What is supply chain planning?
Establishing procedures for various operational phases, from acquiring finished products and storing inventory to delivering orders to consumers, is part of supply chain planning for ecommerce firms.
Each stage in the supply chain requires careful planning to improve supply chain efficiency. Deciding which and how many suppliers to work with, how much safety stock to maintain on hand, and how you will inform your consumers when there are fulfillment or shipping delays are all examples of planning.
Throughout the supply chain, there are many moving parts, and many people are involved (sellers, manufacturers, warehouse personnel, haulers, etc.). Unanticipated circumstances that cause delays and difficulties throughout the supply chain are inevitable.
You can feel more prepared for the unexpected, react swiftly, and still provide a great customer experience by planning and optimizing your supply chain.
3 essential supply chain planning processes
There are several essential procedures that every ecommerce firm must think about during the supply chain planning stage. Here’s a summary of all of them.
1. Production planning
To run a hassle-free supply chain, you’ll need to have an understanding of production lead times, which refers to the time it takes for a purchase order to be fulfilled by a manufacturer.
Here are two tips to keep in mind:
- It’s preferable to have a short production lead time rather than a long one because it ensures that clients get their products as soon as possible.
- Having all manufacturing done abroad versus relying on higher-priced domestic redundancies can reduce the chance of having back-up preparations.
Finding the correct manufacturer may save you hundreds of thousands of dollars over time, and it’s especially crucial for startups with little money.
You’ll need to keep an eye on the performance of your chosen manufacturer over time once you’ve found one. Here are some questions to ask during evaluation:
- What indicators and metrics are important to their success?
- Are they meeting SLAs?
- Is their product quality up to your standards?
- Are they improving?
2. Supply management planning
To establish a strong supply chain, the next step is to figure out how you will plan and manage the supply of finished goods to meet customer demand.
A methodical approach to inventory optimization is required. However, with the right planning, you can better guarantee that the correct amount of inventory is available to meet demand, minimize logistics expenses, and avoid fulfillment delays as a result of typical inventory management blunders.
Here are some of the difficulties with supply management:
- Backorders, wait lists, and out-of-stock issues are all possible as a result of failing to purchase enough inventory from the manufacturer.
- If you have too much inventory, you’ll undoubtedly spend a lot on storing and maintaining it. There’s also the danger of having obsolete, expired, or unusable goods if you order more than you need.
Understanding the limits of supply, as well as demand, is key to successfully managing your warehouses and keeping them in prime working order. That’s why having tools and technology in place to assist with demand forecasting is crucial. Inventory forecasting allows you to fulfill the demands of your consumers when they want it most.
Forecasting demand will never be completely precise, but it will greatly reduce stockouts and improve client satisfaction while maintaining inventory levels.
Nothing kills progress (or your reputation) faster than being sold out for weeks on end. Proper demand forecasting and inventory management can help avoid a company from purchasing insufficient or excessive goods, which may result in too much cash.
3. Operation planning
The most complicated stage is arranging internal supply chain procedures, which are critical to building an efficient, lean supply chain.
Warehousing is the first step in ecommerce management. You must choose where to keep your inventory and whether or not you will fulfill orders yourself, use a warehouse, dropship items, or collaborate with a 3PL.
There are a few common ecommerce problems:
Not expanding into additional fulfillment centers soon enough
It makes sense that you would only fill from one warehouse (or just your home or workplace), but as order volume increases, this can be harmful.
This is because:
- The average shipping cost is often greater than it should be for places like London or Hong Kong (i.e., how freight zones function).
- Because it delays deliveries for end users, it delays the flow of products.
- It raises the danger of a severe storm or any other problem that causes a warehouse to shut down, preventing truckers from picking up.
Even if you outsource fulfillment to a 3PL like Launch Fulfillment so that each warehouse may have only a small space, such as by relying on rapid and affordable supply chains, you can spread risk and offer faster, more budget-friendly shipments.