Rethinking supply chain strategies to build strength and resilience for your ecommerce business
Ecommerce startups need to improve their supply chain resilience to minimise unforeseen supply chain disruptions and ensure business continuity .
In the world of ecommerce, supply chain management is critical to the success of your business. A resilient and efficient supply chain ensures your products reach your customers on time and in excellent condition. However, in recent years, supply chain disruptions have become more frequent and challenging to manage due to the pandemic, geopolitical climate, and other factors.
The need for resilience in today’s economy
The COVID-19 pandemic and the Russian invasion of Ukraine have demonstrated the vulnerability of global supply chains. Many ecommerce businesses have relied on short-term strategies to address the resulting supply chain disruptions.
According to a survey by Gartner, only 21% of respondents have a highly resilient network. This means that only a small percentage of businesses have good visibility and agility to quickly divert sourcing, manufacturing, and distribution activities to avoid disruptions. Ecommerce startups need to improve their supply chain resilience to minimise unforeseen supply chain disruptions and ensure business continuity.
Here are some disruptions that ecommerce businesses should look out for:
Immediate supply chain shocks
The invasion of Ukraine has created three immediate challenges for ecommerce businesses:
- Reduce in production or shutdowns at several manufacturing plants
- Lower purchases of goods sourced from Russia
- Logistics disruptions across air cargo, ports, road and rail, and shipping
The impact has been felt most by the automotive, chemicals, energy, food and agriculture, and travel and logistics sectors.
Long-term threat to demand and critical-materials volume
Ecommerce businesses face several emerging developments that could pose a larger, more long-lasting challenge in the medium term. There is a growing emphasis, especially in Europe, on ensuring the security of vital resources such as food, energy, and other materials. This is likely to have a long-term impact on supply and demand chains. While hoarding goods may offer a temporary safeguard, it may become necessary to secure a reliable source of supply, which could lead to increased expenses.
Lockdowns during the COVID-19 pandemic, which contributed to shifts in consumer spending from services to products, are partly responsible for the current supply chain challenge. As demand begins shifting back to services, demand for products may decline, easing some of the pressure but also adding to the overall uncertainty.
Lastly, demand for suppliers with lower carbon footprints or greener alternatives to existing products could rise as a result of the March 2022 US Securities and Exchange Commission ruling on carbon disclosures, among other announcements, as well as Europe’s continued focus on sustainability. Suppliers will need to shift their inventory management strategies for the near future.
Therefore, to build supply chain resilience, ecommerce businesses must consider adopting fail-proof strategies. Here are some such strategies that can help you stay afloat if not soar even in uncertain market situations:
Identify pain points
To build a resilient supply chain, businesses need to identify potential pain points in their supply chain. To efficiently handle potential supply chain disruptions, it would be beneficial to form a team of people with a variety of skills and backgrounds who can work together and take proactive measures.
Startups should also ensure that their teams have the necessary resources, operational capabilities, decision-making tools, and a robust threat detection system. These tools should track and notify potential political developments, cyber threats, compliance risks, and regulatory risks that could disrupt the supply chain.
Prepare for the unknown
Startups need to prepare for the unexpected, where there is little room for a “steady state.” According to McKinsey, organisations can expect supply chain disruptions that last one month or longer at least once every four years. To avoid the drastic effects of these disruptions on a startup’s growth and revenue, founders must take steps to strengthen their supply chain.
Founders should discuss possible disruptions with their vendors and advise them to stock items in short supply. Businesses can invest in technologies that allow them to track and monitor their supply chain in real-time, allowing them to quickly identify and respond to disruptions.
Decrease dependency and supplier risk
Over 80% of supply chain disruptions begin with lower-tier suppliers, particularly those located in areas with limited transparency and visibility. Relying on a single supplier, especially in these uncertain times may backfire. Startups should advocate for the development and cultivation of partnerships with multiple vendors who can meet their needs in times of uncertainty while the business continues to operate without major disruptions.
Businesses can profit greatly from investing in a supplier management software that allows them to track and manage suppliers' performance and risks effectively.
Capitalise on elastic logistics
Organisations can use elastic logistics, which refers to the use of flexible and adaptable logistics solutions. This approach can help businesses save money by only paying for the services they need, as opposed to owning and managing a fleet of vehicles. Elastic logistics also offers greater flexibility in terms of scaling up or down as per the organisation’s requirements, which can help reduce costs and improve overall supply chain efficiency.
Businesses can leverage various technologies, such as cloud-based logistics platforms, real-time tracking, and analytics tools. These technologies help organisations streamline their logistics operations, reduce lead times, and optimise their supply chain, leading to better customer satisfaction and increased profitability.
Ecommerce businesses must address the vulnerability of global supply chains by rethinking their short-term strategies and start building structural resilience. Supply chain operators may need to consider a range of options, including structural reform, to restore resilience.
The strategies above can greatly enable ecommerce businesses when surrounded by uncertainty technological advancements designed to enhance supply chain operations can keep them prepared for market changes with enriched data, real-time insights, forecasting tools and more.
(Anish Popli is the Founder & CEO of ProcMart)
Edited by Megha Reddy
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)