Supply Chain Planning Processes to Optimize Ecommerce Logistics

Imagine your top-selling product sells out. You order more product from your supplier, but you find out later that there is a major delay in thework-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 passed.  Customers have cancelled their orders, which has led to a loss in sales and a decline in brand loyalty.  

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. 

In this article, we’ll cover why supply chain planning is important, what you can do to prepare for unexpected obstacles, and how an expert supply chain platform can help.

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. 

Why ecommerce supply chain planning is crucial

Even with the most optimized supply chain, unexpected interruptions can occur at any time.

Here is an overview of some of the most recent issues that impact the typical ecommerce supply chain. 

Delays at ports

Whether it’s due to holiday demand influxes, a labor strike, or even an unforeseen global crisis like the COVID-19 pandemic, disruptions, bottlenecks, and stoppages at major ports can wreak havoc on your supply chain and cause shortages and delays for end customers.  

While you can’t always plan for these kinds of supply chain disruptions, it’s still important to factor possible port congestion into your replenishment timeline. Ecommerce brands should plan around potential or predicted port delays and ensure they have a backup plan in case their inventory gets stuck overseas.  

Last-mile delivery delays

Once you pass a package off to a carrier for delivery, it’s out of your hands. You may not be able to control or foresee last-mile delivery delays, particularly if they are the result of: 

• Weather 
• Holiday demand 
• Labor issues 
• Carrier error 
• Incorrect shipping data (as inputted by the end customer) 

That said, in your customers’ eyes, your brand is still on the hook for shipments that are delayed, damaged, or lost. This makes it crucial to plan your last-mile logistics strategy accordingly, building it around carriers you trust and providing as much transparent tracking information to the customer as possible.

Brexit

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.

While the full impact of Brexit is still unfolding, the changes have already resulted in net new regulations, customs, and import duties and 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.  

“Before ShipBob, we were fulfilling all of our UK orders out of our Oxford office, with one person in charge of picking and packing orders and taking them to Royal Mail daily. This solution was not scalable, especially if we wanted to continue expanding our business into new countries and demographics. We knew we needed a partner with a global presence, who could handle fulfillment for us wherever we go.

Thankfully, ShipBob has fulfillment centers in strategic locations not just across the US, but all over the world. We’re able to store inventory on both coasts of the US and in the UK and Poland, which cuts our average shipping costs and shipping times considerably.”

Natalia Lara, CMO of Oxford Healthspan

3 essential supply chain planning processes

During the supply chain planning phase, there are three essential areas to focus on. 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 can reduce costs, but forecasting with higher-priced domestic redundancies can reduce risks (as you have a back-up plan).  

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 enough forethought, 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, lean 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 fulfillment partner like ShipBob so you can utilize a small space in each warehouse, you can spread risk and enable faster, more affordable deliveries.

“By leveraging ShipBob’s US fulfillment network, we’ve significantly reduced shipping times. Previously, it would take us five to six business days to deliver items to customers. However, with the utilization of four of ShipBob’s US fulfillment centers, the average delivery time has been reduced to just two and a half days from order receipt to customer receipt.”

Ali Shahid, COO of Our Place 

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. For example, if your product catalog has 2,000 SKUs and you want to be in 4 fulfillment centers to reduce shipping costs and transit times, you would be 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 determine if the money you’ll save on shipping will offset the expansion costs.

The benefits of a strategically planned supply chain

A well-planned supply chain isn’t just a thing of beauty; it’s an advantage for your ecommerce business. Here are the top reasons why you should strategically plan your supply chain, and the benefits it delivers. 

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 supply chain 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 sourcing and 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 unnecessary spending 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 it’s 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 outsource fulfillment to a professional supply chain platform like ShipBob, which provides full visibility into fulfillment performance and offers insights into how to reduce costs. 

Fulfillment partners also specialize in inventory storage, packaging, and shipping, and their primary goal is to ensure that outsourcing fulfillment is a cost-efficient solution. 

While 3PLs charge fulfillment costs, it can be 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).

Facilitates communication and collaboration

Through proper supply chain planning, you can dramatically improve communication across your supply chain.

Looking ahead forces you to connect with all supply chain stakeholders – including vendors, suppliers, manufacturers, distributors, fulfillment partners, and even your own team members – to share information and align everyone’s efforts.  

This process is easier when your supply chain partners are transparent and proactive communicators themselves. ShipBob, for example, has a platform that integrates with your other ecommerce tools and marketplaces for seamless and automatic information transfer, and offers each brand a best-in-class customer support team that can help you resolve any issues as fast as possible. 

“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 

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 supply chain velocity and 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. 

“ShipBob can handle our order volume because they’re experts at what they do. The last company I worked at had their own warehouse, and I witnessed firsthand how messy and complicated fulfillment can be, especially at scale when it’s not what your company specializes in.

ShipBob’s fulfillment centers are nothing like that. I’ve been to multiple ShipBob locations, and I’ve seen how much they’ve invested into automation and how organized everything is. It’s no wonder that orders get out within 24 hours of being received – ShipBob is really good at what they do.”

Tyler McCann, Co-Founder of Taste Salud  

Meets customer demand and expectations

Proper supply chain planning 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. 

4 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, invest in 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. 

1. 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 supply chain visibility. This way, you can manage the supply chain more effectively and get insights to help you make better business decisions. 

An expert supply chain and fulfillment platform 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. 

“As you grow your business, nice-to-haves quickly becomes must-haves – especially when it comes to data and reporting. There are certain data points that you just have to know, like where we should store our inventory to be closer to our customers, what you’re charging customers for shipping, and what your average order values are. These sorts of metrics need to be driving your decisions if you’re going to be profitable, and so you need to know that information inside out.

ShipBob’s dashboard provides us deep visibility into those crucial metrics for inventory, fulfillment, and shipping. It has been phenomenal. With the real-time data we see in our ShipBob dashboard, we can glean insights that tell us which levers to pull and what our costs are across channels, so that we don’t get any surprises on our monthly income statements. Those insights and the reporting that ShipBob offers are definitely a must-have for our business.”

Neil Blewitt, SVP of Operations at Bloom Nutrition 

2. 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 supply chain expert 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. 

“We have a Shopify store but do not use Shopify to track inventory. In terms of tracking inventory, we use ShipBob for everything — to be able to track each bottle of perfume, what we have left, and what we’ve shipped, while getting a lot more information on each order.”

Ines Guien, Vice President of Operations at Dossier 

3. 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. 

ShipBob’s platform, for instance, integrates with dozens of major ecommerce platforms and tools, as well as with top retailers (including Target, Macy’s, Nordstrom, Saks, and more). This allows merchants to establish a multichannel retailing strategy that leverages  multiple fulfillment locations and sales channels – plus, merchants can track and manage the entire fulfillment process across all channels from a single dashboard.

“Having the same partner handle both direct-to-consumer and business-to-business orders is crucial. Managing separate inventory pools for DTC and wholesale can be challenging, making it essential to maintain unified inventory across all channels. ShipBob enables us to serve both our direct-to-consumer (DTC) customers and our business-to-business (B2B) clients, which include Nordstrom, Target, Bloomingdales, and Saks. This encompasses direct vendor shipments and B2B wholesale operations, all managed seamlessly across ShipBob’s warehouse network.”

Ali Shahid, COO of Our Place

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. 

4. 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 optimize 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.

Plan for supply chain success with ShipBob

Supply chain and logistics planning is challenging, especially during times of uncertainty or growth. 

Outsourcing fulfillment to a supply chain 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.  

“ShipBob’s dashboard is also simpler to use than our previous fulfillment provider’s. It’s user- friendly, cleaner, and more straightforward. There’s a lot of different ways to sort and display data, so you can hone in on what’s important to you. The support portal is also great – if there’s ever an issue, it’s easy to get it addressed and resolved.”

Stuart Jones, Co-Founder of Canvas 

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.