When it comes to your ecommerce supply chain, complacency is the enemy of growth.
No matter how efficient your supply chain is running, finding ways to improve your supply chain is something you should always be doing.
In this article, you will learn best practices on how to improve supply chain efficiency and how a third-party logistics (3PL) partner like ShipBob can help.
What is supply chain efficiency?
Supply chain efficiency is a business’s ability to use resources, technology, and expertise in order to minimize logistics costs and maximize profits. The goal of an efficient supply chain is to save money and maximize profits by optimizing the processes and stages in the supply chain.
What’s the difference between supply chain efficiency and supply chain effectiveness?
Supply chain efficiency is defined as the internal standard of performance of an organization, while supply chain effectiveness is the external standard of performance.
In other words, supply chain effectiveness focuses on meeting the demands of groups outside your organization; and supply chain efficiency refers to meeting those demands as quickly and cost-effectively.
What is supply chain responsiveness?
Supply chain responsiveness refers to the ability to react quickly to sudden changes in the environment that affect your logistics processes.
Examples include the ability to scale up when the COVID-19 pandemic hit (i.e., meeting demand for more than double the amount of typical online orders when lockdowns went into place), or getting inventory shipped quickly during the period of time when some of the busiest ports in the world were completely overloaded with container ship congestion.
Components of a responsive supply chain
What separates out typical supply chains from responsive supply chains? While you could argue that luck is often on the side of responsive supply chains, there’s a lot more that goes into it behind the scenes, from diversifying suppliers and carriers, to implementing connected technology that enables real-time tracking across the supply chain.
Flexibility is at the core of a responsive supply chain, which is not just reacting to changes but being proactive as well.
The objectives of a responsive supply chain include:
- Meeting customer demand (delivering on time and at the expected cost)
- Being able to scale up or down when demand forecasting goes awry
- Managing costs during volatile times
- Continuously improving processes and workflows to fit the current needs and situation
- Reducing risk through diversification, planning, and by establishing the right partnerships
There are several key stakeholders (and often third-parties) involved in ensuring a responsive supply chain runs smoothly, including:
- Your company leaders
- Your manufacturers and suppliers
- Your fulfillment center(s) and 3PL
- Your technology providers
- Your shipping carriers
- Your customers
All of these stakeholders must be responsive communicators, with communication going both ways.
Efficient vs responsive supply chain
Supply chain efficiency is focused on doing more with less, where supply chain responsiveness is focused on agility and keeping business afloat when things don’t go according to plan. But really, supply chain efficiency and supply chain responsiveness work together by managing continuous chaos, as supply chains are some of the most volatile and delicate things in business.
At the end of the day, it’s not about having an efficient vs. responsive supply chain but a cohesive supply chain that can move quickly and adapt without losing money. Efficient and responsive supply chains have common metics to monitor, like on-time fulfillment, profit margins, shipping speeds, lead times, and more.
Together, they have the same end goal of meeting customer expectations.
How to improve supply chain efficiency in 7 steps
Whether you’ve just started your ecommerce business, or it’s already well-established, improving supply chain efficiency can seem like a monumental task. If you don’t know where to start, here are seven steps towards greater supply chain efficiency:
Step 1: Expand your supply chain visibility
The first step in improving supply chain efficiency is to increase your visibility over logistics operations.
The best way to do this is to implement inventory management strategies that allow you and your team to track inventory levels as they move through stages, from receiving to warehousing, to being packed, picked, and shipped to customers.
A modern inventory management software (IMS) can provide more visibility, as well as the ability to access real-time inventory tracking, so you can avoid stockouts, backorders, and overpaying carrying costs.
By implementing an IMS, you’re also given access to data and analytics to help you make informed business decisions, such as inventory forecasting.
Step 2: Develop a good relationship with your suppliers
Communication with your suppliers is key! When you have a good relationship with your suppliers, you can plan better and avoid any shortages, delays, or issues early on.
A dependable supplier is responsible for tracking the work-in-process inventory phase (i.e., the movement of raw materials being processed into finished goods), which impacts the quality of the products you sell and how quickly you can obtain more inventory.
Suppliers that are inconsistent in delivering a quality product can slow down your supply from the very beginning, so it’s important to be selective and weed out suppliers that are consistently causing issues or delays to your sourcing.
Once you have discovered suppliers that are both responsible and flexible, you’ll need to continually foster those relationships through clear and open communication and conflict resolution.
Step 3: Automate your supply chain processes
Finding ways to automate supply chain processes is one of the best ways to improve efficiency, reduce human error, increase supply chain performance and velocity, and save time and money in the long run.
Automating time-consuming tasks, from order processing to automated shipping, doesn’t necessarily replace the need for human effort, but it does help you streamline your operations and increase productivity.
Warehouse automation reduces the time, effort, and errors that are common in logistics. Some business owners even employ logistics automation in their own warehouse, using their own technology and tools.
However, since automation technology, equipment, and robotics can be costly, many ecommerce businesses rely on a tech-enabled 3PL that have made investments in automation to optimize their supply chain.
This way, businesses can invest more in product development, marketing, and other important initiatives.
Step 4: Implement supply chain software
With so many processes taking place simultaneously across your supply chain, it’s important to use implement the right software and technology that allows your team to work as efficiently as possible.
If you manage a warehouse inventory across locations, you might want to consider using a warehouse management system (WMS) that connects with your IMS, which can help you automate order processing, get real-time inventory tracking, order management tools, and data reporting and analytics.
Of course, implementing a robust tech stack can become costly. Fortunately, many direct-to-consumer (DTC) brands partner with a 3PL that already has the technology necessary to optimize supply chain efficiency.
For instance, ShipBob’s fulfillment centers are powered by a proprietary tech stack, including a WMS that lets you know what’s going on in every fulfillment center you have inventory stored in and where your products are stored at all times.
Step 5: Cultivate supply chain experts
Once you’ve made the decision to implement all of the changes above, the next step is to create a training plan for your employees.
Remember, your supply chain is only as efficient as the people who manage it. Warehouse associates, order fillers, and logistics managers should all be trained on standard operating procedures to provide consistency, efficiency, and accuracy in their decision making.
If an employee has been at the company for a long time, be sure to ask for feedback on how your warehouse team can improve operations. If you lack a logistics team, a 3PL can provide the expertise needs to manage your supply chain.
Step 6: Establish green initiatives across your supply chain
Going green is business value that more customers these days are looking for. Your customers are becoming extremely aware of the steps that companies are taking (or not taking) to reduce their carbon footprint, so it’s important to consider ways to reduce waste.
One great cost-effective way is to utilize SIOC packaging whenever possible — which can also reduce shipping costs — or strive for eco-friendly packaging that utilizes biodegradable materials and minimizes waste by cutting back on unnecessary filler materials.
If you’re looking to outsource fulfillment, partner with a 3PL that invest in eco-friendly initiatives or allow you to use your own sustainable custom packaging.
For example, ShipBob partners with Ecocart so you can purchase carbon credits by allowing your customers to choose (and optionally, pay for) carbon offsets on a per-order basis, and allowing you to offset the carbon impact of product manufacturing and even last-mile delivery. We also partner with experts in eco-friendly shipping and packaging.
Step 7: Optimize your supply chain regularly to remain efficient
Improving your entire supply chain is not a one-time fix. It’s a process that needs to be reviewed and optimized as often as possible.
It’s important to continuously collect and analyze warehouse inventory management performance to identify areas of improvement where further efficiency and higher order accuracy can be achieved. This can be done by investing in technology, automating processes, or hiring logistics experts to help.
For instance, ShipBob looks at several different aspects of their fulfillment operations to find ways to become more efficient, such as assigning pickers optimized routes, opening more fulfillment center locations to cut down on shipping times, and improving warehouse picking and packing processes.
Investing in supply chain efficiency improvements allows ShipBob merchants the ability to provide a better customer experience, save on costs, and spend less time worrying about logistics.
4 supply chain management efficiency best practices
It’s one thing to make your supply chain more efficient — but keeping it that way is another matter altogether. To maintain an efficient supply chain, here are four supply chain management best practices to consider.
1. Implement an effective inventory management process
Keeping track of your inventory at all stages of your supply chain requires an investment in technology to improve inventory management processes. There are several inventory apps on the market that can you help you:
- Optimize stock control.
- Avoid inventory stockouts.
- Set automatic reorder points.
- Improve demand forecasting.
- And much more.
Many 3PLs like ShipBob offer order fulfillment technology with built-in inventory management tools to help you better manage inventory, as well as offer direct integration with robust inventory management solutions.
“We utilize ShipBob’s Inventory API, which allows us to programmatically retrieve real-time data on how many units of each product are currently stored at ShipBob’s warehouses. We currently use this API to generate custom reports to tie this inventory data into our accounting platforms.”Waveform Lighting Team
2. Use a warehouse management system
By using a warehouse management system (WMS), you can manage inventory storage, track inventory in real time, and boost productivity to efficiently fulfill orders.
A WMS is designed to monitor the daily operations of your warehouse, so you can decided what areas need improvement, how to save on costs, and how to become more efficient.
For instance, ShipBob’s entire fulfillment network is powered by a proprietary WMS, which provides visibility and transparency into performance such as fulfillment speed, orders fulfilled on time, error rates, orders shipped claim-free, and much more.
“With ShipBob, you see exactly what is picked. With the new [previous 3PL] fulfillment network, we had to rely on our rep for everything. It doesn’t give you the ability to be self-sufficient.
Because of a lack of ownership of the entire fulfillment stack, it’s been difficult to rectify, unlike ShipBob who owns the entire stack: inventory and order management system, warehouse management system, and their fulfillment centers.”Gerard Ecker, Founder & CEO of Ocean & Co.
3. Create a returns management system
Implementing a smooth returns management system is important for two main reasons:
1) It allows you to keep track of damaged inventory that needs to be returned to the supplier.
2) It maintains customer satisfaction by making sure that any damaged or wrong products are returned as swiftly, cost effectively, and easily as possible.
To preemptively prevent ecommerce returns and to keep returns controllable and to a minimum, try including clear product descriptions, increasing the return time window, conducting regular quality testing, and identifying trends in commonly return items.
“Returns were taking a lot of time and resources to process on our end, but ShipBob was super helpful and critical in creating a solution for us.”Nikolai Paloni, Co-Founder of Ombraz Sunglasses
4. Use real-time data for continuous improvement
When you have access to the right data from an analytics reporting tool, you can make better-informed decisions for supply chain planning.
Inventory turnover rate, order accuracy, time to ship, warehouse capacity used, and average cost per unit for storage, fulfillment, and shipment are all critical metrics to track, as they provide insight into which areas of your supply chain are thriving and which require improvement.
With ShipBob, you have access to all these distribution metrics and can swiftly identify where, when, and how your orders are being fulfilled across the supply chain.
“ShipBob’s analytics tool is really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we’re alerted when a SKU has less than a certain quantity left. There is a lot of value in their technology.”Oded Harth, CEO & Co-Founder of MDacne
Supply chain efficiency examples with ShipBob
ShipBob is a best-in-class 3PL with the fulfillment infrastructure, technology, support and, expertise to help you optimize supply chain efficiencies, eliminate bottlenecks, and boost the bottom line through cost and time savings.
Driving down costs with economies of scale
Navigating supply chain efficiency is especially difficult when your business experiences significant growth spurts. The leadership at TB12, a health and wellness brand co-founded by seven-time Super Bowl winner Tom Brady, discovered this first-hand when their sales began to take off.
In addition, ShipBob’s software fit in seamlessly with their existing tech stack, which saved them the struggle of working between multiple incompatible platforms.
Through their partnership with ShipBob, TB12 grew a staggering 75% and can now continue to provide best-in-class products with high-quality ingredients that are important to their active customers without having to worry about inefficiencies during growth.
“As we started to hit that first inflection point of growth, it became apparent we needed to look for a 3PL that could help us expand geographically in the US and also drive down shipping costs and expenses.
Since switching to ShipBob from our previous 3PL, our fulfillment cost on comparable orders went down by 25%.”Michael Peters, VP of E-Commerce Operations at TB12
Save time and speed up fulfillment
After growing The Finer Things 1920 from 50 subscribers to thousands, founder Andrea Hamilton knew she could not keep fulfilling orders from her basement.
To improve her supply chain efficiency, she turned to ShipBob — and one phone call with an account executive later, she had an outsourcing partner for fulfillment just in time for busy holiday season that could handle everything from inventory management, to automated fulfillment and shipping.
By partnering with ShipBob, The Finer Things 1920 team can spend more time expanding their customer base and adding perks such as bonus boxes, as the stress, time, and trouble of fulfillment is off their hands.
“Last time we shipped our own packages, it took us 3 weeks. It took ShipBob less than 2 days. I couldn’t wait to delegate this business over, because the stress level was through the roof. I am just so grateful for ShipBob.”Andrea Hamilton, Founder of The Finer Things 1920
ShipBob unlocks supply chain efficiency for ecommerce
As experts in global supply chain logistics for online brands, ShipBob employs best practices in our operations to ensure that every stage from receiving inventory to shipping orders is done as cost-effectively and efficiently as possible.
Our warehouse teams are trained to receive and store your inventory quickly and accurately, utilize our storage space, and have us pick, pack, and ship your orders with maximum efficiency, resulting in a high order accuracy rate.
ShipBob also employs logistics automation, from automatically generatingpicking list to box selection algorithms for consistent packaging, to automated sorting and the ability to automatically optimize shipping routes.
We also provide access to fulfillment performance data for our merchant with our data and analytics reporting tool, which also includes inventory allocation, shipping, and demand forecasting insights.
ShipBob’s extensive global fulfillment network allows ecommerce businesses to compete with larger brands and marketplaces like Amazon. We also have partnerships with major shipping carriers to negotiate discounted shipping rates, so you can pass the savings on to your customers (e.g., free shipping options).
ShipBob does more than just improve ecommerce supply chain efficiency — rather, we help you save time, money, and energy by taking all-things logistics off your plate, so you can focus on growing your business.
To request a fulfillment quote from ShipBob, click the button below.
Supply chain efficiency FAQs
Achieving supply chain efficiency is a complicated task, as multiple factors are involved in minimizing cost while also meeting customer demand. Here are just a few of the most common questions merchants ask about supply chain efficiency.
What is an efficient supply chain strategy?
Because every business model and supply chain is different, there is no one strategy to build an efficient supply chain. The most efficient supply chain strategies optimize every stage of the supply chain (including warehousing, fulfillment, and shipping) and rely on technology and expertise to deliver time and cost savings.
What is the definition of supply chain efficiency?
Supply chain efficiency refers to a business’s ability to harness the resources at their disposal in the best way possible, so as to minimize costs and maximize profits. This is different from a supply chain’s “effectiveness,” which refers to a business’s ability to meet the demands of groups outside the organization.
How do you measure supply chain efficiency?
To measure supply chain efficiency, merchants should track several supply chain metrics that relate to inventory, orders, fulfillment, and shipping. Inventory turnover rate, order accuracy, and average cost per unit for fulfillment and shipping are just a few key metrics to track that can help you find ways to improve your supply chain.
How can you improve supply chain efficiency?
While there are many ways to improve supply chain efficiency, almost all methods boil down to having the right tech stack — one that offers insights into your inventory data and deploys automation, along with the right logistics team. The combination of technology and expertise can transform your supply chain efficiency into a competitive advantage, and ultimately foster your business’s growth.
What is responsiveness in supply chain performance?
Supply chain responsiveness is how quickly a business is able to react to sudden changes in the logistics landscape. Think back to when the COVID-19 pandemic hit, and demand for certain products quadrupled overnight. Companies that were able to deliver more inventory to customers faster came out as winners.
What are the characteristics of a responsive supply chain?
All responsive supply chains have a few characteristics in common, including flexibility, diversification, technology adoption, and strong working relationships with their partners and stakeholders. A responsive supply chain also stays focused on meeting customer demand by adapting to the situation at hand.
Can supply chains be both efficient and responsive?
Yes! While supply chain efficiency is focused on doing more with less, supply chain responsiveness is about agility and keeping business afloat when things don’t go according to plan. However, name a supply chain that isn’t constantly volatile and delicate! Rather than thinking it’s either a supply chain that’s efficient vs. a responsive supply chain, you need both to move quickly and adapt without losing money by focusing on key metics such as on-time fulfillment, profit margins, shipping speeds, lead times, and more.