Understanding Supply Chain Operations

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Building your supply chain can be one of the hardest parts of starting an ecommerce business. To build an effective supply chain, you’ll first need to understand the operational components that comprise one. 

Most supply chains include many operations, each of which has its own unique goals, requirements, and motions. These operations work together as a whole to move goods from your business to the customer — and because they all work together, every operational component has the potential to impact the other components, as well as the overall supply chain. 

As such, in order to keep your supply chain running smoothly, it is very important to understand precisely how each operation works, as well as how it contributes to revenue and affects efficiency.

In this article, we’ll cover what supply chain operations are, the seven operational components in a typical ecommerce supply chain, tips for creating a supply chain operations strategy, and more.    

What are supply chain operations?

Supply chain operations are the systems, activities, and processes that work together to move goods from the supplier to the merchant to the end customer.

These operations must be carried out daily, and require coordination between multiple parties, including suppliers, manufacturers, warehousing services, ecommerce businesses, and last-mile delivery services. 

Why are supply chain operations important?

Supply chain operations are not usually glamorous, but they are absolutely essential to a business’s success. 

You could develop an ingenious product, market it to perfection, and sell it through a state-of-the-art website; but if your business cannot effectively move it through the supply chain and onto the customer’s doorstep, you’ll struggle to achieve customer satisfaction and build a customer base. 

However, when your supply chain operations are all optimized for quality and efficiency, you can achieve the seamless order fulfillment your customers were expecting, and deliver a positive experience that leaves customers primed to purchase again. 

Efficient supply chain operations can also help boost your business’s cost savings and improve your bottom line. Ultimately, the way your supply chain operations are planned and carried out will help you increase revenue while saving time and cutting costs.   

The seven supply chain operation components

While not every ecommerce supply chain is the same, many include at least seven different operations, which function sequentially. Below we’ll walk through each. 

Demand planning

Demand planning (also called demand forecasting) is the first and one of the most vital components in your supply chain operations.

You must carefully forecast demand for each product to ensure that you order or create just enough inventory to meet customer demand for a certain time period. 

Your demand planning operations may involve using historical sales data to pinpoint purchasing patterns, which inform predictions on future demand. Knowing how goods sold in the past provides insight into demand patterns rooted in seasonality or trends, so you can accurately plan your inventory purchases or prepare your production schedules accordingly.

Purchasing

Purchasing operations include all activities involved in procuring raw materials to be used in production. To complete these operations, purchasing or procurement teams may be tasked with:

  • Sourcing, researching, and evaluating suppliers
  • Negotiating price points
  • Preparing and finalizing purchase agreements
  • Assessing the number of raw materials required
  • Creating purchase orders
  • Coordinating transportation of purchased materials to the manufacturer or business’s warehouse or fulfillment centers

Manufacturing

After the raw materials inventory is procured, the next supply chain operation is manufacturing.

Manufacturing involves converting or transforming raw materials into finished products. Some ecommerce businesses manufacture their own products, while others purchase finished goods from 3rd party manufacturers.  

Inventory management

Inventory management operations control how a business receives, stores, and tracks its finished goods.

Inventory management operations begin with counting and checking the finished inventory (especially if it was delivered by a manufacturer) to ensure that they have received the correct quantities of the correct items.

Next, a business must store the inventory, so that it can be found and accessed easily in later supply chain operations. This may require optimizing and organizing your storage space so that pickers can quickly find the items they need and travel between different aisles, and take into account product features such as perishability and size. 

Inventory management operations also include tracking inventory as it moves through the supply chain, and monitoring inventory levels to make sure there is enough stock to fulfill customer orders. 

Many businesses utilize inventory management software that provides real-time visibility into the quantities of each unique product variety (or SKU) at a glance, so a merchant knows when to reorder. 

“We are very impressed by ShipBob’s transparency, simplicity, and intuitive dashboard. So many 3PLs have either bad or no front-facing software, making it impossible to keep track of what’s leaving or entering the warehouse.

On the supply chain side, I just throw in what we placed at the factory into a WRO in the ShipBob dashboard, and I can see how many units we have on-hand, what’s incoming, what’s at docks, and so on. I can see all of those numbers in a few seconds, and it makes life so much easier.”

Harley Abrams, Operations Manager of SuperSpeed Golf, LLC 

Fulfillment & Warehousing 

Finished inventory remains in storage until a customer places an order. When an order comes in, fulfillment and warehousing operations commence.

Fulfillment and warehousing operations include processing and confirming orders, picking the units of inventory specified in each order, packing those units into a box or poly mailer, and setting it aside to be shipped to the end customer. 

Growing ecommerce businesses may find that fulfilling orders through one warehouse or fulfillment center is not efficient enough, and choose to operate multiple fulfillment centers in different locations.

Fulfillment and warehousing operations like picking and packing must be carried out at every fulfillment center, with available inventory divided and distributed between the locations depending on what’s in demand locally. 

“It was kind of like magic — my orders were imported into ShipBob from my Shopify Plus store and started getting fulfilled right away. I didn’t have to do anything. And since then, we’ve grown 115% and experienced 2.5 times more order volume — all fulfilled by ShipBob.”

Noel Churchill, Owner and CEO of Rainbow OPTX

Shipping & Transportation

Shipping and transportation operations transfer packages from a business’s warehouse or fulfillment center to the end customer. Last-mile transportation operations are not usually within a business’s control, and are usually delegated to carriers like USPS, UPS, FedEx, and more.

Your transportation operations may involve software that provides real-time tracking information and updates on where each order is. That way, you can instantly get notified of any delays or setbacks that could prevent your customers from getting their orders on time, and act accordingly.  

Customer service

Your supply chain operations don’t end once the customer receives their order. Customer service operations involve supporting your customers even after a package is placed on a customer’s doorstep. 

Customer service operations include assisting your customers with complaints, returns, replacements, refunds, and repairs even after they’ve received their orders. These activities are typically carried out via phone, email, and live chat.

To ensure that your customer service operations are executed seamlessly, you’d need to invest in a powerful CMS platform that integrates with your other tools. That way, you can easily process return and refund requests, set up a time for repair, or replace customer orders in one place. 

How to form a supply chain operation strategy

With multiple moving parts and players involved, you’ll need to maintain your operations through diligent maintenance and an overarching supply chain strategy. Here are some best practices to help you design and maintain efficient supply chain operations. 

Keep communication lines open

Supply chain operations involve many players. In order to maintain good partnerships, supplier relationships, and customer relations, all stakeholders should all have easy means of raising concerns, pointing out issues, or sharing updates. 

Expectations, duties, roles, rules, due dates, and changes should be clearly communicated to relevant parties in a timely manner. That way, no one is left wondering what the next step is or whether they need to coordinate with any other member of the supply chain.

To improve communication throughout supply chain operations, be sure to invest in tools that increase visibility and that integrate seamlessly with your partner’s existing tech stack.

“Not all fulfillment companies are created equal. Before we partnered with ShipBob, we worked with a 3PL that was absolutely massive. Because we were such a small part of their business, they turned out to be completely unapproachable — we couldn’t even talk to someone from their team on the phone.

When we went viral in 2016 and suddenly had thousands of additional orders to fill, we knew we had to outsource to a different 3PL that could give us the attention we needed, regardless of our size.

We moved to ShipBob right after that, and have received dedicated support ever since! We’ve had a handful of Merchant Success Managers as our main point of contact at ShipBob, and each one has been stellar. With real individuals helping us troubleshoot and provide guidance, we know that the next time we go viral, we will always be ready.”

Juliana Brasil, Director of Operations at Food Huggers

Keeping up with seasonal and popular trends is crucial for demand forecasting operations; but those are not the only trends you should mind. 

The supply chain industry is constantly changing as new technologies are introduced, and your supply chain operations may benefit from adopting new software or automations

Automating manual workflows or operations (such as purchase order and pick list generation, invoice payment, and reorder reminders) can save a business time and money while improving accuracy. This streamlines your supply chain operations, so be on the lookout for supply chain technology developments that could give your supply chain a competitive advantage. 

Build resilience and agility

Supply chain operations work best when they’re positioned to react to unforeseen events or changes in a market. While historical data is crucial for identifying patterns in consumer demand, it isn’t enough to build supply chain resilience and agility

You will need to create contingency plans in case of global supply chain delays, weather disasters, or other disruptions. With backup suppliers, safety stock, and an inventory distribution plan in place, you can maintain better inventory control and resource allocation even in the face of challenges.

Use ShipBob to simplify inventory management and fulfillment

For many ecommerce merchants, managing inventory and other supply chain operations like fulfillment, warehousing, and shipping is not a good use of their limited time. 

When you outsource these operations to ShipBob, our expert team will store your inventory in one of our 30+ global fulfillment centers. ShipBob’s proprietary software enables you to view inventory levels at these locations in real-time, as well as historical data to improve demand forecasting and key analytics to help you avoid costly stockouts

From there, ShipBob streamlines fulfillment and warehousing operations for cost optimization and efficiency. Rather than accumulating your own warehouse, utilities, insurance, staffing, and labor costs, ShipBob’s teams of supply chain professionals will pick and pack your orders, and send them out to last-mile carriers at discounted bulk shipping rates. 

With years of experience in logistics management and the trust of over 7,000 ecommerce brands, ShipBob is here to make supply chain operations management easier, so that you can take your business operations to the next level of growth.  

If you want to learn more about how ShipBob can streamline your supply chain operations, click the button below and request a quote.

Supply chain operations FAQs

Here are answers to some common questions about supply chain operations.

What is the supply chain?

The term “supply chain” refers to a network of functions, resources, companies, and individuals that work together to create products, sell them, and deliver them from the manufacturers and merchants to the end consumers.

How can ShipBob help me with my supply chain operations?

ShipBob can help you with your supply chain operations by taking on your inventory storage, fulfillment, warehousing, and shipping activities, while optimizing all for efficiency and accuracy.

What’s the difference between supply chain operations and supply chain management?

Supply chain operations refer to the business processes, systems, and activities that are involved in planning and executing the flow of goods throughout the supply chain. Meanwhile, supply chain management (or SCM) refers to the management of those operations, and the work of ensuring that different supply chain processes are seamlessly executed.

Written By:

Rachel is a Content Marketing Specialist at ShipBob, where she writes blog articles, eGuides, and other resources to help small business owners master their logistics.

Read all posts written by Rachel Hand