What is Supply Chain Management? Key Principles + Best Practices

A product’s journey starts with a raw material in the field or on a farm, continues through various stages of production and processing, is inspected for quality, stored temporarily before being sent to consumers (often many times), and then completed when it reaches its destination.

Each stage in the retail supply chain is crucial. Supply chain management (SCM) is essential to optimizing incoming and outgoing logistics procedures while also expanding your business.

Even one damaged link in the ecommerce supply chain has the potential to produce a ripple effect that results in lost income, sluggish delivery, reduced supply chain velocity, and a decline in consumer satisfaction.

This can result in stockouts and usage of a single manufacturer that shuts down for a period of time and causes manufacturing delays, among other things.

Customers don’t want to hear that their order will be delayed in today’s environment of 2-day delivery and the desire for everything now.

We’ll look at how ecommerce firms use supply chain management, the global supply chain structure, and SCM best practices in this chapter.

What is a supply chain?

A supply chain is a method of moving a product or service from one person or entity to another. This distribution channel is made up of sellers, manufacturers, people, information, resources, transportation methods, and more.

What is supply chain management?

The supervision of the movement of raw materials and completed goods inventory from production to delivery to the ultimate customer is known as supply chain management.

How good supply chain management makes your ecommerce business more efficient

Supply chain planning and management are what keep a company moving forward. As a result, you won’t be able to develop swiftly if it’s clogged or inefficient. Ecommerce companies of all sizes have several untapped possibilities for improving their supply chains.

There are a few things you can do to increase the efficiency of your supply chain. Whether it’s diversifying suppliers and working with local manufacturers, improving inventory management in warehouses, or even outsourcing fulfillment to the best 3PL provider, there are numerous techniques to improve your supply chain while reducing costs and maintaining client satisfaction high.

Having the right amount of product at the right time

Proper supply chain management allows you to plan ahead of time and anticipate demand for goods, allowing you to always have enough on hand. You run the danger of stockouts and backorders if you don’t have enough safety stock, which may result in your consumers having to wait longer for their orders. With too much stock, you’ll have to pay hefty storage costs, which will deplete your cash.

Minimizing lag time between parts of the supply chain

By examining and optimizing your supply chain, you can reduce transit time and increase efficiency.

  • Do your products take too long to create? Make better terms or look for another source.
  • Are you having a hard time getting your goods to market on time? Examine your warehouse locations and pick out fulfillment centers that are closer to your end consumers.
  • Do you have a hard time keeping popular items in stock? Increase your production, invest in inventory forecasting, establish more frequent reorder points, and increase your reorder quantity.

By looking at every part of your supply chain, you may identify areas for improvement and implement changes as necessary.

Reducing fulfillment costs

Fulfillment by Amazon costs money if it isn’t done intelligently. Ineffective inventory management, inconvenient geographic locations, expensive shipping rates, and inefficient labor and operations can add up over time and eat into your margins. eCommerce retailers that have a solid fulfillment operation that isn’t just a cost center but also generates revenue can benefit from it.