Whenever there’s a supply chain crisis, consumers have to suffer the brunt of it. However, businesses are the ones that are hurt the most when such a crisis is afoot.
According to Interos, global supply chain disruptions can cost businesses around $184 million every year. Sometimes, this value can skyrocket. Such was the case during the COVID-19 pandemic in 2020 and 2021.
As reported by CIPS, supply chain disruptions caused by COVID-19, alongside geopolitical tensions between the US and China, cost American and European businesses up to $4 trillion in 2020. The impact of these disruptions can be felt even today, almost three years after they were initiated. That’s how grim the situation is when it comes to a supply chain crisis.
Amongst the worst-hit businesses due to supply chain crises, e-commerce businesses are right at the top. Freight Waves reported that 93 percent of sellers from the e-commerce giants Amazon lost revenue due to the supply chain disruptions between 2020 and 2022. A similar situation was also faced by several other e-commerce businesses.
Supply chain disruptions will keep coming for one reason or another, and e-commerce businesses must be well-prepared to tackle those challenges. Here’s how they can ensure that.
Diversify Your Supplier Network
In this day and age, especially amidst a global supply chain crisis, you can’t rely on a single supplier or a small group of select suppliers. You need to consider diversifying your supplier base so that you can reduce the dependency on a single source, making your business more resilient to potential disruptions.
Conduct thorough research to identify alternative suppliers, both domestically and internationally, and establish relationships with them. Evaluate and monitor the situation with your suppliers. See how they perform and whether or not they are able to deliver on their promises on time. It will help you decide which suppliers should continue working with you and which should leave to make room for new ones.
Maintain Transparent Communication
Establishing clear and transparent communication channels with your suppliers is essential for effective supply chain management, especially during a crisis. Stay informed about potential disruptions by maintaining communication with your suppliers.
Open lines of communication will let you quickly respond to challenges, collaborate on finding solutions, and make necessary adjustments to minimize the impact on your e-commerce operations.
Implement Robust Inventory Management
Efficient inventory management is crucial to ensure your e-commerce business can withstand a supply chain crisis. Striking the right balance between stock levels and demand forecasting is key.
Adopting inventory management systems and utilizing advanced analytics can help you optimize stock levels, anticipate demand fluctuations, and identify potential bottlenecks in the supply chain. Regularly review your inventory strategies to ensure they align with your business goals and provide sufficient buffer stock during times of crisis.
Invest in Technology
Leveraging technology can significantly enhance your e-commerce business’s ability to tackle supply chain disruptions. Implementing cloud-based platforms, such as enterprise resource planning (ERP) systems, can centralize and automate various processes, including inventory management, order tracking, and supply chain monitoring.
Besides using technology, with demand forecasting in supply chain, you can also make the most of data analytics for gaining insights into demand patterns and, at times, supply chain vulnerabilities. Insights on these areas will help you make data-driven decisions as your e-commerce business prepares itself for tackling a supply chain crisis.
According to Red Stag Fulfillment, demand forecasts help project sales for the next few months or even years. With the forecast, you’ll get a well-rounded picture of potential opportunities as well as pitfalls that await you if there is a supply chain disruption during the forecast period.
Establish Contingency Plans
Preparing for potential supply chain crises requires developing robust contingency plans. Identify the critical components of your supply chain and assess the risks associated with each. Develop alternative sourcing strategies, emergency logistics plans, and backup distribution channels to ensure continuity during disruptions.
Regularly review and update these contingency plans to reflect changes in your business landscape and emerging risks. Conducting simulation exercises and scenario planning can help you test the effectiveness of your plans and identify areas for improvement.
Collaborate with Supply Chain Partners
Building strong relationships with your supply chain partners is crucial in times of crisis. Engage in regular collaboration and information sharing with key partners, including suppliers, logistics providers, and distributors. Work together to identify potential risks, share best practices, and explore joint solutions. By fostering a culture of collaboration, you can collectively address challenges, find alternative routes, and minimize disruptions along the entire supply chain.
Tensions between the US and China are getting more and more intense. Russia’s war in Ukraine is raging on in full force. On top of that, the world is still recovering from the effects of the COVID-19 pandemic. Thus, it’s easy to see that another supply chain crisis is not that unlikely, which is why e-commerce, as well as other types of businesses, need to plan and strategize accordingly to make sure that any further disruption in the supply chain doesn’t impact their business.