eCommerce companies come with a lot of advantages over traditional brick and mortar stores.
From decreased startup costs to a lower barrier of entry, expenses are lower and marketing is easier.
However, even with all the benefits of eCommerce websites, no business owner can escape the need to source and manage suppliers. Operations and supply chain management might have its origins in physical businesses, but it’s just as integral to eCommerce companies.
This guide will explore the various components of operations and supply chain management. We’ll also offer tips on working with suppliers.
You’ll learn:
- What operations and supply chain management is
- Why it’s important in eCommerce
- How to choose the right supplier
- How to manage your suppliers
What is Operations and Supply Chain Management?
Before diving into the nitty-gritty, let’s get some definitions straight.
Operations and supply chain management is a broad term that refers to anything involved in a company’s internal organization and functioning. It also includes any activities that occur in tandem with third parties.
The operations management portion is chiefly concerned with the inner workings of a business. The supply chain management portion focuses on all activities that occur outside of the business.
A successful eCommerce company needs to focus on both of these areas to stay organized, competitive, and keep growing.
What Is Supply Chain Management and Why Is It Important?
Supply chain management in eCommerce involves:
- Sourcing and processing of raw materials
- Organization and storage of goods
- Balancing supply and demand
- Tracking inventory
- Managing orders
- Handling distribution and delivery
It’s the same as traditional supply chain management, except it happens in the eCommerce space.
Supply chain management is important because it optimizes cost-effectiveness, boosts customer satisfaction, and helps your company stay competitive.
However, without an effective strategy, you’re operating in the dark. You don’t know what customers want, how much to produce, when materials will arrive, or if your customers will receive their orders on time.
How to Choose the Right Supplier
The supply chain of eCommerce companies doesn’t differ much from that of brick and mortar operations. It’s all about sourcing the right materials, perfecting the manufacturing process, and timing orders with deliveries.
Finding the right supplier is critical to establishing customer satisfaction, maintaining pricing structures, and complying with quality standards.
When you first enter into the confusing world of operations and supply chain management, you probably don’t quite know where to begin. While you might be tempted to take the most affordable option, cost isn’t the only factor to consider — it’s not even the most important.
Let’s explore the steps you should take to find the right supplier.
1. Define Your Business’s Needs
Operations and supply chain management will look different for each eCommerce business. Before you can find the right supplier, you have to define your company’s needs clearly.
Here are some questions you should ask:
- What kind of materials am I working with?
- How much do I need to be produced?
- How much time can I wait for products?
- What kind of margins can I afford?
2. Look for Suppliers in the Right Places
After defining your needs, start actively looking for a supplier. If there’s a large supplier in your niche that meets your needs, you might be able to request a quote directly on their website.
Trade magazines are another way to find promising leads when there’s no obvious choice available.
3. Compare Potential Supplier Bids
Once you receive at least a handful of bids, you can start comparing each to see which is the best match. Be sure to reference your initial list of requirements. You’d be surprised how many unqualified candidates decide to reach out despite not having what you need.
Take an aggregate approach to this assessment. Rather than focusing on one factor and forgetting the rest, consider how well the supplier matches all of your needs.
4. Set Up a Meeting with Your Chosen Supplier
If you haven’t found a promising supplier after comparing all of your leads, you might need to repeat one of the previous steps.
However, if you’ve identified a potential option you should set up a meeting.
This initial contact can be a short call or video chat to go over the basics. It gives you a chance to clear up any misunderstandings and make sure both you and your supplier’s expectations are aligned.
It’s wise to get everything laid out before moving ahead with more in-depth and legally-involved steps.
How to Manage eCommerce Suppliers
Managing your suppliers is an important aspect of operating a successful eCommerce business. Let’s go through some of the steps you can take to ensure your supplier relationship is in top working order.
Write a Solid Agreement
All great operations and supply chain management strategies start with a good contract.
The goal isn’t to manipulate or take advantage of your suppliers. A solid written agreement should ensure everyone’s needs are being met.
Having clear expectations at the beginning makes it easier to keep your business organized and running smoothly. A good contract can also prevent miscommunication that will lead to mishaps down the road.
It’s always a good idea to hire legal help to lay out the legalese and then translate it. You need to have a clear understanding of what your supplier agreement says.
Don’t be afraid to ask for changes. It’s perfectly normal for an agreement to go through a few rounds of edits. You want everyone to feel comfortable with your new business relationship.
Only sign with a supplier if the agreement meets all of your needs. Even a seemingly ideal supplier is a no-go if the contract isn’t a fit.
Invest in eCommerce Inventory Management Software
There are countless moving parts to consider when optimizing operations and supply chain management. Unfortunately, many of these factors aren’t even under your control.
For many eCommerce companies, you’re outsourcing production, manufacturing, and a variety of other business departments to a supplier. Your job is to focus on the management side of the business.
You can’t have complete oversight of what your suppliers are doing. So it’s important to have excellent systems in place for everything you can control.
This is where inventory management software comes in.
eCommerce inventory management software can help you keep tabs on inventory levels to optimize product distribution and production.
Don’t waste time contacting a dozen different people or consulting various logbooks. The information you need can be conveniently compiled into one manageable, accessible, and organized location.
With this information close at hand, you’ll make better, more accurate, and timely business decisions.
Keep Lines of Communication Open
Just like any personal relationship, open lines of communication are an indispensable component of professional associations.
Operations and supply chain management is all about oversight, administration, and control. Regular contact with suppliers helps to establish rapport and build trust.
If you’re only reaching out to your suppliers when something goes wrong, it’s a good sign you’re not communicating enough. From the beginning, be sure to provide new suppliers with your preferred communication method and request the same information from them.
You can conveniently store this information in your eCommerce inventory management software. That way, anyone involved with supply management can reach out to a supplier when necessary.
Schedule regular calls to stay up-to-date with any changes, make sure everything is operating optimally, and discuss critical information.
Stick to Your End of the Deal
While suppliers are willing to compete for your business, don’t forget this relationship is a two-way street. To make sure your business continues operating without a hitch, you have to hold up your end of the bargain.
Pay your suppliers on time, communicate regularly, and relay adjustments promptly.
Holding up your end of the bargain shows suppliers that you’re a trustworthy and respectable client. It’s helpful to think of your suppliers as business partners rather than random third-parties.
Your goal should be to create a long-lasting relationship with suppliers that powers through uncertainty, finds success, and lasts for your business’s lifetime.
The time it takes to develop a meaningful relationship with clients pales in comparison to the struggle of looking for new suppliers every few months.
Operations and supply chain management is at the core of any eCommerce business’s success. Choosing the right supplier and implementing an effective management strategy can impact your entire business, including customer satisfaction, product quality, and profit margins.
Start by determining what you need from a supplier. This information will help you find the best places to look for a partner and make it easier to choose the right match.
After finalizing a contract, start focusing on managing your business. Pay attention to what you can control, and don’t forget to hold up your end of the deal. Think about investing in tracking software for real-time assessments of how your business is functioning.
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