Supply Chain Management: The Biggest Challenge In Ecommerce Business
All the things considered, eCommerce stores like Alibaba, Etsy, and Amazon make it look very simple. Customers tap on items they need and, regardless of the seller, the products lands on their doorstep all the way from the store. Managing an eCommerce store isn’t that easy as it looks. It takes a lot to keep the things running and never let the customers feel about the complexity every eCommerce store owner faces in the meantime. Here we are going to discuss how just having an eCommerce website is not enough and how you have to deal with a bigger challenge right at the beginning.
Getting An Ecommerce Website Is Not The Biggest ChallengeIt's a luck for you that eCommerce website development is no more a big deal for the business entrepreneurs. The latest advancement in eCommerce website development technologies has made them so simple and accessible for anyone. If you want an eCommerce store, or you want a multi-vendor marketplace site everything is pre-developed. Just hire an eCommerce development company and they will get you whatever you want on your website; it's their headache to get you the best out of it. So, if you were thinking that getting an eCommerce website is the biggest challenge, you might reconsider after reading about these challenges. Because these are not something that you can pass, and you have to deal with them all by yourself.
The Challenge Of Supply Chain Management If you are in the phase of starting an eCommerce business, the first challenge relates to the inventory management. Supply chain management clearly states that an effective supply can only be managed if you are able to deliver the right amount of products in the right time interval. Any wise business expert would not suggest you keeping the stock of the products without analyzing the demand trends. Keeping the stock in the warehouses itself is a huge investment. Moreover, the overhead cost of managing a warehouse would not be something that you want in the very beginning. For this, it requires maintaining a continuous supply channel between the eCommerce site(you) and the manufacturer (the supplier of your products). There are series of challenges that you face in maintaining the supply channel: ●
Challenge: Your manufacturer needs to be updated for how many products it need to manufacture for you in a time interval. ➢
In case of Failure - If Manufacturer fails to supply the desired amount, you fail to deliver to your customers. It spoils the reputation of your website.
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Challenge: To manage this, you need to know how many products you can sell in the relative time interval. ➢
In Case of Failure- If you don’t know how many products you need to ask from your manufacturer, you would have a deficient or no supply-flow at all. Resulting in out-of-stock products on the site. Ultimately loosing the potential sales.
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Challenge: To know how many products you need to ask from the manufacturer, you need to forecast the demand that would be there for the product. ➢
In Case of Failure- Failing to correctly forecast the demand trend would not only stop you from fulfilling your orders but would also have a direct impact on your reputation as seller.
So, maintaining a continuous supply chain is one of the toughest tasks when you are in eCommerce business. The above challenges are just a glimpse of the
bigger picture when you have to deal with different types of products and their respective manufacturers. As the number of products increase, it increases the complexities of dealing with every manufacturer. Solution: There isn't any holy grail of managing the supply chain in eCommerce without any issue. To come up with something that works for you, you need to ask yourself few questions: 1. Will you manufacture, or re-sell the products from other Manufacturers? 2. Will you have an inventory of products? 3. Do you want to control the shipping and packing of products to the customers? 4. What type of products would you be selling? 5. What volume of products would you be selling? If you can answer these questions precisely, you can decide the nature of your supply chain model. You need to build a base of manufacturers and suppliers for your store (if you are thinking about re-selling; not manufacturing I guess). √
Get in touch with trade associations- After deciding the type and volume of products you would be selling, you should get in touch with the manufacturers in your interested domain. It’s a tough task! However, you can contact the trade associations, go through trade magazines, or can simply look up in trade association directory to find the list of manufacturers who would be interested in business with you. ➢
Challenge-
Manufacturers
generally
avoid
fussing
with
small
eCommerce retailers. They usually want to sell very large volume that is typically out of reach for the small start-ups. To deal with this, you might want to work with the smaller manufacturers who would not refuse your offer. However, the smaller manufacturers cannot always keep up with the volume of demands and they might not always be able to deliver everything you need. So, ultimately, both the quality and quantity of the supply is at stack. √
Do not rule out local retailers- Manufacturers are not the only sources of inventory. Business with local retailers is also a wise way to maintain the supply chain. Local retailers would be quicker and more reliable for
accessing limited resources, though.
Depending on Drop ShippingDrop Shipping is a supply chain strategy where a store doesn't keep the items it in the stock. Rather, when a Merchant receives a product order, it buys the product from a third party and has it dispatched directly to the customer from there itself. The Merchant never sees or handles the product.
Drop Shipping is a revolutionary concept in eCommerce market and has become very famous for its enticing benefits:
Benefits of Drop Shipping- Stock Management is no longer a necessity - Lower wholesale product prices - No warehouse management cost - Less devotion to shipping management
Challenges of Drop Shipping- Over dependence on Drop Shippers lure them to raise their prices anytime. - Overhead costs might be there which are not directly involved in order fulfillment. - Shipping management by Drop Shippers might not be efficient, they might use unreliable shipping services. - A single Drop shipper might not always be in the game, it might pull its hand
anytime, leaving you supply-less. - Drop Shipper might not always have the enough stock for you. - Drop shipper might supply your share of products to another retailer at the peak time in hope for more benefits.
Final words An eCommerce business always needs to have something for selling. This can be done only if the supply chain management goes all right. That is why your product sourcing is the most crucial element and biggest challenge in any type of eCommerce business you are. Whether it is an inventory model or a marketplace model, supply chain management is the first challenge that you need to deal with.