The eCommerceer Podcast - Episode 16: Shortening Supply Chains: Is it a viable option for eCommerce?
In this episode we discuss with Grant Fraser, Global Head of eCommerce finance at TradeBridge, the viability of shortening eCommerce supply chains.
As of April 2022, China has seen a resurgence of the pandemic, and the Chinese authorities have implemented a strict wave of measures to curb the soaring rate of infection.
The fallout has had a similar impact on the shipping of goods from the People’s Republic as it did in 2021. The highways and ports are now backed-up and workers have been stranded. Factories are being temporarily closed.
Reuters has suggested that supply chain paralysis may ensue, and disruptions will ripple through global supply chains on goods, ranging from electric vehicles to iPhones.
For eCommerceers, the uncertainty of the international supply chain has been a constant pressure. The likelihood of that pressure diminishing fades with every new story.
What options are available to reduce the impact of supply chain disruption on your eCommerce business?
In a recent interview with Grant Fraser, Global Head of eCommerce finance at TradeBridge, we discussed the viability of shortening eCommerce supply chains.
To discover how TradeBridge can support eCommerceer’s to seize growth opportunities visit: tradebridge.com/ecommerce
Logistical & cost benefits of shortening your supply chain
The first and most obvious benefit is that your merchandise is closer to you. Five or ten years ago this wouldn’t have been a consideration in your supply chain, the advent of the recent and continuing crises, mean proximity to your product’s source may now be a top priority for eCommerce businesses. In some cases, the time it takes for eCommerce businesses to get products from the supplier to buyer has increased by months.
It’s undeniable that businesses globally are feeling this impact. In a recent survey conducted by SupplyChainDrive, it was reported that almost 90% of companies have claimed to be dealing with the
“Extraordinary cost increases because of supply constraints.”
Further noting issues from transport costs, labour shortages, energy price increases, and the subsequent rise in inflation.
In this macro environment, companies are shifting their focus to making their supply chains more resilient. As costs continue to rise, companies have looked for ways to economise, and one such solution is to shorten supply chains.
“The economic argument is in the eCommerceers favour as well. Everybody has recognised the global trade issues, rising shipping costs and delays in supply chains. All of that has meant that eCommerce businesses shortening their supply chains, moving from China to Western Europe or even UK based manufacturing in some cases.”
- Grant Fraser, Global Head of eCommerce Finance, TradeBridge
According to IMD, the trend towards localising supply chains started well before the pandemic, but was fast-tracked as a result of the disruption. The results have helped ell prepared companies ease the costs and reduce delays.
Sustainability benefits of shortening your supply chain
Shortening supply chains is one step eCommerceers can take to reduce carbon emissions. However, if the environmental aspect of eCommerce is to meet global requirements and consumer expectations, then there are additional actions that can be taken.
TradeBridge’s Global Head of eCommerce Finance Grant Fraser, commented:
“You’ve got to live and breathe it. Economically it's likely to cost more to build a sustainable product using the right raw materials and ensuring that you're not utilising any cheaper products like plastic. But fortunately, consumers are willing to pay for and buy into a message that resonates with their moral beliefs. And when you make the effort to communicate that to them, they will then go beyond to dig into your supply chain and your suppliers, how well you're paying those suppliers, what your manufacturing process is like and what you do with your waste.”
“You better believe consumers are going to put the time and energy into researching your company and your sustainability credentials. And if you don’t live up to your credentials, they will turn against you. Previously the consumer was offered little choice and took what was offered generally on the High Street, whether sustainable or not. But the growth in eCommerce has afforded the opportunity for a lot more choice for, and consumers now have access to materials to educate themselves.”
“For large businesses, making conscious considerations for sustainability is not going to happen overnight, but as long as you put in actions to do the right thing and apply the right standards then you can start to make those decisions. For the short-term having the agility to implement strong sustainability credentials will give smaller eCommerce businesses an edge. But it’s now not a nice to have, and there will come a time when the market will be saturated, and sustainability will become a prerequisite.”
Building supplier relationships is vital to eCommerce success
Having a good relationship with your suppliers can be the difference to becoming a buyer of choice and being left by the wayside.
Shortening your supply chain will cost time and money when establishing new relationships, particularly in times of high demand. Last year we saw those new relationships come with tighter credit terms; new suppliers had the expectation of deposits and shorter payment cycles.
But the best way to mitigate those costs is to become a buyer of choice. Having proximity to your supplier affords better opportunities to consolidate that relationship.
TradeBridge’s Global Head of eCommerce Finance, Grant Fraser commented:
“eCommerceers may be more inclined to go to the supplier who produces a better product, and offers the capability of working closely together.”
How TradeBridge eCommerce funding can help
In these circumstances, managing cash flow is a challenge for eCommerce sellers. It’s not only a risk to have a product that isn’t performing in terms of sales – but selling out of a product that may take months to re-supply, and not being able to meet consumer demand is equally damaging.
When there is a surge in demand, finance can be the difference between that surge being a growth accelerator, improving the seller’s GMV (gross merchandise value) or an opportunity lost for a merchant that does not have the funds to buy more stock.
To resolve this, merchants require immediate access to working capital.
TradeBridge provides vital working capital to ensure that merchants can capitalise on the opportunity to grow.
Access to working capital can help sellers optimise logistics and fulfilment and help with the access of products, to increase their average order value (AOV).
To see how much eCommerce funding your business could be eligible for, why not try our instant calculator, or if you already have an eCommerce funding provider try out our comparison calculator to see how TradeBridge could offer you better terms.
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