The last few years will have been the most challenging that many ecommerce businesses have faced when managing their supply chains. Unfortunately, heading into 2023, many of those problems will continue, with a few new ones thrown in for good measure.
The good news, however, is that there’s industry-wide optimism that some form of supply chain normality should return later in the year. In response to all the disruption, there’s been a lot of innovation in supply chain management, with many involved finding new, exciting and, frankly, overdue ways to navigate those challenges.
“I think that people were desperate for a solution in 2020,” says Henry Guyver, an ecommerce founder, supply chain expert and Juni Business Development team member. “I think we’re starting to see the fruits of those labours and are gradually shifting towards a more robust supply chain in the long run.”
We’ve compiled those challenges and changes, along with potential solutions, actionable tips and expert advice, into this guide to help manage your supply chain in 2023.
Meet the expert
Henry has a long history working in supply chain management. As well as founding a number of ecommerce businesses, he spent three years working in China as a consultant and project manager for Chinese tech companies and factories, handling project lifecycles from concept design, sourcing and sampling through to quality control, mass production, packaging and distribution.
The impact of the pandemic is still being felt up and down supply chains. As well as some of the challenges listed below, expect port congestion, unpredictable freight costs, further inflation and a continued shortage of raw materials.
Although the World Bank predicts that energy and fuel costs will come down in 2023, fuel and energy prices are still expected to stay high throughout the year. All of this will continue to impact the cost of shipping, production and storage.
A volatile few years that included a global pandemic and much political unrest looks set to continue, disrupting production and shipping, especially for ecommerce businesses dealing with overseas suppliers.
Sustainable and eco-friendly supply chains are not only essential for the planet but increasingly important for business. As we pointed out in our How to build ecommerce supply chain sustainability, 90% of 18 to 24-year-olds now say that all companies should make a positive social contribution and help to protect the environment. While many businesses are also increasingly opting to partner only with others whose values match theirs.
Consider multiple suppliers and locations
In the search for security, having multiple suppliers and good relationships with them is essential. If there are issues up the supply chain, you can shift quickly. For many businesses, this means moving their production into different locations. Chinese production, for example, has been particularly volatile since the pandemic began. As a result, many ecommerce businesses have moved some or all of their production to Vietnam.
But how do you decide where to move to? “It depends on your product and the region,” says Henry. If you’re operating in Asia, “China is still often best for high tech, as they have the machinery and experience. But if you have a product that’s simply made, for example, injection moulded plastics, basic clothing, or shoe parts, maybe go to Vietnam. Many major footwear providers already made the move years ago.”
It’s a similar story in Europe, where many ecommerce clothing businesses source from. “For textiles, the gold standard is still Portugal, Italy and Turkey. The work done in Eastern Europe and the Baltics is an option too.”
Bring production closer to home
For extra security, consider bringing production closer to home. But even bringing just a piece of production to the EU or UK will be “an absolute shock” to margins.
How do you combat that? Henry suggests a “kind of a patchwork solution.” That is, truly examining every bit of your supply chain, accepting the added costs and starting slow. “I would start moving pieces over gradually and building relationships. By offering factories a certain lifetime value, you can reduce your cost base a lot.”
For more information on localising your supply chain, check out our blog: Should you localise your ecommerce supply chain?
For many, navigating the challenges of 2023 will be a technology-assisted exercise. Here are a few of our favourite strategies and tools.
Automated supply chain management
There are now several tools that help automate and optimise your entire supply chain, from production through to fulfilment.
Dynamic production planning
You can share inventory data with manufacturers and get automated responses using dynamic production planning, allowing you to increase or decrease production according to demand.
Supply chain support with Juni
Juni can also support your supply chain management going into 2023. You can automate payments to suppliers and manufacturers, match receipts and invoices, and even help boost your cash flow with working capital, cashback and more. Plus, we give you a unified view of your finances with cards, multi-currency accounts, and integrations - all in one place.
Build data-driven flexibility into your supply chains
Diversifying your supply chains isn’t just about location. It’s also about building flexibility in every step. It becomes easier to rapidly adjust production levels, raw-material needs, and distribution methods. Traditional, pre-pandemic methods don’t allow for this. Instead, Flexport’s 2023 Supply Chain Planning Playbook suggests the following:
Look at circular supply chains
A circular supply chain involves refurbishing discarded products, turning them back into their raw form and creating new products. Doing this can help cut costs, mitigate volatility, and reduce a company’s environmental impact. As we’ve discussed, this is great for the planet and business.
Plus, many countries and jurisdictions – including the EU – are beginning to introduce stricter recycling and waste disposal regulations. Businesses with sustainable practices may stand to gain incentives for their efforts.
There are many ways you can make your supply chains more sustainable. Check out our How to build ecommerce supply chain sustainability blog to find out more.
The pandemic’s impact led to new waves of supply chain innovation as businesses had to rapidly adapt to a new and unpredictable world. “I think it emboldened founders to run with ideas that pre-pandemic would have really challenged the status quo, but post-pandemic became a no-brainer,” explains Henry.
What is the aim of all these changes? “Security and predictability. You need to make sure that you have reliability in your supply chain.”
Going into 2023, even with the worst impact of the pandemic easing, that’s going to be just as important.
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