E-commerce businesses rely on a range of factors to run successfully. Supply chains are integral to their success, and as a business owner, you must deal with the different processes inherent in them. Procurement is essential to business success since so much depends on the quality of raw materials and products you source from your suppliers.
Customer delivery times also play a massive role in ensuring repeat business. These days, you cannot afford to spend 14 days shipping a product from the other side of the planet. Consumers expect high-quality products, and they expect them to arrive quickly.
The bottom line is: If you want your E-commerce business to succeed, you must understand shipping lead times and the role they play in your business’ growth.
When speaking of shipping lead times, most E-commerce business owners default to thinking about customer delivery times. However, understanding lead times from your supplier to you is also essential. How long will it take you to procure raw materials or finished products from your suppliers, and what quality can you expect on delivery?
Many vendors ship substandard products when faced with short lead times. You must work with your suppliers to source high-quality products as quickly as possible. In this regard, focusing on a small list of reliable suppliers is better than casting a wide net.
E-commerce financing firm 8fig notes that trust is essential to the process. “Focus on building relationships with a small group of reliable suppliers to accelerate your logistics lead time,” it explains. “While disruptions are inevitable, you need to trust that your partners are doing their part to avoid interruption, and know they’ll communicate with you if delays occur.”
With strong supplier relationships, you’ll receive raw materials faster, setting you up for success with your customers.
Optimal inventory management
Inventory is a significant cost for E-commerce firms. While smaller firms rely on dropshipping or using merchant services to eliminate inventory costs, these options don’t work for bigger companies due to high volumes. For instance, processing reverse logistics and ensuring customer satisfaction is almost impossible when outsourcing inventory.
Lead times help you create optimal inventory storage processes. You can model supplier lead times, add manufacturing or product finishing times, and estimate customer shipping times to maintain an agile inventory. As volumes grow, you’ll have to factor in returns and other process impacts on inventory.
However, lead times play a key role in helping you maintain an agile, low-cost inventory structure. Automation helps in this regard. Automate large parts of order entry and shipping fulfillment, and you’ll have more time to devote to inventory analysis and lead time specification.
Your customers are the most important part of your business. Make sure you exceed their expectations, and the rest will fall into place. Lead times play an important role in ensuring your customers receive their products on time. The more you meet their expectations, the faster your business grows.
In an ideal world, your customers will receive their products instantly. However, this isn’t quite possible yet. You must consider the impact of small lead times on your business. Faster shipping options exist, but these cost money. Make sure you understand the impact of these costs and compare them to your customer’s LTV.
For instance, if the average customer’s LTV is extremely high, consider reducing your margins and accommodating higher shipping costs. However, if most of your customers make just 1 or 2 purchases for a low LTV, passing on faster shipping costs is the right way to go.
Streamlining your supply chain’s processes via technology is essential. 8fig notes, “Building a comprehensive plan of your logistics process gives you insights you wouldn’t be unable to see otherwise. This allows you to streamline your supply chain while adapting more quickly to interruptions.”
The software will help you model different variables and offer insights into your lead times. The result is optimal and sustainable growth over the long term.
Better demand planning
Lead time analysis will offer insights into bottlenecks in your business. Fast shipping is a key selling point for many E-commerce businesses these days, and you must consider relocating supply points to cater to these needs.
Onshoring your suppliers might be a great way to increase customer satisfaction even if it decreases your margins. Pushing a “Made in..” brand will set you apart from your competitors and drive greater sustainability, something essential to consumers these days.
Shipping lead time analysis will help you understand some of the variables in this equation. How well can you service your customers while maintaining margins that will propel your growth? While lead times cannot unlock answers to these questions by themselves, they are a great place from which you can begin your analysis.
Better lead times, faster growth
E-commerce business growth might be challenging, but lead-time analysis can help you install processes that help you scale and boost profits in the long run.
By modeling different variables, you can make intelligent decisions about customer LTV versus lower margin trade-offs, and so on. The result is an E-commerce business that is primed for growth and sustainable scaling.
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