Tactics > delivery and distribution
A more efficient
supply chain
Seven areas
them. You will probably have to commit to large
volumes and up-front deposits, and then there
are all of the logistics expenses associated with
to focus on to
getting the product to your warehouse. Also
take into account that you will probably have
to cover the cost of faulty items. And don’t
improve your
overlook the increased chances of ending up
with large amounts of obsolete inventory. In
practice, when all costs are taken into account,
operations
sourcing in the UK or the rest of Europe is not
as expensive as it at first appears.
’m not sure who coined the phrase
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buying and stock management. Run
out of stock and your customer may never
I
“There’s nothing so constant as return; order too much and not only are
change”, but it certainly applies to you tying up cash but you are also taking up
what’s happening to direct selling precious warehouse space, which is likely to
supply chains. reduce efficiency, and will probably incur
In recent years the internet’s markdown costs when you finally decide to get
relatively low cost of entry enabled many rid of the unsold inventory.
ecommerce businesses to launch and rapidly No one can predict the future, so don’t go
grow. But once they hit annual turnover of
By Simon Tomlinson
over the top trying to develop bigger and better
roughly £5 million-£15 million, many of them forecasts. Focus on finding sources of supply
hit a glass ceiling. They reached a point where with short lead times, and find out the optimum
the business approach and processes that got purchase quantities. Quite often suppliers will
them off the ground no longer sufficed. give great discounts if you order full cases,
It may be that the product range was too pallets, or even containers. Those discounts
limited or the market too small. It may be that can cost you money, though, if you have to buy
competitors came in and their niche market appreciably more inventory than you need in
became mainstream. Or it may be that their order to obtain them.
businesses needed to take control of their
supply chains and make them more efficient.
The drive for supply chain efficiency will of
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warehousing and fulfilment. It is quite
common for an operation that ran well when
course feature different elements depending on small to begin falling apart as volumes grow,
the business. But the common themes are because the people running the fulfilment have
no experience of operating at these higher
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sourcing. Most internet businesses start levels and the existing processes prove not to
with some great products sourced from any be scalable.
number of places. Because overheads usually Some organisations, recognising that this is a
start low, the cost of the products is not always problem, outsource their fulfilment. It is clearly
the most important consideration, and in any better to have it done well by a third party than
case with low start-up volumes, the business poorly by yourself, but paying a management
has little buying power. As sales grow, though, fee to a third party can take a significant bite
overheads often rise even faster, and sourcing out of your margin.
becomes more important. The temptation now Alternatively you can try to get the skills you
is to go for the lowest price. need in-house, by training your existing staff
With access to China and the rest of the Far and/or bringing in new managers experienced
East getting easier every day, direct sourcing in operations for businesses of your size (and
from the factory becomes a possibility for even bigger). Then, once you have the right skills,
small companies. But before you give in to you need to consider technology.
the lure of those low prices, be aware of the Investing in technology is not simply a
conditions and hidden costs that come with question of improving quality and efficiency,
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Catalogue e-business www.catalog-biz.com
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