E-commerce, or electronic commerce, has transformed the way we shop and conduct business, allowing us to buy and sell goods and services online. With the rise of e-commerce, the supply chain industry has also seen a significant shift in how it operates. Supply chain management, which involves the coordination of various activities involved in the production and delivery of goods and services, has been a crucial aspect of business for decades. However, the traditional supply chain model has struggled to keep up with the increasing demand for faster and more efficient delivery methods.
The recent disruptions like the pandemic, inflation, and wars further exacerbated these challenges, as supply chain disruptions caused by lockdowns and reduced workforce availability affected businesses across the world. Yet, e-commerce has played a vital role in reviving the supply chain industry. By utilising technology and innovative approaches, e-commerce has helped streamline supply chain processes, reduce costs, and enhance visibility, ultimately leading to a more resilient and efficient supply chain industry. This blog will explore the historical context of the supply chain industry, the challenges it faces, and the impact of e-commerce on supply chain management.
Historical Overview of The Supply Chain
The concept of supply chain management can be traced back to the early 20th century when companies began to focus on improving efficiency and reducing costs. However, it wasn't until the 1980s that the term "supply chain management" was coined (Source: SCM Research). Since then, the supply chain industry has undergone significant changes, and technology has played a crucial role in its evolution. In the early days of supply chain management, companies relied on paper-based systems to manage their operations. The lack of technology meant that processes were often slow and inefficient, leading to high costs and low productivity. However, with the introduction of computers and the internet, the industry began to experience a significant shift towards more digitised processes (Desire: Blume Global).
One of the most significant technological advances in supply chain management has been the implementation of enterprise resource planning (ERP) systems. ERP systems help to streamline and automate various supply chain processes like inventory management, procurement, and logistics. In a 2019 survey, 67% of distributors and manufacturers described their implementations as successful or very successful. These systems enable companies to track their operations in real-time, which improves visibility and reduces the risk of errors. Before the rise of e-commerce, the supply chain industry faced several challenges that limited its efficiency. One of the most significant challenges was the lack of supply chain visibility. Companies had limited insight into their supply chain operations, which made it challenging to identify inefficiencies and areas for improvement. Additionally, the traditional supply chain model relied heavily on manual processes, which were often slow and prone to errors. This led to delays, high costs, and reduced productivity.
E-commerce has played a significant role in changing the supply chain industry by introducing new technologies and processes that have helped overcome these challenges. For example, e-commerce platforms have enabled companies to automate various supply chain processes like order processing, inventory management, and shipping. This has not only led to faster delivery times but also reduced costs and improved customer satisfaction. E-commerce has also introduced new technologies like big data analytics, which have transformed the way companies approach supply chain management. By analysing vast amounts of data, companies can gain valuable insights into their supply chain operations, which can help identify inefficiencies and areas for improvement. Additionally, e-commerce has enabled companies to track their supply chain operations in real-time, which has improved visibility and reduced the risk of errors.
E-Commerce and Supply Chain Management
E-commerce has had a significant impact on supply chain management. As e-commerce has grown in popularity, supply chain management has had to adapt to keep up with the demands of online shoppers. This has led to changes in supply chain processes and the adoption of new technologies that have helped improve efficiency and reduce costs. One of the most significant impacts of e-commerce on supply chain management has been the rise of omnichannel retail. Omnichannel retail refers to the practice of selling products through multiple channels like online, in-store, and mobile devices. Brands with an omnichannel customer engagement strategy witness a 9.5% increase in annual revenue per year. On the other hand, brands with poor omnichannel brand strategies see only a 3.4% increase (Source: DigiZuite). This has led to changes in supply chain processes as companies have had to adapt to meet the demands of customers who want to shop across multiple channels.
E-commerce has also led to changes in inventory management. With traditional retail, companies typically order products in bulk and store them in a warehouse until they are needed. However, with e-commerce, companies must be able to fulfil orders quickly, which requires more agile inventory management. This has led to the adoption of just-in-time inventory management, which allows companies to order products as needed rather than keeping large amounts of inventory in stock. Additionally, e-commerce has introduced new shipping and delivery methods that have helped improve efficiency and reduce costs. In 2020, 64% of retailers were challenged to adapt their supply chain for e-commerce (Source: RetailNext). For example, the rise of same-day delivery and two-day shipping has forced companies to optimise their supply chain processes to meet the demands of customers who want fast and reliable delivery.
Similarly, the use of big data analytics has also been a game-changer for supply chain management. E-commerce platforms generate vast amounts of data that can be used to optimise supply chain processes. By analysing this data, companies can gain valuable insights into their operations, which can help identify inefficiencies and areas for improvement. Finally, e-commerce has led to the adoption of new technologies like radio-frequency identification (RFID) and Internet of Things (IoT) devices, that help improve supply chain visibility. These technologies allow companies to track products as they move through the supply chain, which can help identify bottlenecks and reduce the risk of errors.
Key Components of Supply Chain Management
Supply chain management is a complex process that involves the coordination of various activities to ensure that products are delivered to customers in a timely and efficient manner. While there are many different components to supply chain management, four key areas stand out as being particularly important: logistics management, inventory management, procurement management, and supplier relationship management.
Logistics Management
Logistics management refers to the process of planning, implementing, and controlling the movement of goods from one point to another. This includes activities like transportation management, warehousing, and order fulfilment. Logistics management is critical to the success of supply chain management because it ensures that products are delivered to customers on time and in the most cost-effective way possible.
Inventory Management
Inventory management refers to the process of monitoring and controlling inventory levels to ensure that products are always available when needed. This involves managing stock levels, forecasting demand, and optimising inventory turnover. Effective inventory management is critical to supply chain management because it helps reduce the risk of stockouts and overstocking, both of which can lead to lost sales and increased costs.
Procurement Management
Procurement management refers to the process of acquiring goods and services from suppliers. This includes activities like supplier selection, negotiation, and contract management. Effective procurement management is essential to supply chain management because it helps to ensure that products are of the highest quality and are delivered on time.
Supplier Relationship Management
Supplier relationship management refers to the process of managing relationships with suppliers to ensure that they meet the needs of the organisation. This includes activities like monitoring supplier performance, addressing issues, and collaborating with suppliers to identify opportunities for improvement. Effective supplier relationship management is essential to supply chain management because it helps to ensure that products are delivered on time and to the required quality standards.
Challenges in Traditional Supply Chain Management
While effective supply chain management can bring numerous benefits to businesses, many challenges must be overcome. Some of the key challenges facing supply chain management include:
Lack of Transparency
In many cases, supply chain management involves multiple parties, each with its own set of goals and objectives. This can make it difficult to achieve transparency throughout the entire supply chain, which can lead to issues like delays, quality problems, and increased costs.
Limited Visibility
Supply chain management often involves numerous parties and processes, making it challenging to have a complete view of the supply chain. 57% of Businesses have poor visibility across their Supply Chain according to InvespCRO. This can make it difficult to identify inefficiencies and opportunities for improvement, leading to missed opportunities and increased costs.
Inefficient Processes
Supply chain management can be complex, and inefficient processes can lead to delays, lost sales, and increased costs. For example, nearly two-thirds (63%) of companies do not use any technology to monitor their supply chain performance (Source: InvespCRO). This can be particularly challenging in industries with high levels of demand variability like fashion and retail.
High Cost
Supply chain management can be costly, particularly when it involves long supply chains with multiple parties. Indeed, 24.7% of supply chain professionals say that delivery costs are the biggest challenge for B2C e-commerce companies. This can lead to increased prices for consumers and reduced profitability for businesses.
Supply Chain Disruptions
Supply chain disruptions can occur for a variety of reasons like natural disasters, transportation delays, and labour disputes. These disruptions can lead to delays, lost sales, and increased costs, and they can be particularly challenging to manage when they occur unexpectedly.
E-commerce and technological advances have largely addressed these issues and are continuing to do so. Businesses must implement effective supply chain management practices that prioritise transparency, visibility, and efficiency. This may involve implementing new technologies like RFID and IoT devices to improve supply chain visibility, optimising inventory management processes to reduce costs, and collaborating closely with suppliers to ensure that products are delivered on time and to the required quality standards. Additionally, businesses must be prepared to respond quickly to supply chain disruptions by developing contingency plans and building resilience in their supply chain processes.
How E-Commerce has Revived The Supply Chain
E-commerce has brought significant changes to the world of supply chain management, reviving an industry that was once plagued by inefficiencies and high costs. Some of how e-commerce has helped to revive the supply chain industry include:
Streamlined Processes
E-commerce has enabled businesses to streamline many of their supply chain processes like order processing and inventory management. This has helped to reduce costs and improve efficiency throughout the supply chain.
Improved Supply Chain Visibility
E-commerce has made it easier for businesses to track products as they move through the supply chain. This increased visibility has helped businesses identify inefficiencies and optimise their supply chain processes, leading to improved performance and reduced costs.
Increased Transparency
E-commerce has also brought increased transparency to the supply chain. Customers can now track their orders in real-time, and businesses can monitor supplier performance and identify areas for improvement.
Lowered Costs
E-commerce has helped lower costs throughout the supply chain. By streamlining processes and improving visibility, businesses can reduce their inventory costs and optimise their transportation networks, leading to significant cost savings.
Reduced Supply Chain Disruptions
E-commerce has also helped reduce supply chain disruptions. By providing real-time visibility and monitoring capabilities, businesses can respond quickly to disruptions and minimise their impact on the supply chain.
Conclusion
Supply chain management is a critical aspect of business operations that involves the coordination and management of various activities and parties involved in the production and delivery of goods and services. E-commerce has revolutionised the way businesses manage their supply chains, bringing significant improvements in efficiency, visibility, and cost savings. With e-commerce, businesses can streamline their supply chain processes, improve visibility and transparency, lower costs, and reduce supply chain disruptions. However, as with any technological advancement, e-commerce also brings its own set of challenges, including security concerns, data privacy issues, and the need for specialised skills and expertise. To leverage the benefits of e-commerce and overcome its challenges, businesses must implement effective supply chain management strategies that prioritise collaboration, transparency, and data-driven decision-making. By doing so, businesses can ensure they are well-positioned to compete and thrive in today's fast-paced and constantly evolving marketplace.
If you are a manager in the logistics and supply chain industry, check out SNATIKA's prestigious Master's degree program in Logistics and Supply Chain Management or MBA program in Logistics and Supply Chain Management. SNATIKA also offers Diploma programs in the same domain. These programs are delivered online, which means you can pursue them in your spare time and earn globally recognised European qualifications within 12 months! What's more, the programs are cost-effective and delivered through SNATIKA's ISO-certified LMS. Check out the programs now!