As a refresher, a supply chain is a system involving a business and its suppliers in the production and distribution of a particular product to the end-user. The system comprises various people, activities, entities, resources, and information. It additionally illustrates the phases it takes to process the product from its raw state to the consumable state.
Here we explain the increasing costs of the supply chain, the causes of the increase, and how to work with the challenges. So let's dive in:
The Rising Cost of the Supply Chain and Ways to Work With the Current Challenges: eCommerce Business Owners
To plan and ensure that things flow uninterrupted, a current supply chain has to change to fulfill the current demands and overcome the supply chain challenges. A mixture of consumer expectations, additional avenues to the market, and complexities globally coupled with other aspects generate substantial challenges throughout the supply chain system.
The Rising Cost of the Supply Chain
As supply chain costs skyrocket, profit margins consequently decrease. The costs originate from several areas, and lack of proper visibility and accountability to lower them can cause increased operational costs.
Some of the main factors leading to the increased costs include:
- Increasing commodity prices hike raw materials' cost.
- The hiking of the price of fuel used to ferry commodities using the air, sea, or land.
- Elevated costs of labor from manufacturers and suppliers.
- The complicated global logistics result in the increased transfer, storage, and supervision of commodities.
- Complexity of the supply chain owing to the various market channels.
The basic supply chain has to adjust, especially when customers purchase products through numerous channels, increasing avenues to the market. To deal with every channel, managers of supply chains have to create variations on supply chain procedures. Including:
- eCommerce websites retailing to customers need quick last-mile distribution and regional logistics.
- Regular wholesalers and retailers require big storage facilities near main metropolitan regions, coupled with up-to-date stock control to guarantee the availability of goods.
- Third-party markets such as Amazon need in-depth fulfillment knowledge and submission to their conditions and terms.
- Drop shipping sales need quick global services to enable customers to get products fast.
To guarantee a better end-consumer experience, supply chain managers have to manage third parties, numerous supply chains, third parties, and other organizations regardless of how customers place orders or receive goods.
Customer Demands Rise - Need for Enhanced Speed, Quality, and Service
Every industry is encountering disruption; therefore, customers have had no choice. Each touchpoint with an end-consumer has to concentrate on delivering outstanding products and services. Quality, just like speed, is gaining significance as pricing is for buying goods:
- Customers need saleable commodities instantly, then online commodities shortly.
- Goods have to be of the quality required by the customers.
- Safety and additional submissions have to be met by the commodities and unprocessed materials as well.
Ways to Work With the Current Supply Chain Challenges
Using Order Fulfillment Centers
A fulfillment center refers to the third-party logistics warehouse where inventory is accepted, processed, and stored. The merchant can accept and review products before transporting them to the fulfillment center or send them directly from the manufacturer to the warehouse to manage stock with the outsourced fulfillment center.
Outsourcing enables the merchant to pass on the obligations and costs related to warehouse management and concentrate on their growing business. The fulfillment center is held accountable for stock issues like "misspeaks" and "midships."
Major shipping carriers typically negotiate the charges with fulfillment centers dealing in significant business volumes. The savings enable the merchant to provide better offers to customers like free shipping.
An ordinary warehouse is an area where stock is kept, whereas a fulfillment warehouse performs various tasks apart from storage. The typical American transport warehouse is bigger than 25,000 sq. ft. Whereas 50 percent of warehouses presently are about 50,000 sq. ft.
Although every challenge calls for a unique solution, it's worth noting that your customers are humans, not concepts. Learn how partnering with Rakuten Super Logistics can help you navigate supply chain challenges. Request a quote here.