Build an Efficient Supply Chain: 5 Obstacles to Overcome

eCommerce is experiencing an extreme, extended boom that is showing no signs of stopping.

Thanks in part to the pandemic, online shopping is now ubiquitous. As of 2022, 93.5% of internet users have purchased something online.

But as eCommerce grows and more and more sellers make the jump online, the pains of profitable scaling present themselves much clearer.

One of the biggest differences from physical retail that eCommerce businesses face is the way in which they organize their operations. Simply put, eCommerce order fulfillment is much more challenging and costly than replenishing retail shelves.

When selling to customers, delivering the product can be where the rubber meets the road for a seller’s profitability. While it seems like online shopping has been around forever, the fulfillment industry has taken longer to catch up with this new normal. Thankfully, there are now purpose-built solutions for eCommerce’s logistics challenges.

In this article, we look at the 5 most common fulfillment obstacles that eCommerce companies face and provide guidance on how to overcome them with modern tools.

1. Unstable supply chain costs

The rising costs of oil and gasoline have headlined inflation troubles around the world. Few have felt the impact of these rising prices more than the logistics industry – and thus eCommerce sellers.

Fuel makes up a significant portion of the total cost of delivery operations, whether you use it for airplanes, cargo, or delivery vans. Faced with increased costs, fulfillment services are passing on the costs to their customers, eCommerce merchants. In the past few months, both Amazon and Walmart have added fuel surcharges to their prices for Fulfillment by Amazon and Walmart Fulfillment Services, eating into sellers’ margins.

The intuitive thing for a seller to do is to pass the cost on in turn to customers via shipping fees, but 55% of shoppers say they abandon a cart when the additional costs are too high. Price competition online is brutal thanks to how easy it is to find competing products, so sellers have been left battling ever-narrowing margins.

In the short term, a workaround would be to work your delivery fee — or a portion of it — into your product pricing so buyers don’t feel it as much. Another option would be to offer bulk orders at a discount so they can save money when they buy more in one go.

These short-term solutions leave you vulnerable to being undercut by the competition, though. The only lasting solution to rising logistics costs is to adopt a fundamentally lower-cost model. You need to store your inventory close to customers across the country, so that no matter where an order is placed, it can be delivered to them quickly and efficiently via ground shipping. Modern fulfillment networks like Cahoot are designed with eCommerce in mind and will strategically distribute your inventory across the country, lowering your shipping costs to the minimum possible.

2. Changing customer purchasing behavior

Another of the more common eCommerce fulfillment challenges isn’t in the industry itself but in the end users. People’s behaviors are changing.

For one, payment behaviors are rapidly shifting due to innovation in online payments. Whereas people once paid primarily through credit cards, many buyers are turning to e-wallets. This has had a bigger-than-anticipated effect on conversion for online merchants, many of whom are observing their cart abandonment rates edge upwards without the options that people want.

The straightforward solution for eCommerce businesses is to have multiple payment channels on your website. Provide at least three options for your customers to choose which payment channel works best for them.

The three payment options you should have at the bare minimum are credit card, debit card, and e-wallet. If you want to go further, there are now online payment tools that aggregate many more than three options and enable all of them at once on your site. Consumers can pick their favored option (usually one that already has their information saved) and quickly check out. In this way, the right checkout option can boost your conversion.

3. Poor product handling across the supply chain

You must know the pains and headaches of dealing with a damaged or expired product, either as a buyer or a seller. Poor delivery experiences are devastating to an eCommerce sellers’ profitability. The hit comes in three places – one, you have to process a return. Two, you have to send a new item and write down the damaged one. And third, you likely will lose the customer! Most sellers lose money to convert new customers, and then build a profitable business through repeat purchases. Damaged products threaten lost customers and a severe hit to the bottom line.

While some delivery damages happen due to carrier negligence and cannot be avoided, a lot of them can be mitigated or minimized with smart fulfillment strategies.Third party logistics (3PL) companies that don’t specialize in eCommerce likely don’t know what it takes to safely package a product to be sent to a customer. If the 3PL company has been around for a long time and grew through retail replenishment, they’re used to shipping in bulk. On the other hand, warehousing services that are build specifically for eCommerce know how to store and pack single products ordered online to minimize damage.

Using manual and automated inventory management systems, warehousing partners can track notes on certain inventory so they know how to handle them best and avoid any food spoilage because of wrong room temperatures and other storage conditions. Inventory management solutions make it easier for warehousing staff to track handling concerns and requests. The added edge of automated inventory management will help avoid any unwanted damages to the products such as breakage, spoilage, and so on.

4. Rider and delivery crew reliability

With the growth of just-in-time last-mile services, there have been growing challenges to manage that part of the fulfillment process. Restaurants face various last-mile delivery challenges, but one of the most common has to be rider reliability. While many riders remain reliable and competent, there will always be a bad bunch that stain the reputation of a business and its merchants.

Using some form of feedback system to gather insights into rider performance is crucial in this sense. Companies, whether the riders or the merchants, should also use these systems to evaluate whether they should work with a certain rider or not. For instance, if you have a rider that has a star rating lower than three, then it should be a signal for a last-mile delivery company, merchant, or customer to not do any business with that service provider.

5. Lack of efficient supply chain processes

As author of Atomic Habits James Clear once stated, “You do not rise to the level of your goals. You fall to the level of your systems.”

That principle doesn’t just apply to personal productivity. It applies to business efficiency too. A fulfillment and delivery operation must have systems and processes that are optimized for the task at hand. This extends to your fulfillment provider, who must be optimized for eCommerce, and to you and the way in which you communicate with your customer after they’ve placed an order.

For example, giving timelines on your delivery should be a part of your system. Currently, 24% of online buyers will abandon an order if no delivery date is provided. Amazon set the standard for “date certain” delivery, as it’s called, and now it’s an expectation that all online sellers must meet. You should be able to supply that information with an order tracking system to remove the buyer anxiety most people who order online might feel.

Of course, date certain delivery won’t be a positive experience for your customers if the date they see is more than a week in the future, or if they had to pay an arm and a leg for shipping. This is where your fulfillment provider also must be optimized for the world of modern eCommerce. As we mentioned before, if they haven’t built a network that blankets the country in warehouses, and if they don’t have intelligent software that can govern where each order should ship from, they simply can’t support your needs. You need fast shipping at a low cost to compete – and anything other than a nationwide network of eCommerce warehouses can’t do that for you.

Fulfillment defines efficient eCommerce supply chains

Learning how to solve fulfillment challenges is crucial for any eCommerce business. As the world of online buying and selling grows, your options for cutting-edge eCommerce fulfillment operations expand as well. You don’t need to operate your own warehouses to win. Even small to medium businesses can make the world their oyster and sell everywhere if they pick the right fulfillment provider that will help them win new customers and keep their costs low.

Cahoot’s nationwide network of over twenty warehouses provides affordable national eCommerce order fulfillment for online merchants. Our wide and diverse network enables us to fulfill a wide variety of needs, from sellers who need absolute peak speed at minimum cost to those that have fragile items or others that require special handling.

Our fulfillment centers are outfitted with dedicated personnel and technology that creates an efficient supply chain:

Efficient picking enables late 2pm order cutoffs
Barcode scanning all but eliminates incorrect orders
Intelligent pick and pack software optimizes boxes for every order, minimizing shipping cost for complex orders
Lowest cost by design

Getting started with Cahoot is fast and easy – with pre-built integrations for major eCommerce channels like Amazon, Walmart, Shopify, and BigCommerce, we can get merchants started in as little time as it takes to send us your inventory.

Talk to one of our experts today and explore how we can be the key that unlocks the next level of your profitable eCommerce growth.