Supply Chain Planning Processes To Optimize Logistics
May 26, 2021
Imagine this scenario:
Your top-selling product is sold out and you order more product from your supplier. But you find out later that that there is a major delay in the work-in-process (WIP) stage, so your supplier can’t move forward with manufacturing your products.
A month later, you finally get the product back in stock, but too much time has past, which led to canceled orders, a loss in sales, and a decline in brand loyalty.
With so many moving parts and people involved throughout the supply chain, issues can occur that are outside of your control. But failing to plan and prepare for unexpected events can cause even more damage.
With a plan, you can respond to supply chain interruptions accordingly and ensure that customers are still being provided the best possible experience despite inbound and outbound logistical setbacks.
In this article, learn why supply chain planning is important and what you can do to prepare for unexpected events, issues, and delays.
What is supply chain planning?
Supply chain planning for ecommerce businesses consists of establishing processes for various operational stages, from receiving finished goods and storing inventory, to efficiently shipping orders to customers.
Each stage requires strategic planning to optimize supply chain efficiency. Planning can involve anything from deciding which and how many suppliers to partner with, how much safety stock to have on hand, and how you will effectively communicate to your customers when there are fulfillment or shipping delays.
Since there are several moving parts throughout the supply chain and many people involved (sellers, manufacturers, warehouse staff, carriers, etc.), unexpected events that cause delays and issues throughout the supply chain are inevitable.
By taking the time to plan and optimize your supply chain, you can feel more prepared for the unexpected, respond in a timely manner, and still provide a great customer experience.
Supply chains have little room for error
Even with the most optimized supply chain, unexpected interruptions can occur at any time.
ShipBob is a third-party logistics (3PL) company that partners with thousands of online brands from around the world to fulfill their orders and streamline their logistics operations. Unsurprisingly, over the years we have witnessed a variety of supply chain challenges.
Here is an overview of some of the most recent issues that impacted the typical ecommerce supply chain.
Delays at ports
With the holiday season months behind us, two major ports located in California, the Port of Los Angeles and the Port of Long Beach, are still causing month-long slowdowns in imports and a growing backlog of cargo to dig through, along with increased costs for this demand (up to more than 3x).
Some shipping companies are warning that these issues could last throughout the entire year.
Last-mile delivery delays
Holiday promotions started earlier than ever in 2020, as shipping delays were a top concern. This came to fruition in Q4 2020, as the COVID-19 pandemic shifted holiday shopping online, which led to strained supply chains and capacity constraints for all shipping carriers.
Major shipping carriers implemented surcharges and extended holiday surcharges indefinitely to help offset the high demand.
In response to this, ShipBob created an easy way for merchants to track time-in-transit carrier data (that’s still updated weekly). It provides time-in-transit averages for the four leading carriers in the United States throughout all of 2020 up until now, as compared to pre-COVID average transit times.
Fortunately, most carriers are back to their pre-COVID transit times, even amid the continued pandemic.
International logistics come with its own set of challenges. One big example is when Britain exited the European Union (EU) on January 1, 2021 (known as Brexit). Consumers outside of the UK now face value-added taxes (VAT) and customs duties when buying products from the UK.
These changes can highly impact international buying behavior since consumers will be more reluctant to purchase items that ship from the UK. In fact, analysts expect that Brexit will impact cross-border ecommerce in the UK, projecting a 7.3% decrease in 2021.
While the full impact of Brexit is still unfolding, we do know that the changes will result in net new regulations, customs, and import duties and will require merchants to set up unique VAT and EORI registrations for the UK.
This is why it is important to adopt a UK-specific ecommerce fulfillment strategy if you’re selling heavily in that market (or plan to).
Working with an international fulfillment provider like ShipBob that has distribution centers in the UK ensures you’re still able to offer fast and affordable shipping to all countries in the UK to meet today’s consumer expectations and drive repeat business.
“We had a distribution point in the UK in London, but anticipated that cross-border shipping issues would become more prevalent with Brexit pending, as we realized a good chunk of our customer base in the EU wouldn’t be able to as easily receive shipments from the UK, as it may be more expensive with longer shipping times.
We reached out to ShipBob, as we became more concerned with Brexit and wanted a fulfillment center in the European Union. Beyond taking care of all of our mainland European and Ireland orders, we quickly became very impressed by ShipBob’s transparency, simplicity, and intuitive dashboard.”
Harley Abrams, Operations Manager of SuperSpeed Golf, LLC
3 essential supply chain planning processes
During the supply chain planning phase, there are essential processes that every ecommerce business must consider. Here is an overview.
1. Production planning
To run a smooth supply chain, you will have to get a sense of production lead times, which involves the period of time between a place purchase order and the manufacturer completing the order.
Here are two tips to keep in mind:
- A short production lead time is better than a long production lead time, as it ensures customers get products quickly.
- Having all manufacturing abroad versus forecasting with higher priced domestic redundancies can build reduced risks for having back-up plans.
Finding the right manufacturer can save you hundreds of thousands of dollars over the years, and is even more critical for startups who are strapped for cash.
Once you find the right manufacturer, you will need to monitor their performance over time. During evaluation, here are some questions to consider:
- What are their key performance indicators and metrics?
- Are they meeting SLAs?
- Is their product quality up to your standards?
- Are they improving?
2. Supply management planning
To establish a strong supply chain, the next step is to figure out how you will plan and manage the supply of finished goods to meet customer demand.
Inventory optimization requires a great deal of planning. But with proper planning, you can better maintain the right amount of inventory required to meet demand, keep logistics costs low, and avoid fulfillment delays caused by common inventory management mistakes.
Here is what makes supply management challenging:
- Not ordering enough inventory from the manufacturer to replenish stock can cause out-of-stock issues, backorders, and wait lists.
- Ordering too much inventory can lead to high inventory carrying costs and the potential for outdated, expired, or unusable products.
That’s why having tools and technology in place to help with demand forecasting is so important. Inventory forecasting lets you provide the products your customers want, when they want them.
Forecasting demand will never be 100% accurate, but it will significantly lower the risk of stockouts and improve customer satisfaction while optimizing inventory levels.
Nothing kills progress (or your reputation) faster than being sold out for weeks on end. Proper demand forecasting and inventory control can help ensure a business doesn’t purchase insufficient or excessive inventory, which can build up too much capital.
3. Operation planning
One of the more complex steps is planning the internal logistics processes that are vital to creating an optimized supply chain.
Ecommerce operations starts with warehousing. You have to make decisions on where to best store inventory and whether or not you will fulfill orders yourself, rent a warehouse, dropship orders, or partner with a 3PL.
There are a couple operational issues that are common in the ecommerce space:
Not expanding into additional fulfillment centers soon enough
Only fulfilling from one warehouse (or just your home or office) may seem logical, but as order volume grows it can be detrimental.
This is because:
- The average shipping cost is much more expensive than it could be for farther away destinations (i.e., how shipping zones work).
- It simultaneously slows down deliveries for end consumers since it requires a longer transit time.
- It increases risk in the event of a severe weather event or different issue that causes a warehouse to shut down or prevents carriers from picking up.
But by splitting inventory across multiple fulfillment centers, even by outsourcing fulfillment to a 3PL like ShipBob so you can utilize a small space in each warehouse, you can spread risk and enable faster, more affordable deliveries.
“We sell flammable goods that need to be shipped via ground, so ShipBob has been a great ally as they have fulfillment centers all over the US, facilitating a 2-3 day delivery time for any customer in the US.
This is helpful especially when weather challenges happen; being able to have different locations to ship from allows for a more seamless supply chain.”
Andrea Lisbona, Founder & CEO of Touchland
Trying to get started in too many fulfillment centers too soon
This becomes costly if the average savings per shipment doesn’t justify the additional expense (e.g., if your product catalog has 2,000 SKUs and you want to be in 4 fulfillment centers to reduce shipping costs and transit times, but you are then stuck paying for 8,000 storage units, in addition to the extra costs for receiving inventory, transportation costs to move products into new locations, etc.).
In other words, you need to weigh the costs and make sure you can justify this expansion (so the costs are offset to deliver quicker).
Supply chain management planning strategies
Supply chain management planning might seem complex, but there are ways to simplify and streamline processes.
The key is to establish back-up plans, ensure you always have enough ecommerce inventory to meet demand, implement the right tools and technology, have a strong fulfillment strategy in place, and provide open communication with your customers.
To help you get started, here are the primary supply chain management strategies.
Implement real-time supply chain data
With so many processes happening simultaneously and literal moving pieces, it’s important to have systems and processes that help you aggregate data and provide visibility into your supply chain. This way, you can manage the supply chain more effectively and get insights to help you make better business decisions.
A tech-enabled 3PL like ShipBob operates their fulfillment network with warehouse management system (WMS), which monitors and controls daily logistics operations in a warehouse, to send these insights back to you.
This allows merchants to have access to real-time inventory counts, the ability to filter through orders by status, gain insights into fulfillment and shipping performance, and much more all through a single dashboard.
“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
Set up real-time inventory management
The next strategy is to implement real-time inventory management technology to help you ensure you have the right inventory at the right place and time.
To improve visibility and accuracy, there are several inventory apps and other types of inventory management software and solutions on the market that help you track real-time inventory levels of each SKU for better inventory control across your store(s) and warehouse(s).
When you partner with a 3PL like ShipBob, you’re given the information you need to manage inventory throughout your distribution network, without the need to implement and invest in your own inventory management system.
“ShipBob lets you manage your inventory while providing important data in a very digestible way. Another ShipBob integration I love is Inventory Planner. It saves me hours every week in Excel spreadsheets, and I can raise a PO in minutes when it used to take me hours.
For every order I placed for years, I was ordering too much or not enough. Between inventory forecasting tools and the ability to auto-create WROs, we don’t have stockouts much anymore. I sleep better at night.”
Wes Brown, Head of Operations at Black Claw LLC
Use integrated technology
To establish a strong supply chain, implementing technology that easily integrates with your store, as well as your fulfillment engine and entire tech stack will ensure accuracy and offer real-time insights.
For instance, ShipBob operates their entire tech stack. This allows merchants to establish a multichannel retailing strategy involving multiple fulfillment locations and sales channels. With ShipBob, merchants are able to track the entire fulfillment process all from one dashboard.
“When trying to leave the fulfillment network to return back to ShipBob, the fulfillment network had 1,500 units of missing inventory that they couldn’t find.
Because of a lack of ownership of the entire fulfillment stack, it’s been difficult to rectify, unlike with 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.
Whether you are looking into a solution for inventory management, order management, fulfillment, or even marketing and payment processing, be sure it connects easily with your tech to create an end-to-end ecommerce solution.
ShipBob also partners with leading ecommerce solutions, so you can easily expand your tech stack and keep it synced with your fulfillment solution.
Create room for supply chain optimization
There is always room to improve supply chain efficiency, especially as your business grows.
Once you have your supply chain plan in order, the truth is that there will soon come a time when you will need to revise the supply chain plan and make optimization to meet your needs as you hit that next level of scale.
Supply chain optimization is the practice of improving your supply chain processes to be more efficient, cost-effective, and nimble. This can be done in a handful of ways, but many areas of opportunity are found across your manufacturer(s) and retail fulfillment processes.
By creating room for supply chain optimization, you can focus on making small incremental improvements in a consistent manner to reduce inefficiencies and save on overall costs, whether it’s slowly expanding into new fulfillment centers or diversifying your carrier network.
A strategically planned supply chain is essential for growth
There are endless benefits to planning a strategic supply chain. If you’re looking to grow without as many growing pains, planning can help you improve operational efficiency, lower costs, and improve communication with your internal staff and your customers.
Here are the top reasons why a strategically planned supply chain is essential for business growth.
Improves operational efficiency
By spending time on supply chain planning, you can be more certain that operational productivity will increase by providing the tools, resources, and support needed to help your staff meet customer demand, improve order accuracy, and more.
Always be sure to evaluate your current operations to find areas of improvements. To give you an idea of where to start, here are some questions to consider:
- Are your products taking too long to be manufactured? It might be time to negotiate better terms, diversify your supplier network, or find another manufacturer to partner with (even if it doesn’t replace your current manufacturer).
- Are your transit times slow and shipping costs high? It might be time to rethink where you store your inventory based on where your customers are located.
- Are you constantly out of stock of fast-selling, popular products? Use data and analytics to track production lead times, and be proactive by setting reorder points, and increase your reorder quantity if necessary.
By examining every aspect of your supply chain, you can find improvement opportunities and implement changes as needed.
Reduces overall costs
An agile supply chain plan reduces overall costs and allows full transparency into inefficient supply chain processes that are cutting into profit margins.
For instance, order fulfillment can be costly for your business if not implemented strategically. Inefficient inventory storage, poor geographic locations, high shipping costs, not understanding dimensional weight, and unoptimized labor and operations can add up over time and kill your margins.
Ecommerce businesses benefit from effective fulfillment that is not just a cost center but a revenue driver if optimized correctly.
That’s why many fast-growing brands choose to partner with a 3PL like ShipBob, which provides full visibility into fulfillment performance and offers insights into how to reduce costs.
3PLs also specialize in inventory storage, packaging, and shipping, and their primary goal is to ensure that outsourcing fulfillment is a cost-efficient solution.
Of course 3PLs charge fulfillment costs, but it is can become overall more cost-effective to leverage their scale and resources rather than attempt to do it yourself (since spending time on this yourself prevents growth).
“We need to deliver quickly and inexpensively. 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
Improves communication and collaboration
Through proper supply chain planning, you can dramatically improve communication across your supply chain.
However, managing a warehouse and staff can be a time-consuming process. But if you you partner with a 3PL like ShipBob, the entire fulfillment process is operated by the ShipBob team. That means, you don’t have to spend time training your own staff while still maintaining control over your operations.
With ShipBob, you have access to real-time insights so you can get full visibility into operations. And unlike a 4PL partner or on-demand warehousing solution, a 3PL provides consistency in operations while giving you access to a best-in-class customer support team that understands your brand and can help you resolve any issues as fast as possible.
“ShipBob saves us a lot of time by saving us a lot of headaches. Whenever an issue comes up, the resolution is quick, and we appreciate how they make things right.
Having Evan, our dedicated Account Manager is such an amazing help to us. He’s been so great and is always there for us. It’s such a pleasure working with him and having a direct contact on the team.”
Ines Guien, Head of Logistics at Dossier
Speeds up operations
By choosing the right supply chain partners, implementing the right technology, and creating processes to improve operations and communication, you ultimately speed up operations without compromising high order accuracy.
But investing in your own infrastructure and technology can be costly. As experts in global logistics operations 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.
“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
Meets customer demand and expectations
Proper supply chain management ensures you can anticipate and forecast demand for products and always have enough on hand. If you don’t have enough safety stock, you run the risk of stockouts and backorders, causing your customers to wait longer for their orders.
With too much inventory, you’ll have to pay high warehousing fees, which eats up your capital and can risk products becoming obsolete before they are sold.
ShipBob provides a robust international fulfillment network and 2-day shipping options, so you can expand your customer reach while speed up transit times and keep shipping costs low.
“Customers get accustomed to a certain service level at a low price — often free — and want it faster over time. Ever since we started our partnership with ShipBob in the summer of 2018, they’ve been able to deliver the customer service level we need at the right cost.”
Michael Peters, VP of E-Commerce Operations at TB12
Managing logistics isn’t easy, so rely on experts when possible
Supply chain planning and management is challenging, especially during times of uncertainty or growth.
Outsourcing fulfillment to a logistics partner like ShipBob can help you worry less about the planning and management, so you can focus more time on business growth.
With ShipBob on your side, you have access to expertise, technology, and the fulfillment infrastructure to help optimize your supply chain, from inventory management to inventory distribution, to establishing a shipping strategy.
Consumer expectations are always increasing, competition is rising, forecasting is challenging, and logistics and customer acquisition costs can be expensive. To deliver orders fast and inexpensively, you need to have inventory in stock.
Tracking inventory velocity over time involves being able to monitor best-sellers and stay ahead of production — even as demand changes. To connect your upstream manufacturing activities with your downstream sales, ShipBob lets you:
- Set reorder points for each SKU, especially those with a high inventory turnover rate, so that you can get more inventory in time to prevent stockouts.
- Calculate lead times, freight transit times, warehouse receiving times, and other factors that could add to the timeline.
- Monitor slow-moving products carefully and potentially deplete supply in a flash sale, or risk over-spending on storage.
“Other ecommerce companies who are approaching or are in an inflection point will benefit from ShipBob because they allow entrepreneurs, like myself, do what we do best — create, sell, and grow! I’m proud to be a ShipBob partner.
Looking back at our 2019 month-over-month numbers, there’s a big difference between the months I was with ShipBob and the months I was with my previous 3PL.
A lot of entrepreneurs and companies underestimate the cost-savings and power of choosing your entire supply chain and partner network wisely. These choices will make or break your business.”
Courtney Lee, founder of Prymal
To learn more about how ShipBob can help you plan an efficient supply chain, click the button below.
Supply chain planning FAQs
Here are answers to the most common questions related to supply chain planning.
Can you outsource supply chain planning?
Yes, you can outsource all or parts of supply chain planning, as well as management. For instance, ShipBob is a 3PL that offers fulfillment services, from receiving product, storing inventory, picking and packing orders, and shipping packages to customers along with tools and analytics to help you make better supply chain plans and decisions.
How does supply chain planning work?
Supply chain planning involves several key initiatives and best practices. When planning an efficient supply chain, it is important to plan for every stage starting with your manufacturer or supplier network. You will also need to plan for how much inventory to order and when, where to store it geographically. Lastly, you will need to plan for an efficient fulfillment process that is fast and accurate to meet customer expectations. Another consideration is evaluating your supply chain plan over time, as your needs will change as you grow.
Why is supply chain planning important for ecommerce?
There are several moving parts and people involved in the ecommerce supply chain. With that said, unexpected delays and issues are unavoidable. Supply chain planning helps to prepare for the unexpected so you can respond effectively and still provide the best customer experience possible.
This might include diversifying your supplier network, calculating how much safety stock to have on hand, or partnering with a 3PL like ShipBob that can help optimize your supply chain.