Addressing the importance of Supply Chain Management in the Online Retail Industry

Expert David Kiger has often mentioned that supply chain management, far from being an undetermined term that only addresses industries at a certain point, is rather something inherent to them. In light of the latest developments in regard to the online retail industry and its children, the e-commerce operations, it would be wise to raise the question as to whether this relationship is merely incidental, since the basic rules and premises of demand forecasting and stock and inventory optimization work in an independent manner of the channel under examination; however, the differences between this channel and traditional retail are no less than evident.

Over the years, there have been a myriad of industries dedicated to helping new ventures, startups, entrepreneurs and even well-established businesses —mostly in the transition— with their operations, emphasizing the importance of adopting today’s new supply chain developments as part of their innovative operations, especially in relation to demand forecasting figures and analytics. The future, after considering the staggering pace at which the online retail industry has been evolving, raises additional challenges, most of which will be discussed in the subsequent lines.

First, it would be wise to consider the nature of what has traditionally called an online retailer. In its purest form, an online retailer serves as the bridge that narrows the gaps between delivering an order from a particular warehouse after receiving order confirmation —this is: purchases—. From the forecasting and ordering point of view, the analysis is rather pretty much straight forward and would not require further analysis, as there is only one single channel to forecast, and stock chunks and inventory are reserved solely for that particular and specific channel. Nonetheless, the peculiarity or special feature about the nature of «online» is that companies and businesses in general —and supply chain managers, of course— tend to overreact in terms of registered data. This only means that they are seemingly more likely to register more data since the vast majority of the shopping process occurs through computers and digital devices. To provide readers with a broader image of what has been said, it would be adequate to provide an example: companies and businesses, in general, could support both forecasting and assortment management just by adopting and introducing page-view information from the website in the whole process. Pricing, however, is another area that is definitely more challenging and critical to the online platform: if a competitor happens to be selling the same product at a much lower price, customers will find this compelling enough to buy it from them. Thus, collecting, having and properly interpreting such data will definitely come in handy.

Retailers, irrespective of their nature, with both a consolidated online and outer non-virtual high street presence face a slightly more tricky and challenging situation. For them to manage their supply chains accurately and properly forecasting, at a channel level, is vital and no less than crucial, for, in the end, several and different channels have different sales standards and patterns. Think of Christmas, for instance: the Christmas epitome or peak often arrives somewhat earlier for online based stores than for non-virtual establishments. Some retailers, after having faced the situation, have separate warehouses for digital and physical lines of businesses, which, of course, make an inventory and stock management way simpler, but, on the other hand, unavoidably increase the total stock amount in the business as items end up being double counted or stocked. The other scenario could be the case that a product or good runs out of stock in one of the warehouses but is nonetheless still available and overstocked in another warehouse. From the supply chain management point of view, logic dictates that it is definitely much better just to have a single pool of stock, and further analysis in regard to costs and efficiency would not be required after considering the previous examples; however, this does raise the question in regard to how would it be possible —possible interpreted as efficient and effective— to manage availability between different channels. In this case, the most straightforward answer would be virtual stock ring-facing.

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The vast majority of retailers has incorporated both home delivery and click and collect options to their operations. From time to time it does make sense to apply different and separate methods to forecast these goods as if they belonged to different channels —home delivery orders, for instance, could be addressed and subsequently fulfilled from a different, entirely foreign, e-commerce platform, whereas click and collect orders could be directly delivered from the initial store stock. Whichever the case, good analytics, and proper information interpretation become key in order for the business to have a proper depiction of the split between these two delivery models: both at item and store level.

* Featured Image courtesy of Negative Space at

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