Global retail eCommerce sales were USD$5.7 trillion in 2022. That figure is likely to increase as consumer demand grows.

But how can you ensure this success at the company level? Of course, your website and an item catalog are essential, but you need more. You must have a cost-effective system that allows you to distribute your products in record time without compromising their integrity.

However, achieving that fate is pretty challenging when there is a mass movement of products to consumers. That’s where a proactive eCommerce supply management strategy comes in handy.

This article discusses all you need to know about supply management in eCommerce and how you can streamline its impact on profitability.

What is eCommerce supply management?

It refers to the management of the production and movement of goods from the manufacturer to the consumer. The main stakeholders in this process are the suppliers, manufacturers, vendors, logistics companies, fulfillment entities, and the buyer. 

Each entity mentioned above plays a vital role in their corresponding supply chain stages. As such, mismanagement of any of them could have significant repercussions on the success of your eCommerce business. 

How to manage the impact on profitability

Profit percentage is one of the high-level metrics used to measure the success of any business. You need to find a strategy that improves your profit margin, and the best way to do so is by monitoring the supply management. 

Here are some of the tips you can consider:

1. Optimize inventory levels

The first thing you must ensure is the right balance of inventory. This factor is key to minimizing expenses and maximizing profitability. Understocking leads to lost sales and poor customer experience. On the other hand, overstocking results in unnecessary storage costs.

How can you prevent inventory understocks and overstocks? Forecast demand based on historical data. Some products sell more during certain periods, while others are in demand throughout the year.

Analyze these sales trends and set your inventory levels accordingly. You can also program your system to notify you whenever stock hits a given threshold. 

You can opt for eCommerce inventory financing if you don’t have enough money to purchase your next stock. These are cash advances that allow you to spend how and when you need them. But ensure you choose a lender whose terms are favorable for your business. 

2. Negotiate with suppliers

Another way to manage the impact of inventory management on your profit percentage is by negotiating with suppliers. Remember, every company will likely sell their products to you at a different rate depending on your agreement. 

So, before you strike a deal with any supplier, do your calculations. How much will you earn at the end of the day? Will the profit margins cater to your business needs and still leave you with something to deposit in your savings account? Negotiate the terms considering these two questions. 

Among the factors you may want to include in the agreement include:

• Bulk purchasing may reduce delivery and unit costs as most suppliers are willing to discount larger orders. 
• Longer payment terms mean you’ll pay a small amount per week or month, allowing you to sustain your business better and minimize financial pressure.
• Discounts for early payment are another viable option if you’re sure you can pay for all goods immediately after purchase.

Your objective should be to increase margins and reduce the overall costs of buying your inventory.

3. Monitor customer satisfaction

Almost every solution above is geared towards a better customer experience. But you can only know and understand their impact on your success by monitoring customer satisfaction.

Encourage every client to send their feedback after they’ve received their orders. They can do this on your eCommerce website or via your official email. Analyze this information regularly and improve any areas of concern as soon as possible. 

Customers should find this process very easy because it will improve their shopping experience. By working with the WordPress agency on this page, you can design a simple feedback form that can be easily accessed by your customers. This solution will help you to know what makes your clients happy and unhappy, so you can make the necessary changes in your supply chain management process.

4. Automate processes

Every successful business today leverages the power of technology in one way or another. You can do the same by automating your inventory management process. Use specialized software rather than filling your order and shipment forms manually. 

Another technology you may want to employ is an automated reorder system. Program your software to submit a new order whenever inventory falls below certain thresholds. This will help maintain optimal inventory levels and prevent over or understocking. 

Process automation ensures faster and more accurate data entry since there is little human intervention. It’s also easier to track inventory in real-time, which is beneficial for your data analysis. You can identify trends and patterns which will help you make informed decisions. 

5. Manage shipping costs

Logistics companies play a vital role in the success of your eCommerce business. The amount they charge to deliver products to your customers can impact your profit margins. 

Remember, you wouldn’t want to overcharge the customers as this can scare them away. So, the best approach is to negotiate favorable shipping rates with carriers. It may help to work with one carrier for most of your orders as you may qualify for discounts.

Optimizing package sizes may also help reduce shipping costs. If a customer orders multiple items at the same time, it’d be wise to combine rather than ship them in different packages.

Find a fulfillment partner to further cut these expenses and minimize shipping times. Fulfillment centers typically have negotiated shipping rates with carriers due to their high shipping volumes. Outsource your fulfillment to companies within cities where you have a high demand to better enjoy these benefits.

It’s worth noting that fulfillment centers can scale up or down quickly depending on your business needs. This allows you to adjust your inventory levels and order fulfillment processes as your business grows or contracts.

Conclusion

Supply chain management is a vital aspect of any eCommerce business’s success. Whichever strategy you choose will have huge repercussions on the profits your enterprise generates. The first thing you should consider is the inventory levels. Prevent overstocking and understocking to avoid related expenses. 

Negotiating with suppliers to offer discounts on early payment or bulk purchasing can reduce initial costs and increase your profit margins. Other solutions you should implement include process automation, cutting shipping costs, and monitoring customer satisfaction. 

 

Author’s Bio:  Amanda Nelson is currently a professional content writer.