by Julie Shrum, Sales Manager at Midlake
For most e-commerce businesses, one of the main challenges is inventory management and sourcing. Many e-commerce business owners quickly realize that supply chain sourcing strategies are what they need to cut down on the time, effort and expense of maintaining their inventories. Some companies rely on other manufacturers to provide their inventory while others want to produce their own products.
Many companies prefer to create their own e-commerce websites to showcase the products they make, and then hire a manager to handle the inventory, shipping and returns. So, what is your supply chain management strategy? It all depends on your type of company and your industry to determine how and where you plan to get the items you sell to your customers.
Know the Basics.
This is where the supply chain strategy becomes important. If you are new to e-commerce, there are a few basic concepts you need to know:
- Product Sourcing – This is when you secure a source for products you sell that you don’t produce yourself.
- Drop Shipping – This is when you transfer your customer orders to another company, and they fill those orders by shipping the items directly to the customer for you.
- Wholesale Suppliers – A money-saving source, this is when you buy the items directly from the manufacturers themselves at lower wholesale prices.
Create a Strategy.
When it comes to supply chain management, a one-size-fits-all strategy simply doesn’t work. You have to come up with a strategy that works for your particular industry, as well as the goals and vision of your company. To get started, ask yourself the following important questions:
- Do you want to keep an inventory on hand, or drop ship items?
- Will your company produce all or some of your inventory, or would you rather resell items?
- How much control do you want to have when it comes to packing and shipping?
- Considering the goals of your business, how critical is price control at this time?
- What are the size of inventory and the volume of products you plan to deal in this year?
Seek Out Sources.
There are many places to obtain supplies and inventory, but whatever you choose has to be what works for you, and even more importantly – what works for your customers. Here are some good places to start your quest for suppliers:
- Look Locally – Don’t overlook local retailers, because they often have limited resources for doing business. Local businesses are always on the lookout for creative ways to sell their stock, so ask them if they would be interested in having someone sell their products online. Retailers near you are usually more willing to drop ship, too.
- Tools of the Trade – Read trade magazines, contact organizations and associations in your industry, and go relevant conventions and trade shows, to find new suppliers of product. Dig deep by contacting the associations that feature the products you want to deal with, so you can make contact with members. Look up a directory of trade associations that aim to connect retailers with manufacturers, even those from other countries.
- Small Manufacturers – Although this sounds like a win-win, it is hard to find wholesalers without their own sales force, resources and distributors, because they want to sell large quantities well beyond the scope of the smaller e-commerce sellers. However, some of the smaller companies who have limited inventory may be interested in another sales source. The only problem is the smaller manufacturers are not always able to provide the product whenever you want it. Look for smaller companies online and in the Yellow Pages.
Drop Shipping Pros.
Drop shipping has revolutionized e-commerce. This is because there are so many advantages and very few disadvantages to drop shipping. The benefits include:
- No need to keep a large inventory on site.
- No large upfront investment required.
- Lower wholesale prices save money and raise profits.
- Extends the range of products you can offer, without risks.
- Saves time with inventory, order taking and delivery.
Drop Shipping Cons.
The best advice to give someone looking for a reputable drop shipper is to shop around and research thoroughly. You don’t want to find a drop shipper, only to learn they’ve gone out of business, as drop shippers come and go frequently. The downsides of drop shipping are as follows:
- Once you become dependent on them, some drop shippers will raise their prices.
- Some drop shippers have fixed overheads or other hidden costs not related to order fulfillment.
- In order to ensure their customers are serious, some drop shippers will charge a membership fee. Not all fees are the same, so shop around for one that is reasonable.
- Some drop shippers try to save money by using an inexperienced or unreliable shipper.
- Billing policies vary, so make sure to find one that suits you.
- In cases where customers return products, reverse logistics can become complicated. You’ll need to find out the return policy of your drop shipper.
The Proof is in the Profitable Pudding.
According to Morgan Stanley Research, e-commerce is revolutionizing the entire world of retail, but this change also transfers over to other industries, like manufacturing, for example. They released a report projecting that global e-commerce, will be a $1 trillion market by 2016. Some big companies are leading the way, including Amazon and Walmart, but there are other companies aside from the retail realm that are doing quite well, too. They including us here at Midlake in Louiseville, Ohio. We base oursuccess on a formula of traditional business attributes, like inventory management and customer service, combined with modern technology and innovation.
The companies in Morgan Stanley’s report all know that no matter how their customers choose to interact with them, they need a supply chain that provides true visibility into inventory, demand and supplies, and also manages variability, streamlines operations and enables them to have a 360-degree view of each customer. The new consumer have a single view of retail, whether they go to a brick and mortar storefront, order via a catalog or call center, or shop online via a pc or a mobile device.
Every e-commerce business must have product to sell, and this is why sourcing an important factor. The right approach depends on your marketing plan, your budget, and your business goals.
Julie Shrum heads the sales team at Midlake. Julie has grown up in the hinges business and she has watched this bricks and mortar store venture into the online world. She enjoys sharing her expertise and business insights online. Follow Julie and Midlake on their Facebook page.