The Role of E- Commerce in Supply Chain Management24/09/2022 2 By indiafreenotes
Business efficiency at all operational levels is critical for the success of e-commerce. Supply chain management is an essential component of e-commerce. Supply chain management in e-commerce focusses on procurement of raw material, manufacturing, and distribution of the right product at the right time. It includes managing supply and demand, warehousing, inventory tracking, order entry, order management, distribution and delivery to the customer.
The e-commerce industry is not just limited to setting up a website and selling products online. It includes product configuration, suitable infrastructure, logistics, secured payment gateway, and supply chain management. An efficient supply chain accelerates e-commerce processes to meet customers’ expectations.
Vital Components forming the Supply Chain and Logistics Processes of E-commerce Industry:
Inventory Management: Inventory is a critical component of supply chain management. According to the traditional inventory model, businesses used their own warehouses to sell the products directly to customers. But, now as per the risk-pooling strategy, e-commerce businesses do not hold their own inventory and rather outsource their inventory to a larger wholesaler. It enables e-commerce businesses to reduce the risk of keeping their own inventory.
Several businesses are adopting the drop-shipping model for inventory. According to this model, a store does not hold the product it sells on the website, rather it purchases the product from a third-party and ships it to the customer.
Reverse Logistics: E-commerce businesses also have an SCM structure which entails reverse logistics. Reverse logistics is defined as the planning and execution of the movement of goods from the point of consumption to the point of origin. Almost, all e-commerce businesses provide the facility of exchange and returns. This increases the need for logistics.
Optimized Inventory Management, a Must-have for Supply Chain Management in E-commerce
Product Availability and Service Level:
The success of an e-commerce website depends on customer satisfaction. If customers cannot buy the right product at the right time, they will immediately switch to other e-commerce stores. A service level of 95% of products is ideal for e-commerce success. The slow delivery process increases the risk of losing potential customers and can even cause a negative impact on the reputation of the business.
From inventory to logistics and purchase to supplier management, processes should be well-coordinated and optimized. Even if one link of the supply chain doesn’t function well the entire supply chain management will fail, resulting in loss of revenue.
The reputation of an e-commerce business is measured by customer reviews and experiences. It is a critical factor that impacts the growth of an online store. Price comparison search engines are the first point of contact for online shoppers. The search engine ranking is also done based on customer reviews. To receive good reviews, the delivery of the right product at the right time is necessary.
Platforms like Amazon and eBay use internal key figures to assess the credibility of distributors. These platforms have supply chain key performance indicator (KPI) targets. If the KPI is below certain minimum values, then penalties in the form of account suspension can be imposed.
Excess Inventory Increases Costs:
E-commerce businesses are expanding rapidly due to which they reach their limit on inventory management. With the growth in business, product portfolio, supplier base and surge in returns also grow at a rapid pace.
Increasing inventory drastically is common mistake e-commerce businesses make to meet the demands of customers. Inventory represents a significant portion of the total investment of e-commerce businesses. Excess inventory can mutate into obsolete stock (dead capital) which can lead to increased costs.
Role of Supply Chain Management In E-Commerce
- Supply chain management helps E-commerce business to track their business across the network and provides complete transparency.
- Supply chain management plays a vital role in connecting the customers to the business through websites so that the customers can communicate directly with the organizations. Organizations form company websites to stay connected with the customers and collect feedback regularly.
- Supply Chain Management provides a global platform for organizations for trading. It plays an active role in the import and export of products and raw materials.
- Supply chain management is also helping to promote virtual business, where organizations can list their products on online portals. Supply chain management does all that is required to send the products to their customers.
- Supply chain management software comes useful to coordinate and monitor the movement of products and services to ensure they are delivered to customers on time. It also helps to execute the activities that are required to satisfy the customer’s requirements.
- Supply chain management helps to reduce company costs by removing retail units, and excess staff since the process is mostly done online.
- E-Commerce businesses aim at customer satisfaction. This is where supply chain management plays a vital role. It helps to keep track of the requirements of customers and ensures the products and services are delivered to customers on time.
- E-Commerce Supply Chain further helps companies maintain proper inventory by monitoring the time taken to deliver a product to ensure customers are satisfied with the service.
Strategies of Supply Chain Management for E-Commerce
- The main focus of any E-commerce Business is to deliver a product on time to its customers. Therefore SCM has developed a strategy to strengthen the inbound supply chain by accessing the currently existing problems and finding solutions to them, identifying the vendors who are responsible for the delay, Implementing compliance programs for vendors, and ensuring faster and cheaper ways of conducting final checks on supply chains.
- Supply chain management has further developed strategies that help in lowering the cost and time for delivery.
- Since organizations can monitor the inflow and outflow of products on regular basis through the SCM software, the normal capacity of a warehouse can be utilized to its fullest by tracking the products being delivered and are yet to be sent to customers.
- It further has developed strategies that have reduced manual labor. All the documentation can be done and stored in the machines. This helps reduce the risk of human errors and also adds to the efficiency of the organizations using supply chain management because the processing time considerably reduces. Students who are finding it difficult to understand how supply chain management increases the market efficiency can take marketing assignment help from professionals. They guide students and help them gain more clarity.
- Supply Chain Management further helps to reduce labor costs by making the most of their skills. It has also developed strategies to streamline the process of taking orders. As a result, the number of accepting orders in a day has increased leading to more revenue.
- It has also helped in the growth and development of E-Commerce by making the most of the existing warehouses reducing the outbound expenditures by using logistics of the third party.