How Supply Chain Strategies Impact 
E-commerce Success

By Paul A. Myerson

Paul A. Myerson is Professor of Practice in Supply Chain Management at Lehigh University and author of books on Lean for McGraw-Hill, and supply chain for Pearson, 610-758-1576

E-commerce has emerged as part of a company's omni-channel marketing program. Achieving success requires not only an agile, lean supply chain, but also a strategy to get there.

Many e-commerce companies sell a variety of products, and each type of product establishes different strategic needs. For example, functional products require lean and flexible network strategies, while innovative products require more responsive or agile strategies.

Some key factors to consider when employing an e-commerce strategy include:

• Individual product characteristics
• Demand volatility
• Product variety
• Product life cycle length and position
• Criteria for orders, profit margins, and dominant costs—for example, physical vs. marketing
• Quality of information available
• Type of forecast used—qualitative vs. quantitative

In many cases, considering all these factors may result in the need to develop segmented strategies for each supply chain and individual groups of products.

E-commerce has evolved into a combination of retail and industrial product types and industries, as well as internet technology and devices, the transportation and logistics sectors, and inventory tracking and fulfillment systems.

As a result, e-commerce requires strategies that address the following major elements:

• The internet and mobile devices. The platform where sales happen is moving from personal computers to mobile devices such as tablets and smartphones (also referred to as m-commerce).
• Omni-channel retailing. This process integrates brick and mortar, TV, catalog, social media, e-commerce and m-commerce channels both for purchases and for returns.
• Changing supply chains. In retail, inventory must become more transparent to create efficiencies in new supply chains with direct-to-consumer shipments from online orders, sometimes with returns to stores. Adding to the complexity are ship-to-store and ship-from-store customer orders.
• Distribution and fulfillment centers. In the world of e-commerce, companies design and build fulfillment centers to satisfy online orders, which, in many cases, are for a single item. E-commerce orders typically are smaller than those for traditional brick-and-mortar distribution centers, and often require one-day fulfillment.
• Automated inventory systems. Beyond the increased current use of RFID, barcode readers, handheld mobile computers, and automated carousels, e-commerce requires companies to plan for the design and implementation of robotic systems in their fulfillment centers and supply chains. These systems can range from the use of automated guide vehicles and robots to the (far) future use of drones for delivery.
  
  
  Online retailing has been growing by an annual average of more than 18 percent globally in recent years, while non-internet sales are growing by only 1.3 percent annually. As a result, e-commerce is one strategy retailers should not take lightly.