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Ecommerce has exploded in recent years because of the many benefits to both consumers and business administrators. Companies can cut costs on certain aspects of business operation, and consumers benefit from those reduced costs by purchasing goods cheaper than ever before. The operations that make this possible differ greatly from traditional storefronts.
Key Differences from Brick-and-Mortar
Given how fundamentally different eCommerce stores are from their physical counterparts, it only makes sense that their supply chains differ greatly. Some supply chain components will play a larger role in eCommerce businesses, and some components may be entirely unnecessary. For instance, fulfillment centers are much more complex in the eCommerce industry because they must handle the larger volume. In contrast, distribution centers serve no purpose for eCommerce businesses because there is no physical storefront with shelves that need to be filled.
Here are a few other supply chain differences between eCommerce businesses and brick-and-mortar stores:
Stock keeping units, or SKUs, are the primary tracking products in a business’s stock. Information about a product is translated into a series of numbers and letters that computers can maintain and manipulate. For example, if your eCommerce business has a stock of shoes, then an SKU would keep data about a particular model of shoe’s price, color, manufacturer, and so on. Ecommerce businesses typically handle more SKUs than physical stores, which requires them to have a more robust system capable of maintaining an inventory with more variability.
Inbound logistics for an eCommerce business does not have to account for distribution centers, and storefront inventory like brick-and-mortar stores do. These logistics can also be directly associated with customer orders.
- Fulfillment Center Focus
The focus of fulfillment centers shifts towards streamlining the entire process of finding and shipping a package. In general, the process of finding products, packaging them, and then shipping them is subject to more scrutiny than it is with physical stores.
ECommerce’s return processes are different from physical stores where a customer could walk into a location and return the product. A smooth return process is wildly important to eCommerce businesses as it must handle a higher volume without worsening the customers’ experience. This is why solid warehouse shipping software is so crucial to eCommerce brands.
- Supply and Demand
Ecommerce companies can respond to out-of-stock items and their demand much quicker than physical stores can. In some cases, the entire process of taking inventory can be automated, allowing managers to view real-time data of their inventory as it is being sold.
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Steps of The Supply Chain Process
- Demand Forecasting and Sourcing
The first step in the supply chain of an eCommerce business is predicting what products will be in demand and deciding where you should buy them from. Use data from the inventory you have previously sold to inform this decision. Remember that because holding inventory is more centralized for eCommerce businesses, meaning your products aren’t spread across several storefronts, you can order more stock than you would initially expect to sell and not be burdened with over-stock in the same way a brick-and-mortar store would.
Once you have sourced your inventory, it’s time to decide where to store it. If you have multiple fulfillment centers, you need to choose how to prioritize certain centers. Ask yourself questions that will help make this decision easier. Which fulfillment center reaches the highest volume of customers? Which fulfillment center is located where this product is currently the most popular?
- Order Fulfillment
Once all of the previous steps have been completed, you can begin fulfilling your customers’ orders. Remember to streamline the operations of your fulfillment centers as much as possible, as this will have a huge impact on your customer experience and reputation.
Though returns are not an inherent part of a supply chain’s process, it is still essential to consider. Some customers will inevitably need to return their products, and when they do, they will expect the process to be quick and easy.
Ecommerce brands also benefit from more easily being able to serve potential customers across the globe. The primary barrier to expanding a business internationally is the initial cost of setting up shop, but for eCommerce companies, there is no shop to set up. As an eCommerce retailer, you can reach all of the members of your target audience regardless of where they live.