This article discusses 4 important supply chain choices for e-commerce businesses. On average, the supply chain costs are around 20 to 30% for e-commerces with inventory. This means that reducing these costs is extremely determinative for the profit margin. The four choices discussed are;
- Last-mile fulfilment
- Last mile fulfilment technology
- Replenishment technology
This covers the process from handing the package over to the delivery businesses till the actually delivery to the customer. The e-commerce has no influence on this proces itself, so they can not guarantee the quality of this process. Errors that can occur can be caused by;
- E-commerce (giving a package of over 2 kg to a delivery company that only handles light weight packages)
- Customer (register a wrong adres)
- Delivery company (forget to tell the client that their package is at the pick up centrum)
Possible solutions to this problem is to join volume contractors such as MyParcel or SendCloud or outsource your logistics by joining the platform of bol.com, which uses external sales points. This is specifically for small businesses. For big businesses, they should sign a contract with a delivery business. Because of their big sales volume, they can use their big volume to negotiate discounts and additional conditions, such as ‘less than 1% procent default in deliveries’.
Last mile fulfilment technology
The technology, chosen to support your e-commerce is of great importance. It should be customer-friendly, which means it has to be easy, logical and appealing. There are a lot of customers that quit in this process, which makes it even more important. There should not be many options, because customers will get confused or consider the process as too difficult.
The back end office is a complicated process. The traditional ERP systems are not equipped for the new e-commerces. The more components the process has, the more complicated it gets and the higher the need for a automated and integrated system. A few examples of the components are multiple warehouses or a mixed drop-ship and owned inventory.
The efficiency of the warehouse is mostly dependent on the automatising (not mechanisation!). Optimisation of warehouse management should be done by analysing Big Data and automating as many processes as possible. For the small companies, warehouse management should be outsourced, because doing it yourself it is not profitable. Big companies should keep warehouse management in the company. This will increase quality control.
This article is written by a teacher at Fontys Hogescholen (university), partner at District Management Consultants and owner of a fast-growing European e-commerce (www.topvitamins.nl)