From protecting the customer experience to maintaining healthy inventory levels, the state of the supply chain affects your entire retail business. That’s why it’s vital to embrace strategies that can help you navigate changes, no matter what comes next.
So what do e-commerce entrepreneurs need to know in order to stay ahead of the supply chain this year?
Today we’re sharing the latest data, expert predictions, and potential pitfalls for a glimpse into preparedness.
Supply Chain in 2023: What We Know So Far
- First, a Look Back at the Supply Chain in 2022
- The Current State of the Supply Chain — What Every Seller Should Know
- What Steps Can E-commerce Business Owners Take to Stay Ahead?
First, a Look Back at the Supply Chain in 2022
Supply chains have been vulnerable to disruption since the dawn of commerce.
The McKinsey Global Institute found that companies experienced a one-to-two-month disruption (on average) every 3.7 years — and that’s pre-pandemic.
But for many retailers, the supply chain pain of the early 2020s stung worse than usual.
Despite the major tech advancements and specialized supply chain tools, many global manufacturers were held back by manual processes and chaotic systems last year.
“In the 1995 Kobe earthquake, we put people on motorcycles to weave their way along the damaged roads and investigate the status of factories. That was pre-Internet, and well before the kind of AI-enabled supply chain mapping and monitoring that’s available today. Yet, many supply chain organizations still aren’t using these advanced tools,” said Tom Linton, Supply Chain Veteran and Senior McKinsey Advisor, in a 2022 interview with Resilinc.
This lack of efficiency created a domino effect for e-commerce entrepreneurs, with many sellers over- or under-inventoried for at least the third year in a row.
To add insult to injury, many sellers were still dealing with pandemic-related disruptions, negative reviews, lost rankings, and in some cases, a lack of consistency in product quality due to issues on the supplier’s side.
Of course, that’s just scratching the surface.
Add to that the ongoing crisis in Ukraine, port and labor disruptions, and US tariffs on Chinese imports. We can see why supply chain risks in 2022 led to increased costs and fulfillment bottlenecks for sellers.
But how has this changed risk for e-commerce sellers?
Let’s look into the current state of the supply chain and how it may be affecting your business.
The Current State of the Supply Chain — What Every Seller Should Know
While the picture may be looking somewhat rosier compared to last year, the latest research from SAP suggests our supply chain headaches aren’t over just yet.
After surveying 400 senior business leaders, the report identified global political unrest, inflation, a lack of raw materials, and rising fuel and energy costs among the current supply chain challenges that lie ahead.
With this in mind, the push for sellers to seek alternative solutions has become more urgent than ever. Whether it’s buying your own warehouse, diversifying your supplier base, or transforming your fulfillment strategy, now is the time to explore a new way forward.
According to SAP’s findings, 64% of sellers are moving from a “just in time” to a “just in case” approach, choosing to increase the amount of inventory they store. Of course, striking the right balance can be tricky. With increased storage fees, excess inventory can wreak havoc on your cash flow and profitability.
“The move to ‘just in case’ means organizations will be storing more inventory to help meet customer demand, but doing so also means increased cost,” said Scott Russell, Member of the Executive Board of SAP and SE of Customer Success.
Whether it’s a “better safe thank sorry” approach or a more calculated method for striking the right balance between sales and inventory, the modern supply chain is pushing sellers to think creatively in order to grow their businesses amidst another year of uncertainty.
What Steps Can E-commerce Business Owners Take to Stay Ahead?
While supply chain problems are far from a thing of the past, they don’t have to be damaging to your bottom line.
Here are some actionable tips to help you safeguard your profits and cash flow.
Take the “Just In Case” Approach
Consider increasing the amount of inventory you store with a focus on stocking up on best-sellers and keeping lower quantities of your less-popular SKUs.
Keep in mind that getting inventory levels right can be quite a balancing act even for the most established brands.
For a “just in case” approach that doesn’t leave your cash flow locked up in excess inventory or your margins vulnerable to death by storage fee, use inventory forecasting tools that can help give you an accurate reading in real time.
Upgrade Your Inventory Systems
Perfect the inventory forecasting process, streamline your operations, and collaborate with key stakeholders and suppliers by adopting the latest supply chain tools and technology.
Here are just some processes you can automate and improve with the right supply chain tech stack:
- Demand forecasting
- Inventory management
- Fulfillment trigger emails
- Shipping updates
- Supplier communication
- Customer journey mapping
- Restock reminders
Develop Up-to-Date Contingency Measures
Create backup plans that can help support your store in case of any supply chain issues. Document your current processes and tools and brainstorm worst-case-scenario contingency plans for keeping your operations flowing smoothly, even if these systems were suddenly damaged or made unavailable.
Be sure to create a backup plan for:
- Shipping and fulfillment processes
- Returns and other customer service operations
- Inventory management
- Order tracking
Source and Re-Source In-House When Possible and Practical
If you have the staff, resources, and space to do so, consider consolidating some of your operations by bringing them in-house.
To discover which processes you can take on yourself, start by outlining all of your business operations.
Then ask yourself the following questions:
- Which supply chain management processes have the biggest impact on our sales and revenue?
- How much time per day or week would be needed to take these workflows in-house?
- Which processes can we realistically move in-house without burdening our current operations?
- What materials, people, and technology will we need to create in-house supply chain solutions?
With a clearer idea of your needs and capacity, you’ll be better prepared to take on the right processes vs. all the processes.
Consider Local and Alternative Supplier Networks
While e-commerce brands have relied on China for decades, prioritizing localized supplier networks is a must in 2023.
From avoiding the tech war between China and the US, to saving precious time and money, building closer-to-home supply chain solutions may be the answer to protecting and growing your business.
Consider diversifying your supplier network to include other sourcing options beyond China and the US.
Depending on your business model and product category, consider diversifying suppliers across one or more of the following sourcing countries:
For questions to ask potential global suppliers and insights on moving to a China +1 strategy, read The 7 Best China Sourcing Alternatives to Consider for 2023.
Here are some of the ways you can improve your business’s environmental performance while building a stronger supply chain:
- Use load-planning software to streamline transportation logistics
- Consider using recycled materials during the manufacturing process
- Cut back on packaging by using an eco-friendly design
- Reuse waste and salvage excess materials – get creative about making these materials into new goods and revenue streams
Moving Forward No Matter What the State of the Supply Chain
While things appear to be moving in the right direction, the supply chain still isn’t as reliable as we hoped. That’s why it’s essential to do your part to improve your own supply chain network.
Whether it’s establishing healthy relationships with new suppliers, purchasing your own warehouse, or transforming your supply chain management tech stack, the right e-commerce funding can help.
With the SellersFunding Working Capital solution, you get near-instant access to flexible funding to help manage your inventory levels, contract new suppliers, and revitalize your supply chain strategy.
We can approve credit limits of up to $5 million in 48 hours or less. Plus, you’ll only pay interest on the amount you use.
But don’t take our word for it. Learn how other e-commerce business owners have taken advantage of flexible funding solutions to fuel their growth. When you’re ready to make the next move, the right funding options are available and we’re here to help.
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