Navigating eCommerce Supply Chains During Times of Uncertainty
Supply chain management used to be relatively cut and dry. The expectations of fulfillment and shipping timelines had little variability and many brands defaulted to a standard “90-days” assumption when placing orders out of China. But that timeline has been turned on its head due to the impacts of the global COVID-19 pandemic.
Today, we’re seeing congested ports, labor shortages in manufacturing, and unexpected surges in consumer demand. Logistics managers are fighting for a waning number of shipping containers and big retailers like Walmart are even chartering their own vessels to bypass ocean shipping bottlenecks. That is, if manufacturers even have products to put on those ships.
🤔 All of this chaos is leading to significantly longer (and oftentimes completely unpredictable) wait times for inventory shipments. With so much uncertainty in the supply chain, it begs the question: How can today’s DTC e-commerce brands weather the storm and get smarter about supply chain management?
Below are some tips to bolster your e-commerce business strategy in light of these challenges.
COVID Complexities in E-Commerce Supply Chain Management
For many small DTC e-commerce brands, supply chain management is an especially complex problem. The first hurdle is prioritizing the working capital they have on hand at any given time appropriately.
If you’re running a DTC e-commerce company, you may need to pay a supplier up front for inventory. But, if you don’t get that inventory until six months later, it could take a very long time to sell the inventory and re-coup that initial investment.
For seasonal products that miss a once-yearly shipping and selling window, this is even more of a challenge. It’s not uncommon for small DTC e-commerce companies to cope with capital needs in unhealthy ways — like running up massive amounts of credit card debt. That only extends your timeline for reaching a break-even or profitable point, and may even force you to cut other important costs, like advertising spend that will help you sell the inventory quicker.
Alleviate E-Commerce Supply Chain Woes with Enhanced Planning and Forecasting
Our best piece of advice for navigating supply chain management in e-commerce is to double down on planning and forecasting. A few approaches that work well together include:
Data-Driven Forecasting for Inventory, Advertising, and Pricing Strategies
You need to have a clear picture of how your business operates in order to make strategic decisions in times of uncertainty. Invest in a tool that allows you to see all of your data in one place and tinker with each element of your e-commerce business strategy to plan for worst case scenarios.
Your planning models should be able to stack inventory arrivals against varying advertising spend and customer acquisition costs as well as account for things like future discounting. They should also be able to factor in financing costs and accurately predict future cash needed and cash on hand. Data-driven supply chain planning can give your inventory and financial models the flexibility to:
- Measure the impact of different inventory arrival times
- Forecast ad spend adjustments
- Explore pricing strategy adjustments
Running ‘what if’ scenarios with multiple variables will help you understand the potential impact of each variable so you can make better plans, prepare for delays, and prevent yourself from overspending in certain areas or making short-sighted decisions that leave you in debt.
☝️ Pro Tip: This is also a great time to upgrade your inventory management software - or install one if you don't have one. The trusty Google sheet you have used since inception might have had its last day. A product like Fuse connected to Bainbridge can bring dramatic improvements (and get you and your team out of spreadsheet hell).
Re-Evaluate Your DTC Supplier Relationships
Once the right planning tools are in place, turn your attention to your supplier relationships. This might be the right time to play with inventory quantities and reach for price breaks that previously seemed too expensive to yield a return.
With a flexible forecasting model, you can better negotiate with suppliers and test out different options to see if a higher upfront investment would in fact benefit your business more than dealing with delays in shipping and getting products out the door.
Supplier diversification is also top of mind for many supply chain experts. In fact, major business schools are adapting to changing times with an updated curriculum that focuses on supply chain resilience and managing risk in e-commerce business strategies. Part of those programs include conversations about the downsides of sourcing too much from one country.
While options may be limited when you’re first starting out in the world of DTC e-commerce, more manufacturers in Mexico, Portugal, or within the U.S. are starting to become viable, attractive options when compared to places like China, where competition is extremely high.
Again, a flexible forecasting model can help you weigh the cost-benefit analysis of working with different suppliers and potentially absorbing higher manufacturing costs for shorter shipping routes.
Conduct a Thorough Product Analysis
Merchandising is a tough job. But in times like these, the role of your merchandiser becomes even more important to your e-commerce business strategy.
For companies that sell multiple products, it’s time to conduct a thorough, SKU-level product analysis to determine what product variations really provide a return on your investment. Ideally this is something that happens on a regular basis, but due to the complexity of the data analysis it can unfortunately slip in the list of priorities for many small DTC e-commerce brands.
Approach merchandising decisions in the same way you approach forecasting — get all of your data in one place and analyze the impact of limiting or eliminating certain SKUs.
The Bottom Line: Improving Your E-Commerce Business Strategy
COVID-19 proved to be an exceptional disruption to the supply chain, but also an opportunity for us to learn how to make smarter decisions about how we run our businesses.
It’s essential to plan for disruptions and put the data first. Use your data to strategically forecast for the future, build better relationships with suppliers, and get smarter about your merchandising.
We offer a data-driven DTC e-commerce management software with no annual commitment. Try it today.