6 Supply Chain Investments You Need To Make To Boost Your eCommerce Business Growth
9 September, 2021
Jake Rheude

Jake Rheude

5 minutes

Whether you’re shipping out phone accessories from your garage or have a full-scale apparel business run out of a fulfillment network, your supply chain will always have room for improvement. The smartest way you can spend your money is to save you time, and those are the investments you need to make consistently to keep your supply chain running at its most efficient.

Here are six ways you can invest in your supply chain to grow your eCommerce business:

1. Inventory Management Software

Poor inventory management costs your business in more ways than you might imagine: inaccurate inventory causes so many issues that ripple out from your business up and down the supply chain. Stockouts will frustrate your customers who just want to buy your product but you can’t seem to keep it in stock or order enough – and if your product is not unique, brand-agnostic customers will turn to wherever they can get it. Inconsistent ordering will frustrate your suppliers and asking for rush orders will cost you a pretty penny. Overstocking will cost you the wasted space on the warehouse shelves, and inaccurate inventory counts can mean selling product you don’t have, or showing “sold out” on products that are actually collecting dust on the shelf. 

Investing in an inventory management system will help you accurately track inventory, analyze sales, and forecast for the future. Real-time inventory management can be especially helpful when you have a breadth of SKUs that are difficult to track manually, and when you house those SKUs in multiple different warehouses. 

warehouse inventory

2. Warehouse Management software

Warehouse management software (WMS) works hand in hand with inventory management software to create efficient, effective, and streamlined warehouse workflows. Where inventory management systems keep track of what inventory you have an help keep exactly what you need in stock, Warehouse Management Software looks at the path that inventory takes through the warehouse and optimizes it so that it is as efficient as possible. 

A good warehouse management system wil:

  • Optimize the warehouse design so that it uses space more efficiently and shortens the pick-and-pack process. 
  • Track your inventory so that you know exactly what you have and exactly where it is at all times.
  • Generate reports about the warehouse’s performance and help you find areas for improvement.

Together, IMS and WMS can do inventory tracking, automatic order processing, order management, inventory reordering, data reporting, and analytics.

3. Automation

The first thing that tends to come to mind with automation is robots, and while that is an option, there are a plethora of cheaper and more realistic options that every business can invest in, regardless of size. Utilizing supply chain automation technology means you are paying for technology to do work that you would otherwise spend man-hours on. The work that is best suited for automation technology is repetitive, tedious, and requires high accuracy, all of which are more difficult for human beings.

Spend your man-hours more efficiently and use automation technology for:

  • Inventory Management and Warehouse Management, as discussed in the previous two points.
  • Order management systems. These systems can automatically receive, process, and send orders to the appropriate place.
  • Customer service and communication. If you receive many of the same inquiries over and over, you can invest in a chatbot for your website to automatically answer these types of questions, or direct the customer to your customer service team if they need further assistance.
  • Accounting and bookkeeping. By using a bookkeeping service, you can automate accounting busywork like reports and reconciliation. 

Investing in automation does not mean replacing your employees with robots and software, but rather offloading menial tasks from your employees and redirecting their labor towards a more effective place.

4. Order Speed vs. Accuracy

A major talking point in the order fulfillment business is speed. Faster processing, faster shipping, everything needs to be at breakneck speed to compete with Amazon. However, here’s your hot take for this article: accuracy is more important than speed.

It’s pretty easy to conceptualize why this would be the case. A customer that receives their product 3 or 4 days after ordering, even if they expected it in 2 days, is going to be a lot less unhappy than a customer who receives the wrong order entirely. So while speed is still important, consider making accuracy your first priority. You can do this by incentivizing your employees to pick accurately, always keeping accurate inventory, and striving to eliminate shrinkage.

5. Shipping Time and Cost

There are three components to the cost of shipping a product: distance, speed, and weight. All three of these will dramatically increase the price you (or your customer) pay for shipping. Whether you are absorbing the cost of shipping and building it into the price, charging customers the true price of shipping, or some combination, this is a lucrative area for improvements.

First, distance. Where are you and your warehouses located, and where are your customers located? The further your packages have to travel, the longer they’ll take to get there, and if your warehouse isn’t positioned well, you could be throwing money away. Choosing your fulfillment warehouse location is a critical strategic decision. See if you can move your warehouse closer to most of your customers, or work with a third party logistics company (3PL) that already has their warehouses strategically placed to reach your customers.

Next, speed. Everyone wants their products faster – thanks Amazon – so how can you make that happen? The warehouse location advice for distance is a 2-for-1, because it also applies to how fast your products will get there. The perfect location for your warehouse(s) will maximize speed and minimize distance, and you’ll get the best value for shipping.

Finally, weight. There are two different formulas for weight that shipping companies use to calculate shipping cost: dimensional weight and actual weight. They charge you for whichever one is more – so if you have a large, lightweight product, you’ll be charged based on dimensional weight; if you have a small, heavy product, you’ll be charged the actual weight. See if you can bring down the cost, either by decreasing the weight or the size of the package, whichever one you’re being charged for. 

logistics

6. Reverse Logistics

The final step in the supply chain: reverse logistics. Businesses don’t like to think about what happens when a customer wants to return a product, so they often don’t invest in the process. But returns are top-of-mind for eCommerce shoppers, and you’ll see a great ROI if you direct your attention towards making it a better, easier experience for them.

Over two-thirds of shoppers check the return policy before ordering, and a whopping 70% will buy from a company again if the returns process is easy. So while returns do cost you money in the short term, making it an efficient and easy experience will increase your conversions and bring back more customers.

Here are some ideas to make your reverse logistics more customer-friendly:

  • Make sure that your return policies are easy to find and understand
  • Set a clear return window
  • Outline exactly what qualifies for a return
  • Decide if you will offer a full refund or store credit
  • Decide if you will charge a restocking fee
  • Include a return shipping label in the 
  • Implement an online returns window that is entirely automated

A bad return experience kills any potential lifetime customer value. In addition to that, an inefficient reverse logistics process costs you money by impacting inventory accuracy, and delaying when the product reaches the warehouse, is processed, and gets back on the shelf for resale.

Conclusion

Because a supply chain has so many moving parts, it can be hard to step back and see the full picture. However, at each step of the supply chain there are areas that are ripe for investment. Improving them can bring incredible time and money savings, and help you continue to scale your eCommerce business.

Posted By

Jake Rheude

Jake Rheude

Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

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