According to the US Census Bureau, ecommerce businesses accounted for 15.4% of all sales in the United States in 2023. This number was made up of purchases from 274.7 million ecommerce customers in the United States, constituting more than 80% of the country’s total population. After more than two decades of the industry continuously growing month over month, it’s obvious that ecommerce businesses have become a vital part of the economy. While the ecommerce landscape still offers immense potential, it comes at the cost of risk and volatility. The constant fluctuations make supply chain agility in ecommerce critical for success and semi-stability during periods of extensive growth over fairly short time spans.
The advantages that come with supply chain agility in ecommerce cannot be overstated, however they’re not top of mind for many ecommerce business owners. That’s why in this blog we’ll discuss what constitutes supply chain agility in ecommerce and how your business can benefit from it. Additionally we’ll explore simple strategies that you can implement in your business to maintain supply chain agility in ecommerce, regardless of fluctuating market factors.
What is Supply Chain Agility in Ecommerce?
Traditional supply chain agility can be defined as the ability for a supply chain to rapidly adapt efficiently and effectively to disruptions in the marketplace. This can include changes in customer demand, new technology, or effects of market vulnerabilities, such as labor or material shortages, and geopolitical crises. For any supply chain to be considered agile, including ecommerce supply chains, it needs to be able to quickly develop and deploy new products and services, change organizational structures as needed, and pivot accordingly.
While all of these remains true for supply chain agility in ecommerce, online businesses have the added factors of warehousing, the ability to provide fast and affordable fulfillment for customers, and manage rapid changes from digital marketplaces. Over the last few years supply chain agility has become increasingly important for ecommerce businesses as the industry experiences more frequent and drastic changes. As a result, Amazon sellers and ecommerce business owners who are able to embrace agile supply chain management practices now will be well positioned to succeed in the years to come.
Traditional Ecommerce Supply Chains
With the rapid evolution of ecommerce there have been drastic changes to the traditional ecommerce supply chain, requiring greater agility from businesses. Traditional ecommerce supply chains were designed to be cost-effective for businesses, but are increasingly becoming ineffective in satisfying customer demands. This type of ecommerce supply chain often looked like this for a customer:
- A single or dual channel sales experience, including either brick-and-mortar retail stores or a retailer-specific website.
- Extended fulfillment timelines, with little to no visibility for customers.
- Delayed last-mile deliveries due to limited shipping options and high costs for expedited fulfillment.
And, throughout the traditional ecommerce supply chain customers faced high convenience costs when it came to delivery times and return processes.
Today, the modern supply chain has seen huge strides in prioritizing customer satisfaction throughout the supply chain. With the development of the omnichannel, customers can make purchases through a wide variety of integrated channels, including traditional brick-and-mortar stores, a variety of online marketplaces (including retailer websites, as well as third party marketplaces like Amazon), and social media platforms. While these omnichannels add complexity to supply chain operations for ecommerce business owners who now have to manage fulfillment for multiple channels, agile businesses also have new opportunities to reach customers.
The modern supply chain also highlights and responds to consumer demands at a far greater rate than ever before. Increased customer demands for convenience in the form of faster delivery times, free shipping, and easy returns has put pressure on supply chains to adapt and become more agile. Companies that fail to meet these standards risk losing customers to competitors that can deliver a better customer experience. Last mile delivery has also become pivotal for success, as fulfillment of an order from the distribution center to the customer’s doorstep is complex and expensive– but key to creating a satisfying customer experience. Thankfully for Amazon sellers, these processes are handled largely by Amazon FBA and other logistics practices set by the marketplace.
Companies also need greater access to data in order to be agile in this modern supply chain, due to the complex nature of fulfillment. This means that access to real-time visibility is key for agility, ensuring that their operations are running at maximum efficiency and are capable of meeting customer demands. Real-time visibility is just one component of the growing importance of data analytics for ecommerce agility though, which puts the vast amounts of data generated to use. By utilizing all this data more frequently, companies can gain better insight into customer behavior, inventory levels, supply chain performance, and more. And, with a more complete picture of their supply chain management, companies can invest in processes that help to make their supply chain more agile. For example, companies can use data analytics to identify their most profitable products, forecast demand, and optimize inventory levels.
Lean Supply Chains vs. Agile Supply Chains
There are two primary supply chain management strategies in modern ecommerce: lean and agile supply chain management.
Lean Supply Chain Management
Lean supply chains prioritize reducing cost and waste throughout the entire process. This typically means a supplier has one point of contact and a single contract across the entire business. In this strategy anything that doesn’t immediately add value for the customers is removed to cut costs.
This type of strategy relies heavily on forecasting to predict how much inventory is necessary to meet demand, meaning that variation can cause immense amounts of damage. While a lean supply chain strategy may save you money upfront, it risks large, unexpected costs if reality deviates from your forecasting. Some potential problems include stockouts, shortages, and other disruptions in the supply chain causing the line of business to potentially collapse temporarily.
Agile Supply Chain Management
Agile supply chains focus instead on adaptability and resilience. This strategy is smart for organizations that need to be prepared for rapidly changing marketplaces. By practicing supply chain agility your business will have an easier time adjusting sourcing, logistics, and sales in response to economic swings, technology changes, and customer demand.
An agile system waits to see what the market demand looks like before finishing production. By using short term forecasts, rather than extended predictions, to stay responsive, agile supply chains can almost guarantee optimization of inventory and processes. Agile supply chains result in short order lead times and is quick to respond to customers. Staying agile also helps businesses to adjust when something unexpected happens, by improving adaptability. However, agile supply chains are commonly more expensive on the outset because of the expedited processes and investment in flexible processes.
Benefits of Supply Chain Agility
Improving your ecommerce business’ supply chain agility has a number of benefits, beyond long term stability. Agile supply chain management in ecommerce will allow you to:
Meet Market Demands & Improve Customer Satisfaction
Trends shift quickly in ecommerce, meaning that a reduced lead time on sourcing products from suppliers is key to keeping up with market demands. The more expedited your supply chain management is, the more agile it will be. As a result of improved agility, your ecommerce business will have the flexibility to capitalize on short-lived customer demands.
Remaining agile also helps your ecommerce business to maximize responsiveness to ever-changing consumer expectations. Peak customer satisfaction stems from not only fulfillment of demands but also providing a stellar customer experience. Whether that means an expedited turnaround between sale and delivery, products that come well bundled to meet needs, or continuous improvement of customer service, achieving supply chain agility improves customer satisfaction.
Reduce Supply Chain Costs
While it may seem like you’re simply paying for inventory, supply chain costs can encompass a lot more for ecommerce businesses, depending on your selling model. Inventory, or the raw materials to produce your inventory, is certainly an expense to consider, however there is also the price of labor to produce it, warehouse and storage fees, the cost of shipping, and more. Amazon sellers who utilize Amazon FBA fulfillment services face particularly high fees for operations and logistics, as well as low inventory level fees.
With better supply chain visibility you can optimize inventory management to meet customer demand perfectly, ensuring you never have excess inventory while avoiding stockouts. Agile supply chain management can also help to reduce these costs by streamlining your cash conversion cycle, thus moving products more quickly off the shelves through sales. As a result of streamlined chain management, fulfillment fees will also likely drop as products spend less time in storage.
Stay Competitive
Agility allows for your ecommerce business to stay relevant and maintain a competitive advantage over other sellers, which is essential for long-term success. While it’s important to stick with SKUs and processes that are tried and true, by achieving supply chain agility you’ll also be able to improve your formula for success. Whether it’s adopting new products, ensuring that your supply chain operations are up to speed, or even remaining one step ahead so that supply chain disruptions don’t cripple your sales; agility allows for you to outwit and outperform your competitors who can’t accommodate for changing circumstances and demand fluctuations.
Manage Risks & Scale Sustainably
Every ecommerce business owner that any growth comes with some amount of risk, the key is managing it effectively. By investing in agile supply chain management your ecommerce business can scale sustainably by experimenting with new ideas and easily pivoting if necessary. This agility will give you a significant competitive advantage over your competitors who take longer to make decisions and implement changes. As a result, you’ll likely be able to see rapid growth in sales and profits while still maintaining control over your cash flow.
This is a huge boon, especially for ecommerce sellers, as it will allow you to keep up with the industry as it evolves at a break-neck pace. By changing alongside the ecommerce landscape, you’ll ensure that your business never gets left behind.
Strategies for Ecommerce Supply Chain Agility
While improving your supply chain agility may seem daunting, it can often be done with a few simple changes within your ecommerce business and your interactions with suppliers. Try using one or more of these strategies to begin running things with more flexibility and agility:
Continuous Improvement
In order to truly achieve supply chain agility your Amazon business needs to prioritize continuous improvement in all areas. There is no one aspect that will ensure success, agility is determined by a wide variety of factors, including operation processes, inventory, industry trends, and more that all need constant monitoring and appropriately coordinated updates.
Operation Processes
While adopting new technologies can be intimidating, especially when you don’t have a complete understanding of it yet, it’s critical that you continue to remain on the cutting edge when it comes to operations. Utilizing new tools, especially automation and AI, to streamline your operations processes can save your business immense amounts of time and money.
By automating key processes, you can free up resources and redeploy them to more strategic tasks. Additionally, automating routine tasks will improve efficiency and accuracy. By streamlining processes with technology you can help eliminate potential for human error in tasks like invoicing and collection follow-ups, workflows, and payroll.
Inventory
Use inventory systems that allow for real-time data of stock numbers. This should also potentially include warehouse and shipping technology upgrades for better visibility. With more information available at your fingertips, you can adjust quickly and efficiently to any unexpected delays or disruptions.
Ecommerce Industry Trends
By keeping up with ecommerce industry trends, you’ll have a healthy understanding of what to anticipate in the future, as well as what’s currently dominating the marketplace. Industry trends go beyond just current popular products or services, and show patterns in consumer expectations, optimization strategies, sales trends, and more.
Showing an investment in staying current will give potential customers confidence in your business and encourage them to choose your company over your competitors. Even if customers don’t see those investments outright, they will certainly benefit from improved efficiency. There are many ways to stay updated about industry trends, like subscribing to publications and attending conferences. You can also maintain a presence on social media and interact with ecommerce industry leaders and influencers.
Demand forecasting
A huge part of achieving supply chain agility is understanding how to keep your cash flow moving smoothly at every stage of the process. You can’t have money tied up for extended periods in inventory that sits on the shelf for months at a time. By periodically running demand forecasts you can ensure that your inventory orders are perfectly optimized to streamline your cash conversion cycle–freeing up capital to reinvest and keep your business agile.
The more working capital you can keep liquid throughout your supply chain, the greater your competitive advantage will be. Immediately accessible working capital allows you to take advantage of opportunities as they appear, acting dynamically and with agility to keep your business running at its maximum potential.
Determine SKU re-order checkpoints
After you’ve run demand forecasts, it’s wise to set up SKU reorder checkpoints to ensure that you never face stockouts and can always meet customer demands. By setting checkpoints instead of timelines you’ll be able to ensure that your supply chain always has a consistent flow, rather than a bottleneck of inventory. If your inventory does hit a bottleneck in the supply chain, it can cause serious cash flow crunches and undermine your agility, making it key to streamline effectively.
Split up Inventory
Whether you split up where you source, store, or how you ship, it’s wise to not rely on one channel for fulfillment of your entire supply chain at any stage. If you rely on one source at any point, a supply chain disruption will have the potential to collapse your entire business. Dividing your inventory at sourcing, storage, shipping, and other stages will help brace your business against any sort of shortage or geopolitical upset.
It’s even wise for Amazon sellers who utilize Amazon FBA to consider using fulfillment by merchant (FBM) or a third-party logistics provider for some percentage of their sales in order to safeguard against growing fees that eat into profits. By dividing inventory you can help your business achieve growing supply chain agility and flexibility even in times of uncertainty.
Conclusion
Investing in supply chain agility for your ecommerce business is a great way to mitigate risk and ensure success, regardless of market fluctuations. Although there are some upfront costs associated with agile management, it doesn’t require a complete overhaul of your current processes. Instead, small changes in your current operations can help to improve agility and solidify your business as resilient and flexible in the ever-changing ecommerce environment. Additionally, by implementing these changes you’ll be able to provide an enhanced customer experience–driving even more sales and new growth for your business.
If you’re looking for funding to invest in your ecommerce business’ supply chain agility, connect to Viably today to get funding offers in less than ten minutes! We offer fast and flexible funding, alongside a suite of financial tools to help you get a comprehensive view of your cash flow in real time.
