A Guide to Supply Chain Resilience In Ecommerce

If you’re in the ecommerce industry, you’re aware of the many major supply chain disruptions of the past few years and how they’ve affected businesses. These disruptions aren’t just a thing of the recent past — a major supply chain-affecting event happens every 3.7 years! Supply chain resilience is the key to navigating these challenges successfully. It enables businesses to adapt, recover, and thrive, ensuring that operations continue even in the face of unexpected setbacks. But how do you build supply chain resiliency? 

This article discusses the importance of supply chain resilience, what it looks like, and explains how to build a resilient supply chain that’s ready to face whatever challenges may be on the horizon.

What Is Supply Chain Resilience?

Supply chain resiliency refers to the ability of a supply chain to anticipate, prepare for, quickly respond to, and recover from potential disruptions. These unexpected events can be large or small scale and impact individual networks or entire markets. Supply chain resilience planning enables operations to continue while minimizing negative effects on supply chains and the end customers they serve.

What Does Supply Chain Resilience Look Like?

Now that we’ve explained its meaning, let’s further define the key characteristics of supply chain resilience:

Agility: Agility is a rather broad term, but in the context of supply chain resilience, it boils down to the ability and willingness to take alternative courses of action as conditions change. 

Visibility: Visibility across the supply chain – including access to real-time data on inventory levels, inbound and outbound shipments, and forecasting –  gives businesses the foresight they need to be nimble.

Collaboration and Communication: Open lines of communication keep every stage of the supply chain operating on the same page of the right plan. 

Flexibility Through Diversification: Diverse options for suppliers, multiple warehouse locations, and access to more than one shipping service all enhance a business’ ability to pivot when the unexpected happens. 

Technology: Technology enables the goals of flexibility, agility, and collaboration by connecting parties with up-to-date supply chain data in real-time. 

Capacity Building: The better developed and trained a workforce is, the better it’s able to fare changes in demand. 

Why Build a Resilient Supply Chain?

When it comes to responding to unexpected events that affect supply chains, resiliency means having a competitive edge. A business’ prospects can completely change after unexpected events. The ecommerce businesses that quickly adapt to these changes are in a better position to sustain themselves during times of crisis – while those that aren’t probably won’t fare as well. 

For example, say two skincare businesses sell special aloe-infused cream. Company A sources its products from a single region in Vietnam, while Company B works with suppliers in Vietnam and New Zealand. If a typhoon shut down Vietnamese manufacturing sites, Company A would need to rely on its existing inventory to meet demand – leading to an eventual stockout, backorders, and customers deciding to look elsewhere for a comparable product. Since Company B can still source products from one of its suppliers, it can now seize sales opportunities from Company A’s customers by continuing to offer the aloe-infused cream. 

Strong supply chains are better equipped to deliver high performance and speed in regular conditions, too. Investments made into ecommerce fulfillment resilience – such as technology and training – bolster operational efficiency and delivery 365 days a year. That’s a big advantage if competitors aren’t on equal footing. 

Examples of Supply Chain Disruptions

Supply chain disruptions can manifest in many forms – and are much more common than you might think. Over the last few years alone, ecommerce businesses have dealt with the implications of a wide range of unexpected events outside their control.

COVID-19 is the most far-reaching example of supply chain disruptions in recent memory. When the pandemic effectively shut the global economy down in March 2020, supply chains quickly dried up. Factory closures meant fewer raw materials were being produced, which in turn reduced suppliers' ability to deliver finished goods. That lack of inventory led to stockouts and backorders for ecommerce sellers. 

Computer maker HP faced the unique challenge of meeting unprecedented demand for home computers as its key factories in China and Southeast Asia shuttered for massive lockdowns. Yet, through alternative suppliers and the acceleration of pre-planned cost-cutting measures, the company managed to finish the fiscal year with $56.6 billion in revenue.

Businesses that were unable to adapt didn’t fare as well as HP. Data from an EY survey shows 72% of supply chain executives experienced a negative effect due to pandemic-related disruptions. A report by The Economist claims these disruptions cost companies an estimated 6% to 20% in revenue. 

The COVID-19 pandemic hadn't even subsided by the time the next major disruption hit. In March of 2021, the Suez Canal was partially blocked by a grounded cargo ship for almost a week. This caused backlogs that had ripple effects throughout global supply chains, delaying on-land freight shipping and increasing costs for businesses.

Natural disasters are another common cause of supply chain disruptions. Hurricanes, wildfires, and floods can all impact key transportation routes and damage warehouses or manufacturing facilities, leading to production delays and inventory shortages for ecommerce sellers who rely on those suppliers.

Not all supply chain risks are natural, however. Changes in supply and demand, economic, and political conditions can impact trade, shipping, and the cost of importing goods. It isn’t uncommon for suppliers to suddenly go out of business or for manufacturing plants to experience operational failures, either. 

In all of these cases, surviving as a business means finding alternative solutions to whatever component of the supply chain has been shut down. 

How to Build a Resilient Supply Chain

Supply chain resilience is based on two core capabilities: resistance and recovery. The first component, resistance, refers to how agile a supply chain is in the face of disruptions and risks. Measures are intended to promote survival by providing flexibility and establishing redundancy, which involves creating backup systems that ensure continuity even when primary options fail. 

Even with a strong ability to resist disruptions, businesses are almost always impacted by them in some way. Recovery focuses on bouncing back and returning to normal operations. 

In the following section, we list some steps supply chain managers and other ecommerce professionals can take to bolster the resistance, recovery, and resilience of their supply chain. 

Conduct an Initial Risk Assessment

Honing the ability to resist and recover starts with understanding what risks make it necessary. Every supply chain is vulnerable to broad risks like natural disasters, political shifts, and economic downturns. But there are also more specific threats that pertain to each individual business.

For example, an ecommerce business that relies heavily on a single supplier or shipping company may be particularly susceptible to disruptions in their operations. By conducting an initial risk assessment, businesses can identify these potential vulnerabilities and develop contingency plans for when they occur.

Diversify Suppliers and Service Partners

Spreading procurement across multiple suppliers allows a company to protect itself from the risk of a complete halt in production or delivery if one supplier fails due to bankruptcy, production issues, or other operational challenges. This is especially important in regions or industries prone to economic fluctuations or frequent natural disasters. If demand spikes unexpectedly, a company with a diversified supplier base can scale production more readily without being bottlenecked by a single supplier’s capacity constraints.

Utilize Advanced Technology for Visibility

Having technology that allows for complete visibility into your operations is an important component of supply chain resiliency. Reporting tools in particular offer great value, providing comprehensive insight into operational health through supply chain KPIs like days sales of inventory and order fill rate. Ecommerce inventory management systems also keep individual facilities and entire networks on the same page by digitally recording changes in physical stock in real-time. This uniform access to relevant information improves strategic planning while enabling sellers to quickly adjust to changes in availability or demand. 

Establish Strong Communication Across the Supply Chain

Fast and reliable means communication is invaluable when changes to important operational processes need to be made at the last minute. Electronic Data Interchange (EDI) systems support resiliency in this way by enabling seamless data exchange between warehouses, suppliers, and customers. They can also serve as a convenient single point of contact when working with a diverse set of partners across an integrated logistics network. 

Take Advantage of Route Planning Tools

The advantages of using real-time data for supply chain resilience don’t end at the warehouse. Transportation can similarly benefit from specialized solutions, specifically freight management software. Today’s systems come with route planning technology capable of providing live visibility into everything from travel times and route disruptions to carrier availability to cost.

Implement Buffers and Safeguards

Buffer stock acts as a safety net in case of any disruptions in the supply chain. Warehouses should always have at least some extra inventory on hand to account for unexpected shortages or delays from suppliers. This backup reserve can supplement incoming items and prevent operations from being totally shut down. Safety stock can also help to avoid stockouts, which can be extremely costly in terms of both lost sales and damage to a company's reputation.

Data-driven inventory management is key to benefitting from buffers without turning them into an unnecessary cost. Accurate and up-to-date information about demand patterns and lead times can help companies determine the right level of buffer stock needed to ensure resilience without incurring excessive costs.

The reorder point formula is a good starting point for calculating buffer stock levels. Every business has its own Economic Order Quantity (EOQ), which is why using case-specific data to calculate reorder points is so important. 

Strengthen Logistics and Fulfillment

The strength of a fulfillment system has a big influence on supply chain resilience. Scalable and flexible solutions enable businesses to expand or contract their operations as needed without compromising service quality or delivery speed. Multiple shipping options and routes, as well as the ability to quickly reroute deliveries and adjust shipping methods, are just a couple of examples of what this looks like. 

Consider partnering with strategically located ecommerce fulfillment centers to ensure your ecommerce business has the infrastructure needed to minimize the delays and costs of unexpected events.   

Develop a Risk Management Framework

Regularly assess potential risks in the supply chain to develop contingency plans for full-blown crises. Geopolitical events, economic changes, and environmental factors can all impact supply chain operations, but they rarely occur without some degree of foresight. 

For instance, if you notice trade tensions tightening between the United States and the country you source products from, it may be worth diversifying the location of your suppliers. More predictable periods of uncertainty like hurricane or wildfire season can be mitigated with strategic changes in the journey products travel throughout the supply chain as well. 

Partner With a 3PL for Supply Chain Resiliency

Supply chain resilience isn’t built overnight. It’s the product of large investments in technology combined with well-informed planning and consistent risk reassessments. Every ecommerce business should adopt these principles to guard against future operational disruptions. 

Partnering with a third-party logistics (3PL) company makes building supply chain resilience easier. A qualified service provider will already have the infrastructure to handle sudden changes in order volume, which minimizes risk for businesses. Their experienced staff and advanced technology can also help guide inventory planning for further risk mitigation and cost savings over the long term. 

Working with a top-rated 3PL like Shipfusion means gaining the supply chain resilience that only comes through experience and expertise. Our strategically placed ecommerce fulfillment centers have protocols in place to readily adapt to sudden changes, with our software reporting data in real-time. Designated Account Managers are always on-site, ready to provide one-on-one support when plans change. Learn how partnership can provide you with peace of mind by connecting with our sales team today.