The Importance of Planning, Sourcing, Inventory, and Transportation for SCM
The Base of Successful B2B eCommerce
Supply chain management refers to the total production and distribution of products to customers, from raw materials to delivery and returns. Whereas several years ago, these activities were taking place without too much thought into the actual deed. With the development of eCommerce and competition, these activities had to be refined to help businesses make a difference in the way they operate and promote growth. This article looks into the development of eCommerce supply chain management to what it stands for today, focusing on the business-to-business eCommerce model (B2B eCommerce).
A word that is inseparably connected to supply chain management is efficiency. Since time is a valuable resource in the business world, supply chain management is trying to save as much time as possible from the activities related to the supply chain of products, from start to finish, saving (or making) money along the process. When it comes to B2B eCommerce supply chains, where businesses are supplying products to other companies, competition can be high, especially in sectors such as manufacturing and distribution or marketplaces. On such occasions, the supply chain can include all activities, from planning and designing products, enterprise procurement of raw materials, creating the product, storing, monetary transaction realization, distribution to the correct customer, handling of returns and complaints, and even aftersales policy. With the rapid development of eCommerce, hence the competition, supply chain management became "a thing" and gained extreme importance regarding the efficiency of transaction realization and product delivery that led to business success.
Back in the day, the supply chain was based on local contacts—national at most—as businesses engaged in local activities with known business partners. Especially for big companies with no high competition, the supply chain was not critical, as they did not have much to lose. With globalization and the rapid development of eCommerce, local business monopolies lost their market power to competitors who could deliver the same –or better– product faster and cheaper. This led to a switch in operations, focusing on identifying areas of improvement and streamlining the procedure followed from order to delivery. In other words, SCM, in short, B2B supply chain management, became a very well-used term in business vocabulary and a game-changer for those who invested in it as a means to take their business to the next level.
Globalization and eCommerce development did not only lead to the realization of SCM importance for business success, but also to the realization that SCM might not be a "personal" issue for a company, with every stage being realized in-house but a collection of several companies, each responsible for a different stage of the supply chain, working together towards a common goal. For that B2B supply chain to be successful, all parties involved must be in sync, which can happen using online tools of communication and better digital processes.
The majority of companies today outsource parts of SCM for B2B procurement, either because they do not have the facilities or capacity for certain activities or because it is more efficient to outsource on certain occasions. That leads to a cohort of suppliers, manufacturers, distributors, marketing and advertising experts, and finance experts handling certain parts of the supply chain for a specific product or project on behalf of the "main" business contractor. A successful supply chain always starts with adequate planning. Identifying all the necessary stages and where external support is needed, conducting thorough market research for specific activities and products, trying to foresee demand, exploring "what if" scenarios, and creating a bulletproof strategy is always a good plan. The second essential step is sourcing. Collating a list of potential suppliers or service providers for specific actions, liaising with them, and creating relationships based on mutual trust is one way to go.
Another is the use of suppliers ad-hoc, based on availability and pricing. In both cases, communication is critical, as it can make or break the relationship and potentially result in huge losses due to missed deadlines or inadequate product quality. Equally crucial to planning and sourcing is inventory check, as either too low or too high an inventory can create problems in a business. Inventory should be monitored and checked against projected demands and factors that could affect supply chain management, such as national or international disasters or emergencies (COVID-19 serves as a great example here). Last but not least, transportation is a common bottleneck in B2B eCommerce SCM, as it is a key "middle" process between suppliers, distributors, retailers, or even end-users, so miscommunication with regards to transportation activities can be devastating, leading to easily avoidable delays, hence added cost. These four areas are significant under the umbrella of SCM logistics and require close monitoring and adequate communication and flow of relevant available information.