As a brand, you might have just about everything right when it comes to ecommerce. You’ve developed a compelling product, honed your marketing channels and optimized your selling and pricing strategies. But if you can’t get product to your customers, none of that matters.
Whether you’re an established name or an up-and-coming brand, a supply chain strategy that’s reliable will be the difference between accelerated growth and failure. As a former architect of Amazon’s automated fulfillment operations, I’ve witnessed the complexity of managing a supply chain firsthand — and can appreciate the immense value that comes with figuring it out.
Reducing the friction in your supply chain rests on four key steps: selecting the right channels, understanding your fulfillment capabilities, managing your inventory and finding the talent to execute a skillful supply chain strategy.
Omnichannel doesn’t mean every channel
Just because every channel may be available doesn’t mean you should use every channel. Contrary to the etymology, omnichannel doesn't literally mean "every channel". It means leveraging several channels simultaneously, and you need to decide the optimal mix that will position you to win.
If you’re a legacy brand, the complexity of marketplaces and the difficulty in navigating them are why challenger brands may be beating you. For brands that had their start before the ecommerce boom and are used to moving around cases and pallets, regaining agility can start with problems as seemingly straightforward as knowing what type of box to use and how to ship it. You need to master the basics of ecommerce fulfillment to cement your position and ward off challengers.
If you’re a younger, fast-growing brand, you have to be able to scale and know where to avoid overinvesting. If you’re an expert in Amazon or DTC, for example, you’ll need to learn how to break into channels and process transactions to which you’re unaccustomed, such as physical retail.
Brands, regardless of size, will miss out on the opportunity omnichannel presents if their supply chains aren’t optimized. So, understanding your supply chain capabilities is the next step in selecting and developing the right mix of channels.
Your supply chain capabilities will shape your channel strategy
Brands need to functionally connect to marketplaces and know how to meet customers where they are. This means having a sales strategy, a pricing strategy and an understanding of the competitive landscape.
From there, you need to know how to interact effectively and sustainably with your chosen marketplace. Take Amazon for example. You can sell via a first-party relationship to Amazon. Or dropship. Or third-party. Or seller-fulfilled Prime or fulfilled by merchant.
Your supply chain dictates how you interact with a given marketplace. What do your third-party logistics look like? Your fulfillment capabilities will dictate whether you can sell third-party or need to stick with first-party.
Let’s say your brand wants to sell direct-to-consumer with a Shopify store. Again, your success is completely dependent on having the right shipping costs and available options for your customers.
Your brand’s fulfillment capabilities determine how to operate your channels.
Inventory pooling is key to omnichannel
Let’s assume you’ve selected a handful of marketplaces, like Target and Amazon. You have a solid sense of your competitive landscape, and you know that you can make money on those channels. Moreover, you know that your brand has the fulfillment capabilities it needs.
The next step is inventory management.
Inventory pooling is critical. The term refers to a brand’s ability to make the goods in their inventory as fungible as possible in order to serve multiple marketplaces with uncertain demand.
Every brand in the world, at every size, has had its inventory tied up in the wrong place. Their product is either in the wrong 3PL or in the wrong configuration. Product is in a 3-pack when it should be in a 1-pack, or vice versa. Product is in the wrong color packaging. These snafus happen all of the time.
Fungible inventory that can be pulled from one central network — connected to the handful of marketplaces your brand has chosen — allows your brand to run on overall lower levels of inventory, reduce risk and keeps you in stock for each marketplace.
The alternative — segmenting your inventory into separate locations — can be perilous. Consider this all-too-common scenario. Your brand sells DTC and on Amazon; you have two warehouses, one for each channel. Let’s say your Amazon sales start soaring; then, your Amazon-dedicated warehouse runs out of goods. The rest of the inventory that you could use is stuck in your DTC warehouse.
This scenario can wreak havoc on your brand. Running out of stock on Amazon, for example, spells death. Your sales rank will drop, you’ll lose ad effectiveness and most importantly, you’ll sacrifice consumer trust. Plus, having inventory in the wrong place is extremely expensive. Moving supply on short notice comes with steep costs and irreparable damage to your reputation.
Being out of stock is not an option if you want your brand to quickly grow on any marketplace. So, be sure to get your inventory strategy straight to take full advantage of the channels you’ve chosen.
Figure out what talent you need to solve the supply chain
Now that you’ve worked out your brand’s strategic opportunities, the next step is assembling the partners and solutions to succeed at omnichannel. Building out your fulfillment and inventory capabilities on your own is massively expensive. So, while it may be an option for some extremely well-funded brands, most take advantage of partners who are experts in logistics.
The gold standard for brands is a high-volume, low-defect fulfillment network connected to every marketplace so they can get products to their customers no matter where they are. To unlock the full capabilities of omnichannel, brands need a holistic view of a variety of marketplaces so they can either find new channels or, in places where they’re already selling, become even more effective and scalable.
This is the most free and expansive commerce environment that has ever existed. If your supply chain keeps your brand from getting your product to your customers, another brand will beat you to them. Don’t let that happen. Be strategic, be nimble and be first.