How to Optimize Your Supply Chain for Shipping Lead Times
Shipping speeds matter. As more and more people turn to online shopping instead of taking a trip to the store, consumer expectations are changing.
With e-commerce marketplaces such as Amazon.com offering same-day and one-day shipping options, consumers are shifting their expectations to follow suit. According to a 2021 survey conducted by the Retail Industry Leaders Association, 90 percent of consumers expect two- to three-day shipping as the standard baseline, and 30 percent demand same-day delivery. The 2020 Flexe Omnichannel Consumer Survey reports that 85 percent of online shoppers will search for sellers that offer faster shipping times when making a purchase.
It's clear that shipping speed has become a deciding factor for many, and the only way to remain competitive is to adapt to this new reality. In order to do so, e-commerce sellers should focus on reducing their shipping lead time — i.e., the amount of time that passes from the moment a customer places an order to the final delivery of the product. It's the total of pre-production time, production time, and shipping and delivery time.
While calculating shipping lead time is simple enough, reducing it can be a challenge. Due to the COVID-19 pandemic and global conflict, supply chain disruptions and delays have become all too common. This makes keeping on top of shipping times both more difficult and more important. Fortunately, through supply chain optimization, e-commerce sellers can take steps to shorten their shipping lead time.
Use Technology and Automation to Streamline Supply Chain Management
In the past, manual data entry was the only way to track and fill orders. Now, however, this old method is dated, time consuming, and less accurate than the alternatives.
Investing in high-quality technological solutions to order processing and data entry is a straightforward way to speed up pre-production time and get orders to customers more quickly. It also eliminates human error and frees up time for sellers to spend on other aspects of running their businesses.
In addition to technological solutions to data entry, seeking out software that can map and track supply chain expenses and cash flow is a great way to visualize the entire supply chain, find weak spots, and plan ahead. It can also help sellers understand where delays have occurred in the past or are likely to occur in the future.
Utilize Data to Forecast Demand
Maintaining sufficient inventory to fill demand is crucial when striving for fast shipping times. Stock-outs are immensely harmful to businesses as they create long shipping delays and unhappy customers.
To avoid stock-outs, sellers should always collect and analyze data in order to forecast demand. With today’s available technology, there are many options for data collection, analysis and forecasting, many of which make use of big data and artificial intelligence (AI) tools. An accurate forecast gives sellers the information they need to keep their inventory at an ideal level, maximizing profits, averting stock-outs, and shortening shipping lead times.
Find Reliable and Flexible Partners to Add Supply Chain Resilience
Over the past two years, flexibility and resilience have become priorities in supply chain optimization. When sellers are attempting to shorten shipping lead time, it’s important to make sure that partners are reliable and flexible. From suppliers to third-party logistics providers (3PLs), partners should have the knowledge, connections and capability to find solutions and pivot when they detect a disruption or delay.
Having expert partners who can get things moving during challenging times is invaluable and can keep shipping lead times down when sellers need it most.
Incentivizing Suppliers Encourages Them to Improve Performance
Building good relationships with suppliers is another way to shorten shipping lead times. Communication is key, as knowing what's really going on with supply can be challenging, particularly when suppliers are international. Sellers need to know that their suppliers are operating as promised, and be made aware of delays and disruptions in advance.
Offering suppliers incentives for performing at or above agreed upon measures can work wonders for supply chain efficiency. Some sellers offer bonuses to suppliers when they meet or exceed targets, encouraging them to maintain a high level of achievement. Another type of incentive is a contract extension. The allurement of another year or two of partnership often motivates suppliers to step up their game.
Domestic Suppliers Shorten the Supply Chain and Minimize Disruptions
The supply chain instability that emerged due to the COVID-19 pandemic isn’t going away anytime soon, leading many e-commerce sellers to turn to domestic suppliers.
Local suppliers may be more costly in the short term, but there are a number of benefits that can pay off in the long run. Since domestic suppliers are much closer geographically, it expedites communication. Time zones are less of an issue, and it's more feasible to visit suppliers’ facilities to gain a clear understanding of what's happening on the ground.
In addition, partnering with a domestic supplier shortens the supply chain, as the product has a shorter distance to travel on its way to warehouses and customers. This cuts down on the number of potential disruptions and delays that can occur along the way. When working with international suppliers, any conflict or unrest in the supplier's location can severely impact the supply chain. This is also eliminated when sellers switch to local suppliers.
Maintain a Healthy Cash Flow
Keeping shipping lead times down requires a healthy cash flow. In order to ship orders quickly and efficiently, it's vital to have enough capital to maintain sufficient inventory at all times. As the saying goes, it takes money to make money.
Therefore, it’s important that e-commerce sellers stay on top of their available funds. In addition to funding for inventory management, it's also wise to have extra capital set aside for unexpected expenses. The value of such a cushion shouldn't be underestimated, as it can save businesses when they're faced with the need to overcome unforeseen disruptions and delays.
Optimize for Shipping Lead Times
Shortening shipping lead times has become essential over the past few years. In today’s changing e-commerce space, businesses that have optimized their supply chains for shipping lead time have a significant advantage over those that fail to offer quick shipping. By following the above tips, sellers can reduce their shipping lead time, adding to their customer appeal and taking an important step in growing their businesses.
Assaf Dagan is co-founder and CTO at 8fig, a funding solution designed specifically for e-commerce sellers.
Assaf Dagan is co-founder and CTO at 8fig, a funding solution designed specifically for e-commerce sellers. A seasoned entrepreneur and technical manager with a constant passion to learn, he has served on the founding teams of multiple successfully acquired startups and built a number of products and apps that disrupt the space.