Complete Guide to Increasing Supply Chain Efficiency

An efficient supply chain is the backbone of every successful ecommerce business. Orchestrating manufacturers, suppliers, vendors, warehouses, transportation companies, distribution centers, and marketplaces is not easy. 

So you’re probably wondering: Is there a way to use resources in the most efficient way while still accomplishing goals? The good news is: There is!

To help you navigate the complexity of the supply chain ecosystem, we created a guide with best practices that will increase your efficiency. Let’s dive in! 

Table of contents

• What is supply chain efficiency?

• Why is supply chain efficiency important for ecommerce businesses?

• How to measure supply chain efficiency? 

• 9 ways to improve supply chain efficiency 

• How to increase your supply chain efficiency with Veeqo

What is supply chain efficiency? 

Supply chain efficiency is the ability to maximise the use of resources, technology, and knowledge to deliver products to customers without delay or increasing costs.

Having an efficient supply chain is a prerequisite for ecommerce business success.

Why is supply chain efficiency important for ecommerce businesses?

Businesses rarely tackle the supply chain proactively. In fact, they start dedicating more time to it only if something doesn’t work. That’s a mistake.

Taking a more strategic approach and prioritizing supply chain efficiency can quickly become one of your core competitive advantages and have a positive impact on your overall ecommerce business. 

During the COVID-19 pandemic, ecommerce businesses faced a harsh reality—supply chains are fragile. If you don’t invest in creating an efficient and resilient supply chain ecosystem powered by technology, you could be exposed to even bigger challenges and disruptions in the future.  

Here are some of the benefits of improving your supply chain efficiency: 

• Reducing logistics costs

• Improving customer experience

• Mitigating risks

• Boosting profits

• Driving business growth

How to measure supply chain efficiency? 

Supply chain efficiency is not a theoretical concept. You can measure certain indicators to assess your supply chain efficiency and take the necessary measures to improve it.

Let’s look at some of the most frequently used metrics for supply chain efficiency.   

On-time delivery rate

On-time delivery rate is the percentage of orders you deliver to customers within the promised timeframe.  

Inventory turnover ratio 

Inventory turnover ratio is the number of times your business sells and replenishes the inventory in a specific period. 

Order accuracy rate 

Order accuracy rate is the percentage of orders accurately taken and conveyed to your production and delivery teams. It shows the percentage of correctly fulfilled orders. 

Perfect order index

Perfect order index is the percentage of orders fulfilled successfully—in other words, orders delivered on time, complete, without damage, and with accurate documentation. 

Cash-to-cash time 

Cash-to-cash time is the time between paying suppliers for raw materials and getting paid from customers for the products you sell. 

Supply chain costs

Supply chain costs refer to transportation, shipping, warehousing, and labor costs. Supply chain costs represent a big chunk of your total ecommerce business costs. Being able to reduce supply chain costs will have a significant impact on your business performance. 

9 ways to improve supply chain efficiency 

If you’re running an ecommerce business, you’re probably wondering how you can reduce costs by streamlining operations, optimizing inventory levels, and minimizing lead times. Here are nine ways to improve your supply chain efficiency. 

1. Increase supply chain visibility

The first step towards achieving supply chain efficiency is knowing where your products are at any given time.

By implementing inventory management software (IMS), you can track inventory levels through different stages—from the moment you store them in your warehouse to shipping them to customers.

Knowing the status of your warehouse inventory will prevent stockouts, backorders, and overstocking. 

The best part is that using an IMS will improve your inventory forecasting and help you make informed decisions based on data and analytics. Supply chain visibility is crucial for assessing manufacturing and distribution lead times and performance.

Having inventory management software is even more important if you’re selling across different channels and marketplaces such as Amazon, eBay, Shopify, and Walmart, as it gives you answers to the following questions: 

• What you have in stock

• What you've sold, and on what marketplace

• What you could sell more of

• What's not selling

Equipped with this information, you’ll be able to make strategic decisions that will fuel your ecommerce business. 

2. Use the power of automation in supply chain

Automation and efficiency go hand in hand. Supply chain automation is the use of technology to manage supply chain tasks without direct human intervention.

Finding ways to automate manual processes will help you reduce human errors, avoid bottlenecks, and improve supply chain performance. 

The question is: Where to start? While automation across the supply chain can have a positive impact, start by prioritizing automation of time-consuming tasks.

Here are some of the areas where supply chain automation can improve your business efficiency:  

• Inventory management — Automation can help you maintain optimal stock levels by reordering when inventory reaches predefined levels. As a result, you can reduce the risk of stockouts or overstocking and improve forecasting.

• Order processing — An automated order processing system allows you to receive orders, update inventory levels, and generate invoices without manual intervention.

• Warehouse operations — With technological advances, you can now use robotics to speed up picking, packing, and sorting orders. The end result is improved accuracy, speed, and efficiency in fulfilling orders.

• Shipping and logistics — Another area where automation can improve efficiency is the automation of shipping label generation, package tracking, and delivery scheduling. This can streamline the shipping process and provide customers with real-time tracking updates.

Further reading: 5 Best Shipping Software for Enterprise Businesses

3. Train your team 

Making sure your team knows how to use the supply chain systems and technologies you have is vital for the performance. In order for your business to function like a well-oiled machine, you need to provide your supply chain staff with formal training.

And that’s just the beginning. Technology develops at breakneck speed and requires constant learning and adoption.

So, if you want to stay ahead of the curve, implement regular training sessions where employees can learn about the latest best practices and share knowledge. 

4. Build an integrated supply chain ecosystem

Building an integrated supply chain ecosystem requires careful planning, collaboration, and technology adoption. When creating a supply chain ecosystem, choose solutions that offer scalability and compatibility with existing systems. 

Start by removing silos across the supply chain. You can improve visibility and efficiency by integrating your supply chain ecosystem with ecommerce platforms, marketplaces, shipping carriers, and more. 

As a result, you can achieve real-time visibility into supply chain activities, inventory levels, order status, and shipment tracking. This information lets you make informed decisions about further optimization opportunities.

5. Use supply chain analytics to make data-driven decisions 

Managing your supply chain operations without data is like navigating a ship through uncharted waters without a compass. Real-time data is essential as it can help you optimize inventory levels, production schedules, and resource allocation. 

Based on the insights, you can identify excess stock or potential stockouts and act accordingly.

Another important area where data can help is supplier performance evaluation, where you can use indicators such as lead times, quality, and reliability to create a strong network of suppliers that can support you on your path to growth. 

6. Build strong relationships with suppliers

The relationship you have with your suppliers can make or break your business. Working with dependable suppliers means you can trust them to provide you with the resources you need—whenever you need them. 

Communication is the key to a strong supplier relationship, and you must communicate frequently and transparently with your suppliers. Your supply chain will be as resilient as the suppliers you choose to work with. 

The pandemic highlighted the importance of supply chain diversification and reshoring. As a result, many e-commerce businesses are partnering with local suppliers to diversify their supply chains and create a backup in case of adversity and big disruptions. 

The bottom line is that whether you choose to work with local or overseas suppliers, ensure you deliver on your promises and show appreciation to your partners. That’s how you can build trust and strong supplier relationships. 

7. Invest in sustainability practices 

Sustainability has become one of the most discussed topics among supply chain professionals.

And it’s no surprise.

According to the World Economic Forum, eight supply chains account for more than 50% of global emissions (food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight).

But besides the positive effect on sustainability, green initiatives can also level up your supply chain efficiency. Implementing SIOC (ships in its own container) packaging whenever possible can reduce waste and cut shipping costs. 

Optimized transportation is another green initiative that can help with efficiency. Work with your logistics partners to optimize delivery routes to reduce carbon emissions and transportation costs. 

Last but not least, prioritize working with partners who have implemented sustainability practices as well. From sourcing materials and components from suppliers who adhere to sustainable practices and certifications to working with 3PL partners who use eco-friendly practices, your partner network can improve your supply chain efficiency.  

8. Rely on technology to improve efficiency

The supply chain is on the cusp of digital transformation, which is a prerequisite for using emerging technologies such as artificial intelligence (AI), blockchain, the Internet of Things (IoT), and cloud-based solutions. 

The advances in AI will have a significant impact on supply chain efficiency, especially in the areas of intelligent sourcing, inventory management, and logistical route planning.

AI can help you identify high-performing suppliers, dynamically adjust inventory levels based on real-time demand signals, and optimize transportation routes based on traffic patterns, delivery schedules, and vehicle capacity. 

There’s no doubt that AI will transform the supply chain and improve efficiency, giving you more time to focus on areas where humans perform better than machines.

9. Review and optimise your supply chain regularly

Optimising your supply chain is not a one-and-done activity—it’s a continuous process. Set up regular monitoring, measurement, and feedback mechanisms to stay on top of real-time data and make adjustments where necessary. 

The inability to respond fast can create inefficiencies in planning, procurement, modeling, transportation, and logistics.

Having in mind that the supply chain has a strong “butterfly effect,” even the slightest inefficiencies can create a cascade of responses that can jeopardize your ecommerce business. 

Increase your supply chain efficiency with Veeqo

As customer expectations continue to grow, ecommerce companies that want to futureproof their businesses must build an efficient supply chain that can predict and respond to the rapidly evolving demand. 

Using Veeqo's software, you can prevent stock-outs, forecast customer demand, automate inventory tasks, and keep inventory up-to-date across all your marketplaces, stores, and locations.

Veeqo can also help you process a large number of orders quickly and efficiently through batch processing and automation, as well as reduce shipping costs with smart order routing. 

Ready to increase your supply chain efficiency with powerful multichannel inventory management tools and shipping software? Sign up to Veeqo for free.