Managing the supply chain is one of the most challenging tasks for e-commerce leaders.
Many aspects of our world are constantly evolving, including technology, globalization, risk management, and customer expectations. As the e-commerce industry continues to expand, it is essential to keep up with these changes and meet the needs of consumers.
On top of achieving sustainable operations, several global supply chain challenges have occurred due to the aftermath of the COVID-19 pandemic. Here are some of the most pressing issues you must face in the fourth quarter and the top strategies to overcome them.
The Current State of Supply Chains
Many of the common challenges supply chains face following the COVID-19 pandemic include:
- Port congestion
- Manufacturing delays
- Factory shutdowns
- Extreme weather
However, online retailers found ways to manage these supply chain challenges. They adopted strategies like streamlining operations, focusing on managing working capital, and selling existing inventory.
While these companies were able to survive this volatility, maintain revenue, and satisfy customers, numerous bottlenecks persist and are expected to continue throughout the year. A Gartner survey found that 76% of supply chain executives face even more disruptions than three years ago.
The ongoing supply chain crisis has presented significant challenges for e-commerce businesses, including stock shortages, fulfillment delays, inventory issues, and backorders on popular items. Despite the supply chain being fragmented in 2023, companies are adapting by proactively addressing inefficiencies in operation and working smarter to mitigate the impact.
The Key Supply Chain Challenges in Q4
Although companies are working to mitigate supply chain challenges, it is essential to understand which key issues exist so you can be better prepared.
1. Lack of Materials
Supply chains have faced challenges that impacted material availability. Various industries have experienced shortages since the COVID-19 pandemic, creating global disruptions in supply chains. Manufacturers are struggling to obtain necessary materials, which leads to a halt in production and causes severe delays.
Most material scarcity is due to the changes in consumer needs, with the pandemic further affecting availability. More consumers are shopping online, increasing demand and applying significant pressure on e-commerce businesses. Companies need help managing their inventory and staying committed to timely delivery.
2. Increased Freight Prices
There’s also been an increased surge in e-commerce sales worldwide, which is tremendous for online retailers. However, more online purchasing has created an uptick in container shipping demand. This caused a substantial shortage of shipping containers, disrupting traditional supply routes.
Consequently, freight rates have skyrocketed. Due to the rapid escalation in shipping costs, businesses are experiencing a financial burden. This supply chain issue raises overall operational expenses and challenges maintaining competitive pricing.
3. Difficult Demand Forecasting
The pandemic has created unparalleled demand forecasting complications, disrupting traditional patterns. As a result, businesses must predict consumer behavior more accurately. This leaves online retailers questioning how much inventory they should stock or manufacture.
E-commerce businesses then face the challenge of making guesses based on their gut instinct rather than relying on hard facts from data-driven research.
4. Port Congestion
The pandemic has also caused port congestion, a significant o bstacle to global supply chains. Due to capacity constraints, ships can’t load or unload freight. Labor shortages and social distancing measures have intensified this issue.
The result of these bottlenecks has created far-reaching impacts for e-commerce businesses. Companies must ship goods on time, whereas carriers struggle with breaching delivery commitments — causing reputational damage and financial loss.
5. Changing Consumer Attitudes
COVID-19 has transformed consumer behavior, causing heightened expectations for rapid delivery and superior customer service. Simultaneously, consumers have shown increased flexibility in purchasing, switching brands, and adopting new buying channels. Agile supply chains have become critical due to these shifts.
Inflation has posed significant challenges for e-commerce businesses. It escalates the costs associated with procuring raw materials and finished goods. As a result, online retailers face squeezed margins and weakened revenue streams.
However, inflation issues go beyond cost implications. Businesses must understand how it impacts their operations and devise strategies to combat its effects.
Strategies for Overcoming Supply Chain Challenges
The challenges e-commerce businesses face in supply chain management can seem overwhelming. However, remaining agile and adopting effective strategies let them sustain growth and keep customers satisfied:
- Focus on liquidity management: Ensure you have readily available capital to enable your business to handle periods of inventory fluctuations. This will allow you to meet demand and avoid stockouts. Consider obtaining a flexible line of credit, as it can provide you with the capital to stock high-demand items and prioritize expedited manufacturing and shipping.
- Diversify sources: Broadening sourcing strategies, including on a geographic level, can strengthen your supply chain. Consider establishing relationships with multiple suppliers. Doing so enables adaptability to market changes and provides alternate sources for goods.
- Partner with freight forwarders: Collaborating with freight forwarding companies gives you the advantage of streamlining shipping processes, managing transportation challenges, and negotiating cost-effective routes. It also provides you with invaluable expertise in handling delays and rerouting.
- Identify alternative shipping ports: Combat port congestion by exploring alternative ports. You can ensure you are still meeting fulfillment times during surges in customer orders and other unexpected events.
- Improve demand forecasting: Leveraging automation for demand forecasting can bring precision to inventory management. Predictive tools and historical sales data let you make informed decisions about stock levels and mitigate stockout or inventory shortage risks.
Handling Supply Chain Challenges Efficiently
E-commerce companies face many supply chain challenges, from port congestion and inflation to changing consumer attitudes. However, there are effective ways to overcome them.
I want you to be resilient in successfully managing your supply chain. Preparing for the worst in the fourth quarter will keep your company at an advantage and help you overcome adversity.