How to improve your e-commerce supply chain?
E-commerce has never been in better health: in 2023 alone, sales in the sector will total 159.9 billion euros. That's +10.5% on 2022 (Source: Fevad, 2023).
But while everything seems to be on track, there are others indicators that raise questions. With this rapid growth, how can you successfully manage the surge in product output, transportation, and final delivery to customers?
This is the challenge facing the supply chain, which must now reinvent itself. In this article, discover the definition, challenges and strategies for optimizing the supply chain, for all the e-tailers of today... and tomorrow.
What is the supply chain?
Supply chain: a simple definition
The supply chain covers all stages from the purchase of raw materials, through product production and transport, to final delivery to the customer.
This strategy is of the utmost importance: by controlling and optimizing each stage, an e-tailer can ensure optimal production, sale and delivery. Supply chain management has a direct impact on customer satisfaction. But that's not all! It also helps to improve the company's profitability, to gain market share through strong differentiation... And to aim for better, more sustainable growth.
But before they can achieve these benefits, e-tailers face a challenge: the supply chain must weave a complete network around a product, integrating different players who feed into each link. Throughout this process, there are various flows. Let's talk about them.
Supply chain flows
Supply chain management is divided into 4 flows:
- The physical flow: this corresponds to the logistics chain, encompassing the supply, transport and storage of goods. This flow refers to the movement of products within the company. Good management of physical flows means getting the right products to the right place, at the right time, in the right quantities... and, above all, in the right condition.
- Information flow: this is the data (or Big Data) that drives the physical flow. All the information concerned relates to sales history, strategies and resources deployed by the company, performance indicators, etc. All this information responds to the what (processes), the where (country, warehouse, IT system), the how (resources and conditions) and the when (product life cycle).
- Financial flows: these are all transactions carried out both externally (with partners, suppliers or subcontractors) and internally, within the company. These flows may be denominated in several currencies.
- Administrative flow: this concerns all documents circulating between the parties involved in the supply chain. These include documents linked to the processing and control of orders or payments, management reports, etc., as well as all administrative documents which may have an impact on inventory management, cash flow or product marketing.
All these flows are called “real and digital” and are associated with movements of goods, services, documents or financial data. Both internally and externally. The objective is to ensure good coordination and management of all these flows, to ensure the logistical success of the company.
The actors of the supply chain
As we have seen, the supply chain consists of a set of links. To optimize each of its links, dozens of actors are mobilized and collaborate together, through the different flows.
Producers, suppliers, charterers, logisticians, transporters, etc. All these players are essential to ensure the supply chain… Until the end customer!
The various players in Supply Chain Management are mainly grouped into 4 categories:
- The actors of manufacturing and production
- Stakeholders in storage and inventory management
- Transport players
- Internal actors (accounting, HR, marketing, etc.)
In a market increasingly concerned with the environment, all these actors have a major challenge: reconcile impeccable e-commerce logistics, and economic, environmental and social commitment. Let’s talk about it!
The Challenges of the Supply Chain
All distribution companies, including e-commerce sites, are facing new supply chain challenges. These challenges include:
Integrate sustainability and social responsibility throughout the process
Faced with the current climate, economic and social challenges, many companies are rethinking their supply chain. The solutions envisaged? Choose ethical suppliers (who meet CSR standards), use sustainable materials, optimize transportation to reduce greenhouse gas emissions… Or identify waste management processes.
By promoting the circular economy, environmental sustainability or a more social logistics approach, companies enjoy many benefits. Both in terms of brand image and the acquisition of new responsible customers. In addition, an optimized supply chain can help reduce costs over time… Another important challenge for businesses!
Coping with rising logistics costs
Since the Covid-19 crisis, companies' supply chains worldwide have been heavily impacted. Since the recovery in “demand” on the customer side and the reopening of borders, improvements are notable… But some challenges remain. Especially in the context of inflation and economic crisis. The increase in logistics costs is particularly pointed out.
Let us take the example of transportation costs. Shipping is estimated to have increased by 547% from the seasonal average of the past 5 years, for a container travelling from Shanghai to Rotterdam! (Source: China Ministry of Transport, 2021).
Tackling the Logistics Labour Shortage
In recent years, many companies have been “out of reach”. Suppliers, transporters, deliverers, etc. The supply chain is slowing down. Companies experiencing this labour shortage are also taking the risk of disappointing their customers, with more expensive products and slower delivery.
To meet today’s supply chain challenges, finding the right partners is a strength. So, if you are still looking for yours, for your online store... Rakuten is at your side! We offer our marketplace sellers fast, reliable and economical e-commerce logistics. To let them focus on what they do best: sell.
Rakuten Fulfillment Network allows you to reduce your logistics costs. You get a flat rate regardless of the sales channel. And we take charge of every step of your e-commerce logistics: packing orders, customer returns, storage of your products…
Your customers are satisfied, your schedule is relieved. Our customers save 25% on average on their logistics costs!
Discover Rakuten Fulfillment Network
How to optimize your supply chain? 5 winning strategies
1- Align logistics strategy with business strategy
The starting point for an optimized process? A well-defined strategy from the outset. Always begin with the company's overall objectives to determine the direction you need to take. Once established, your logistics strategy should align with your commercial strategy. So, what are your products? How do you plan to market them? Through which channels and to which target customers?
Answering these questions will help you create a coherent supply chain that matches your business reality.
For example, if you plan to sell products made in France, produced in very limited quantities by your production chain... Consider a pre-order system through your online store, available for a limited time. This approach allows you to anticipate every link in the chain, from creation to final delivery to the customer.
2- Choosing the right technologies
Without the right tools, how can you get good visibility on all your flows? Today, technology is indispensable and inseparable from a good logistics strategy. So, to optimize your supply chain, make sure you use the right tools.
Among these tools, a Warehouse Management System (WMS) allows you to optimize logistics flows, manage your inventory and successfully monitor all your processes. Then, for transport management, a Transport Management System (TMS) is particularly useful. It automates and optimizes this part of the supply chain, in order to promote transport conditions.
Finally, whatever the solutions chosen, here is our advice: favor a centralized computer space, to avoid multiplying spreadsheets and chains of emails sent to logisticians. This is what we offer to sellers in our marketplace, with Rakuten Fulfillment Network, to manage all their logistics in a few clicks!
3- Listen to customer needs
If the last stage of the supply chain concerns the delivery of an order to the end customer… This end customer should not be your last priority! Whether you are an e-commerce or marketplace seller, placing the customer at the center of your business is crucial. Always listen to their feedback to optimize your entire logistics process.
For example, are your customers satisfied with the delivery time? And its conditions? Their feedback is invaluable, to improve the customer experience… And the different links in the supply chain. It is also considered that 98% of online customers remain loyal to an e-commerce site after a positive delivery experience (source: IFOP study, 2021). To preserve this loyalty, stay tuned for feedback from all your customers.
4- Demonstrate adaptability and responsiveness
In addition to listening to customers, listening to the market is essential to improve its SCM (supply chain management) strategy. What is the current situation? How are your partners evolving? And what strategies are your competitors adopting? To optimize its continuous supply chain, market monitoring must also be continuous.
In addition, certain qualities are required: adaptability, flexibility, responsiveness… Indeed, unforeseen events are frequent and can delay the flow of goods. Your supply chain must be able to adapt in all circumstances. Either by anticipating potential production and delivery delays, or by having a plan B available.
5- Monitoring performance indicators (KPIs)
Finally, to optimize the supply chain from end to end, here is our last tip: follow the most important key performance indicators (KPIs). Measuring these KPIs will allow you to measure the effectiveness of your logistics, and identify the main points of friction. As well as what works best.
Among the key performance indicators to measure for your e-commerce site are the following:
- The turnover rate of merchandise stocks
- The ratio forecast to actual sales
- The time of replenishment
- The percentage of complete orders
- The rate of return of products
- The cost per unit delivered
- “On Time Delivery” (OTD)
To help our marketplace sellers track all this data, we provide them with a centralized dashboard. The Merchant Dashboard is a complete tool for managing sales and ads, as well as tracking your performance on Rakuten.
Regular monitoring of this dashboard makes it possible to improve the e-shop’s performance… But also its supply chain. To aim for more growth, more sustainably.