The old adage, according to which a chain is as weak as its weakest component, applies here. The supply chain performance of a company is no different. Every stage of an ecommerce business operation, from production to delivery, has an influence on the following.
This is why good supply chain management is so important for an ecommerce company’s success. But how can you tell if a supply chain is efficient? And how do you choose which areas of development deserve attention?
You need to keep a close eye on your supply chain performance in order to properly run your firm.
Measuring supply chain performance
You can begin measuring your overall supply chain performance as soon as you have a clear picture of the KPIs you want to track.
The measurement of period performance is an important stage in supply chain transformation because it points you to where you may reduce waste, implement technology, or utilize automation to speed up time-consuming activities.
Start with measuring inventory investment & efficiency
Inventory management will account for the majority of your KPIs. That’s because the money you put into inventory has a significant influence on your cash flow. When production exceeds sales in a specified period, it’s termed positive inventory investment; conversely, when production falls short of sales, it’s referred to as negative inventory investment.
Positive inventory investment on its own does not indicate a problem with your supply chain until you increase production based on anticipated or current demand.
Inventory efficiency is a measure of how well you use available inventory to satisfy consumer demand while retaining optimum stock levels. To assess inventory efficiency, keep track of inventory turnover over a specific timeframe.
Having a clear image of your inventory investment and efficiency will aid you in finding areas for supply chain optimization.
Get a clear idea of your lead times
Time is a significant factor in your supply chain. The length of time it takes to complete individual procedures or activities is a major force behind your supply chain.
The number of days it takes to complete a task depends on the duration in seconds. It determines how much time is spent on various supply chain operations, such as order cycle time (i.e., the average time it takes to process, fulfill, and ship an order).
Having a good understanding of the lead time throughout the supply chain might help you identify problems and backlogs, allowing you to simplify your operations.
Don’t forget about on-time supplier delivery
Lead times begin before you receive your goods.
It’s critical to understand how long it takes the supplier to bring in inventory, since this directly affects your capacity to fulfill demand. After that, you’ll need to keep track of warehouse receiving, fulfillment, and delivery times.
On-time supply delivery is essential since late deliveries may severely disrupt the rest of your ecommerce plan and cause longer lead times.
You should be able to tell whether certain suppliers are prone to late shipments and which ones have delivered on time.
To minimize the effects of manufacturing delays or interruptions, some ecommerce businesses broaden their sourcing requirements to create a more agile supply chain.
What affects supply chain performance?
The performance of your ecommerce supply chain is influenced by every stage of the chain, from buying to delivery.
Having a thorough understanding of the variables that influence supply chain performance can assist you in improving supply chain execution.
Your supply chain’s performance is strongly impacted by your relationships with various third parties, such as manufacturers and suppliers, distributors and dealers, and shipping and delivery partners.
Communication barriers and a lack of visibility may contribute to increased manufacturing lead times, greater expenditures, and other delays.
COVID has significant effects on the supply chain, especially when external environmental factors disrupt it. The COVID shift is a testament to this.
Businesses may be able to mitigate the impact of environmental uncertainties by focusing on supply chain velocity and building agile and sustainable supply chains.
Bad weather, epidemics, and a lack of raw materials can all have an effect on your supply chain. Many companies decide how much buffer inventory it’s necessary to keep in anticipation of disruptions.
Another approach to prevent risk from environmental uncertainty is to keep product in several fulfillment centers. If a fulfillment center has to close down, orders may be filled from a secondary location, assuring that customers do not lose their purchases.
3 ways to improve supply chain performance
So you’re interested in improving your supply chain performance. Where should you begin?
Here’s a high-level look at how to spot possibilities and make improvements.
1. Expand the visibility of your supply chain
Supply chain visibility is important for smooth interaction between all parties along the supply chain. As a result, it aids in the development of closer ties and cooperation.
When you know how things are flowing through the supply chain, you can anticipate potential problems and take proactive measures to prevent them.
If a supplier informs you of possible production delays in advance, you may be able to find alternative suppliers before your supply is disrupted once again, or plan to use safety stock to meet demand.
You’ll be able to identify any bottlenecks and find potential areas for improvement with increased visibility. This makes it easier to improve your supply chain efficiency and streamline your processes.
For example, if you notice frequent delays in warehouse receiving, you may discuss how to improve the process with your staff and have more goods on the shelves faster.
2. Automate your supply chain process
Automation is the key to saving time and increasing your supply chain’s productivity. Examine for jobs and processes that may be automated so you can concentrate on things that require human interaction.
Supply chain solutions for direct-to-consumer companies are more accessible now than ever before.
For instance, cloud shipping solutions might help you get your items faster by analyzing the most effective delivery routes and ensuring that purchases are delivered from the most efficient locations.
Launch Fulfillment, an automated fulfillment solution, allows you to outsource the time-consuming operations of selecting, packing, and shipping purchases.
You can manage inventory and fulfill orders on many different channels, store it in warehouses across the world, and monitor supply chain performance from one dashboard with Launch Fulfillment.
3. Nurture good relationships with suppliers
Supplier relationships play an important role in your supply chain performance. That’s why this is another area that you should focus on to optimize your procurement and logistics.
Nurturing good relationships with your suppliers is essential for speeding up your procurement process and ensuring cost-effectiveness.
It also provides you with a better view into the procurement process, allowing you to anticipate any potential changes in raw material pricing or longer production lead times.
As a result, you’ll be able to anticipate and make required modifications before those changes have an impact on your supply chain performance.