by Brian Decker, Supply Chain Practice Director
What are the top supply chain considerations when implementing an eCommerce solution?
You have a new product, now what? You want to sell online, but there are a lot of marketplaces: eBay, Amazon, Jet, BestBuy, Walmart, etc. Creating a selling account and manually listing all of your products for sale on each site separately could consume you for days. And when the orders come rolling in, how do you consolidate them efficiently across various portals for fulfillment and tracking?? How do you handle same day shipping?
Entering the eCommerce world can easily overwhelm your business. It is a challenge to provide customers with the service level they expect while maintaining acceptable operational costs. Customers want to order goods at a competitive price. The goods must be available to ship the same day or next day. Tracking information should be emailed or texted as soon as the goods are shipped. And finally, goods must arrive on time and as ordered.
If all of the above tasks were handled manually, a seller could easily spend 20-30 minutes completing each order. And if problems arise – an issue with inventory, a delay in delivery, or a return requested – the cost of managing this could quickly erase any small profit.
There are supply chain solutions to meet your needs. Whether you want to integrate your consumer orders into your existing enterprise supply chain solution or run the business as a separate entity, here are the key supply chain considerations to consider when selling products online:
- Inventory Availability
- Product Master Data
- Order Management
- Third Party Logistics (3PL) Integration
Managing inventory to fulfill retailer orders with large quantities of each SKU is quite different from managing inventory for consumer orders of one unit each. The characteristics of the ordering and fulfillment processes and the lead-time expectations vary greatly even though it may be the same exact SKU being shipped out.
There are several solutions that allow fulfillment of orders with single SKU quantities between 1 and 5,000 without disruption. The key is to find a way to siphon off available inventory into your eCommerce channels without affecting your high volume customers. Strategies include:
- Creating a new SKU number for the eCommerce channel sales that has a one to one relationship with the main SKU number. The physical product would also be assigned to the new SKU and sellable inventory quantity is based on the total SKU quantity only.
- Selling the same SKU but up to a predetermined quantity based on a channel forecasting process.. The sellable inventory quantity would be based on a SKU / Forecasted Available combination. Orders placed within the forecasted time bucket would reduce the available quantity for sale in the specific channel.
- Selling inventory only from a specific physical location where the SKU could exist in multiple locations. In this case, the sellable inventory quantity is based on a SKU / Location combination.
Each of these solutions can be tricky to implement but a careful analysis of the product, inventory and distribution strategies can lead to the right solution for the business.
Product Master Data
Managing the attributes of your products is difficult enough on a single sales portal. Imagine launching a new product to ten marketplaces. While your core attribute list can be assembled quickly, it is time consuming to plug those attributes into the right fields in the marketplace product portals in order for product landing pages to present correctly.
There are several solutions to this challenge. On the less costly side (with heavy lifting upfront) is mapping all marketplaces product attributes to columns in Excel. Then as you add your data, you can mass upload or easily update with cut and paste. Alternatively, there are software solutions such as Channel Advisor with marketplace integrations already in place. You can enter your attributes into this software and choose which marketplaces to list your product and at what price. There is some implementation work to establish the connection with each of your marketplaces, but the time savings in the long run is well worth it.
Do not underestimate the importance of this step. An investment in this area to get the product information correct will improve your seller rating, increase sales, and reduce product queries and returns.
It requires a lot of time to manually take actions on orders like changing addresses or quantities, substituting SKUs, reducing prices, and completing refunds. Finding and resolving any discrepancies in orders can become a full time job quickly. It is important to have an order management software that integrates with marketplaces either directly or indirectly via product management / marketing software such as Sellercloud . This technology allows you to view, report, and alter customer orders in a single location with automatic updates to the marketplaces and customers.
Establishing this centralized management system has additional advantages too. A common set of processes for fulfilling, delivering and returning goods can simplify the financial management of the channels. Although many marketplaces operate differently, the reporting of financial data from a single source can remove many of the challenges organizations fear when implementing an eCommerce sales channel.
Third Party Logistics Integration
The initial implementation of an eCommerce channel can typically be very manual. Orders are gathered manually and an operator emails order data to the warehouse for fulfillment. It is easily conceivable that any delay in this work could, for example, miss the 2pm cutoff for same day shipments. So a potentially expensive decision needs to be made: Do shipments get expedited so the delivery is still on time? Do orders get refunded if the delivery will not occur as expected? What about those customers that paid extra for overnight delivery? Nobody wants to pay an extra $30 to get overnight delivery if the seller sits on the order for several days. How do you ensure customer satisfaction while maintaining profit?
The current customer expectation is that orders are shipped on the same or next day and that shipping information will be received once the order is placed. Often, companies inexperienced in this business do not process the tracking information emails fast enough. It is embarrassing when shipment tracking emails are received after the goods are delivered! The solution is complex and requires thoughtful consideration for how customers should experience the supply chain. Integration with fulfillment and logistics partners can establish a foundation for near real-time transaction communications both within the supply chain and concurrently with the customer. Building on this foundation with a clear supply chain marketing plan can enable automated processes to deliver and communicate according to customer expectations.
Returns can be tricky. Once you’ve established your return policy, you should put in place a set of standardized processes to quickly resolve negative customer experiences. When a customer requests a return, a lack of process and customer attention can result in a tidal wave of negative publicity. This is a quick way to reduce your seller ratings and lose credibility with both existing and potential customers. Reversing the impact of this negativity can be a long and expensive process.
Developing a physical returns process that quickly evaluates and dispositions your inventory will help you close issues with unhappy customers quickly. Mapping out the various causes for returns and standardizing the product evaluation process to confirm the status of the goods is one of the fundamental steps for setting up a returns program. Enhancing the program by integrating the physical returns process with a systematic, event management solution offers many advantages, such as automated status communications and timely refunds to the customers. This is the most effective way to turn a negative customer experience into a positive one.
Additionally, dispositioning of the inventory can be simplified and automated This enables the quick conversion of scrap and refurbished inventory into cash that can be invested in more profitable ways. Allowing that rejected inventory to age can have a crippling effect on an operation in the long run.
In summary, there are a myriad of detailed activities that need to be executed to successfully sell your products online. There are many solution elements to consider when designing an eCommerce strategy. Your supply chain needs to be nimble and the transaction data needs to be as automated as possible.
Looking to improve your supply chain capabilities? Plaster Group offers Supply Chain Consulting to help implement solutions to complex problems. Our consultants bring years of real supply chain experience to assist you in finding the best solution for your situation.