(This article was last published on November 22, 2017. It’s been updated for completeness and accuracy.)
Online shoppers continue to push retailers to meet their delivery expectations. They want free, fast, and multiple delivery options at check out and retailers deliver as promised. If something does go wrong, shoppers aren’t forgiving either.
In fact, 84% of consumers say that they won’t return to a brand after just one poor delivery experience.
The stakes are high for retailers. Delivery speed, price, and pick up options can dictate whether a customer buys from you or another competitor. It’s an important part of the purchasing decision that can’t be ignored.
Unfortunately, managing your backoffice operations to optimize for fulfillment is one of the hardest aspects of selling online. If you’re a growing business, it’s overwhelming to understand and take action to improve your processes for customers. To help you, this article covers the basics of supply chain management and why you must make it a priority for your online business.
What is Retail Supply Chain Management?
If you’re new to the game, logistics can seem overwhelming. You might think that you’re not big enough to be throwing around terms like supply chain management. However, if you’re experiencing growing pains like delayed fulfillment times, high fulfillment costs, and the inability to offer competitive shipping options and prices, then you’re ready to optimize your supply chain.
Your retail supply chain is the processes you use to get your products to your consumers. It encompasses everything from obtaining the raw materials to make your product to delivering that product into your shoppers’ hands.
Retail supply chain management therefore is how you optimize those processes to maximize both speed and efficiency. You should deliver your products into a consumer’s hands as fast as you can. However, you don’t want to pay outrageous amounts to do that. You must optimize your processes to be as efficient and affordable as you can manage.
Many retailers use shipping software, 3PLs, and integration companies to automate their processes and increase efficiencies.
Why is Retail Supply Chain Management Important?
It’s easy to overlook the importance of supply chain management and undervalue its effect on your business operations. However, retailers can no longer afford to do so.
Online shoppers thoroughly research and compare products and processes before purchasing.
According to the NRF, 65% of consumers say they look up free-shipping thresholds before adding items to their online shopping carts. Further, 39% expect two-day shipping to be free. And, if you don’t offer it, consumers will shop somewhere else. 29% of consumers have backed out of a purchase because two-day shipping wasn’t free.
Retailers of all sizes are falling short on meeting customer’s expectations. Those who provide the best shipping experience will see a big impact on their costs and will gain a competitive advantage. If you’re looking for a way to stand out in your competitive retail space, your fulfillment process and ability to deliver can set you apart from others.
Lower Retail Supply Chain Costs
As briefly mentioned above, retail supply chain management focuses on delivering your products as quickly and affordably as you can. Diving into your supply chain processes can help you determine areas where you can cut costs. You’ll be able to increase your bottom line without even selling more products.
Some ways to save costs is improving your storage strategy, improving supplier relationships, analyzing customer demand patterns, and moving supplies faster. Check out this article for other cost reduction strategies for supply chain management.
When you streamline your supply chain management process, you break down silos and operate more efficiently. You’ll speed up order processing and save yourself money. All it takes is evaluating your current processes and determining where you can make improvements.
Gain a Competitive Advantage
By making your supply chain more efficient, your business won’t be the only one saving money. Your customers can too! Businesses with low supply chain costs can lower their prices (without going into the red), which can increase sales with customers.
For the U.S., the second leading reason for choosing to shop on marketplaces is free and discounted shipping, according to the UPS Pulse of the Online Shopper 2018.
You could start to win back more of their customers by offering attractive shipping prices.
Supply chain management also helps you deliver a better customer experience. You’ll be able to offer better delivery options and shipping prices. Then, you’ll build trust with your customers when you deliver accurately and on-time.
Today’s shoppers expect fast shipping times from same-day to two-day delivery. However, experts like Oracle and Convey say that merchants, over anything else, should first focus on delivery days that they can guarantee. If a consumer is confident that their order will arrive when the retailer says it will, they might be more willing to wait a few days.
How to Improve Your Supply Chain Processes
Proper order fulfillment takes the organization of all the people, process, and technology needed to deliver an order to a customer. This includes everything from your online checkout process, payment provider, and order management system, to how you pick, pack, and ship items.
When looking at your current processes, start at the beginning. Make your online checkout pages shorter and easier to fill out. Use a trustworthy and secure payment provider. Your customers should be confident when they check out.
Now comes the part where you actually pick, pack, and ship the orders to customers. A lot can go wrong from the time an order is placed and then shipped. Many merchants struggle with this part of the process. It’s this area where merchants face the biggest inefficiencies and the most opportunity to improve.
To overcome different challenges during this phase, retailers can turn to a few different options:
Invest in shipping software
Shipping software helps retailers import, organize, and process their online orders for fast and reliable shipping. They help you create and print shipping labels and ensure you’re getting the best rates with carriers.
Partner with a 3PL provider
Realizing that most retailers aren’t going to specialize in logistics, 3PLs, or third-party logistic providers offer a way to outsource either part or all your fulfillment processes.
Integrate Your Systems
Integrating your retail systems gives retailers all sizes the power to compete. You can offer free, 2-day shipping and trust your products will get there in time, even if you’re not Amazon. If you can perform advance logistics operations, then you’ll have more power with your suppliers.
Retail system integration platforms like nChannel connects your eCommerce platform with your ERP, 3PL, or shipping software so you can optimize your fulfillment processes. You’ll be able to perform processes like these and more:
- Split orders for optimized fulfillment
- Manage multiple suppliers or fulfillment locations
- Manage drop shipping
- Reconcile payment terms, purchase orders, and shipping notifications
Don’t Forget about Returns
Don’t forget that supply chain management also includes reverse logistics, or how you deal with returns! Mismanaged returns processes can have a serious negative effect on your bottom line, especially for online retailers. It’s no secret that customers want free returns. In fact, 60% of shoppers say free returns shipping is a top element for a best returns experience.
When evaluating your supply chain, don’t overlook your current return policy and how you logistically handle returns.
Read our guide on how to improve your returns process.
More Retail Supply Chain Best Practices
There’s a lot of variability from one business’s supply chain to another, but call can find ways to optimize their processes through best practices, strategy, and integration. It takes time and investment, but it’s worth it!
To keep reading about more retail supply chain best practices, check out these other articles:
- Big Trends in Supply Chain Management You Need to Know About
- Why Your eCommerce Delivery Strategy is More Important than Ever
- Why Distributed Order Management (DOM) is Key to Your Retail Success
- Reverse Logistics: Where Online Retailers Should Make Improvements
- What is a 3PL and Why are They Important to Retailers?
- Using Online Order Fulfillment to Increase Sales