice.

From 2009 to 2019, Ecommerce penetration in the US alone, had witnessed a slow but steady rise from 5.6% to 16%. The first couple of months since the initiation of lockdown mandates, saw the number jump from 16% to 27%. A rise identical to the that of the past decade, but achieved in just eight weeks.

This unprecedented surge in Ecommerce and the unpredictable volatility of consumer demand, resulted in immense pressure on the supply chains of brands operating in CPG, FMCG and Retain sectors. There was a negative impact on their order lead times, rate of filling inventory, availability of stocks and the customer service as a whole. Optimizing the supply chain being the only answer to combating these changes in the real world and the digital ecosystem.

Ecommerce supply chain optimization in coming quarters

There is no simple solution to the COVID crisis and no easy route to an optimized supply chain that can help your Ecommerce business succeed in today’s market conditions. The following are a few factors that you need to consider when implementing optimization processes for the coming quarters of the financial year.

1. Contingency Planning for figuring out the worst possible conditions that can affect your business. Whether it is bad weather, natural disasters, loss of suppliers, labor shortages, or a global pandemic. Any situation that can completely disrupt the entire business process and endanger your brand as a whole, requires a planned response. If your plan is in place, you can pre-empt the event, have a short response time, and a team equipped to handle the fall-out. The better prepared your business is to handle it internally, the lesser will the impact be on your customers. A detailed contingency plan and a prepared business, can be the difference between your brand surviving the disruptive event with minimal internal adjustments, or being forced into closure.
2. Improved Collaboration between your manufacturer/supplier and the retailer/marketplace, for enhanced forecasting and inventory management based on demand data. This can help your brand to maintain a lean supply chain while increasing profit margins, by efficient inventory management, better fulfillment rates and accurate product availability at the point of purchase. Optimizing inventory is the easiest way to mitigate fluctuations in demand and with effective forecasting and smooth collaboration between elements on the supply chain.
3. Total Cost of Ownership (TCO) should be your point of focus rather than purchase prices. Strategic sourcing enables you to look into the complete cost of consuming a product or service, rather than just the cost of purchasing. Empower your procurement teams to consider operating, training, maintenance, warehousing, environmental, quality, and transportation costs as well as the cost to salvage the product’s value, instead of simply selecting a supplier based on bids and best prices available. Prioritize value over price, introduce a shift in mindset, and let your business reap the benefits.
4. SKU (Stock Keeping Unit) Realization looks into whether a particular SKU should be kept, discontinued and whether a company should make changes to its inventory profile. Keep your business agile, and proactively work towards improved capital and expense management. The end product is one of the key elements of the entire supply chain, and SKU Realization is critical to successfull optimization.

The COVID-19 pandemic not only challenged existing models of business and but altered the very course of Ecommerce. Organizations adapting to these difficult times are relying on new routes to continue business operations and new tactics to maintain their ROI. With a complete shake-up of traditional retail, organizations are conducting demand planning with a much higher focus on Ecommerce buying patterns rather than their in-store traffic. To reduce total investment and save resources, distribution methods are also evolving. Customers can now order online, but choose to receive the product in-store, and your Supply Chain will have to adapt and cater to these modifications. Routing methods are having to keep pace with the changes, where some products are not delivered from the warehouse, but from the closest retail store that stocks the products.

With rapid changes in the digital ecosystem and market conditions being in a state of flux, having an integrated Supply Chain Optimization solution is key to organizational success during this on-going crisis. Access to cutting-edge technology and best-in-class services, can help your brand to forge through and ensure a stable future for both your brand and the consumers who rely on your products and services. Course5’s Supply Chain solutions leverage AI and Machine Learning to deliver actionable insights, and can enable you to build a sustainable supply chain that can be optimized with changes in the both the digital ecosystem and the real world.