Time is a precious commodity in the fast-paced world of e-commerce, where operations and logistics can make or break a business. In this blog, we’ve distilled years of experience and best practices into a quick and easy-to-follow guide that will help you master the fundamentals of e-commerce operations in just 7 minutes. From managing inventory and order fulfillment to optimizing shipping and handling returns, this guide covers all the key aspects of running a successful e-commerce business.
Whether you’re a new entrepreneur or a seasoned pro, this guide is a must-read for anyone looking to streamline their e-commerce operations and maximize profitability. So, let’s dive in and master e-commerce operations in just 7 minutes!
What are E-commerce Operations?
E-commerce operations can be defined as the collective result of several processes by a business to effectively sell a product online. As the successor of traditional commerce, e-commerce inherits the most crucial functions while negating several problems. The inclusion and size of these processes depend on the size of the business. Inventory management, supply chain planning, marketing, and customer service are some of the few crucial processes.
Breaking Down the Main Operations of an E-commerce Business
E-commerce operations vary from one business to another. Several factors, such as the size of the business, industry, and product category, dictate the requirements. The goal, audience type, and industry type sometimes dictate a few additional requirements for e-commerce operations. Even so, a few operations can be tagged as evergreen, irrespective of the mentioned determinants. Here are some of the significant operations:
Order fulfillment
Order fulfillment is the term used to highlight the complete process of a product sales cycle. This process starts from the sales inquiry to its final delivery. Order fulfillment is a process that is more dependent on the logistics side of the business, as warehouse management and shipping play a huge role here.
Furthermore, any supporting tasks required to ensure the success of the mentioned processes are also included. Specific KPIs, such as the order fulfillment cycle, can be pre-determined and is essential for improving certain aspects of the e-commerce fulfillment operations department. It further allows an e-commerce business to track and improve order fulfillment easily.
Shipping logistics
Every product-based online business has an undeniable need for a well-optimized process named shipping logistics. In a general sense, shipping logistics points to the process that kicks off from the first-mile delivery until the product reaches its customer. However, shipping logistics is not limited to outbound logistics, as inbound logistics are also considered part of this process.
The main goal of such a process is cost-cutting and transparent traceability. With constant improvement over the years, there is a solution to any problem one might face during transit. However, the biggest threat faced by shipping logistics is the last-mile delivery, the end process that has proven to increase the overall cost by a whopping 42%.
Inventory management
The bread and butter of every product-based business, stock, or inventory management is the process of acquiring, storing, sorting, and shipping out the inventory in a specific way. The famous inventory term, SKU or the Stock Keeping Unit, plays a very crucial role in determining the success of an inventory management system.
The main focus of a sound inventory management system is to ensure the negation of overstocking while decreasing the turnaround time. Excess inventory might dictate a loss in quality or the product itself, which in other terms, indicates a loss of investment. Therefore, apart from the negation of excess stock, a sound inventory management system also allows a business to leverage demand by improving operations in e-commerce.
Warehouse management
Warehouse management can be broken down into specific rules or protocols to manage the daily operations inside a warehouse. From a higher perspective, you might view it as the process of managing space as per the denoted categories of an inventory. However, smaller functions such as labor scheduling, selection of products, and their subsequent movement to the deemed location equally contribute to the success of a sound warehouse management system.
Specific minor changes, such as replacing paper processes with data entry and automation of return management, have proved to be a massive upside in optimizing the system. The calculation and estimation of a positive ROI might further allow one to improve their warehouse management system with new techniques being introduced now and then.
Customer service
A company’s audible and informative support to its prospects or existing customers can be referred to as customer service. It is the direct determinant of brand image in front of the general public. This service overlays with most of the ongoing operations in a business. From a sales inquiry to providing the required tracking codes in last-mile delivery, excellent customer service is proportional to a higher level of transparency.
Customer service is crucial for exceptional operations for B2B e-commerce. However, many brands’ customer service has faced backlash in recent years. With several third-party companies coming into play to fulfill specific tasks in supply chains, e-commerce businesses have failed to uphold transparency. Proper research and excellent management can conquer this common problem.
Business Accounting
Improper fund allocation has always been the biggest enemy of profitability and scalability. A systematic and analytical process, otherwise termed business accounting, is the solution to this problem. This process allows a business owner to keep track of the finances while also helping determine the return on investment on certain operations within a given timeframe. Together, these factors form one extensive financial report with a detailed breakdown. Business accounting is crucial to ensure better decisions and higher profits.
Types of E-commerce Back-Office Systems
To run a successful e-commerce business, having the right back-office system is essential. In this section, we’ll explore the different e-commerce back-office systems types and choose the right one for your business needs in this section.
Order management systems
The OMS or Order Management Software manages a particular order’s lifecycle. This system allows one to deduct human labor, thus saving costs while acquiring more control over an order’s lifecycle.
Inventory management systems
The Inventory Management System (IMS) is a data entry software that takes the power of inventory traceability to the next level. The IMS provides real-time information on any product present in the inventory based on the assigned SKU. Furthermore, a business can choose the variables important to them.
Warehouse management systems
A warehouse management system monitors and optimizes a warehouse’s operations closely. Product sorting, movement of products, and creating the right shipment are some operations in a warehouse that need to be optimized to perfection with the warehouse management system.
Enterprise resource planning software
Commonly dubbed the ERP, Enterprise Resource Planning software is a must-have for an owner who wants to integrate and manage all the departments from an integrated platform.
Practical Ways to Improve Your E-commerce Operations
In this section, we’ll dive into practical tips and strategies for improving your e-commerce operations.
From automating routine tasks to leveraging data analytics, we’ll explore how you can optimize your processes and deliver a seamless shopping experience for your customers. So, let’s get started with these actionable steps to take your e-commerce operations to the next level.
Leverage technology to automate tedious tasks
Automation technologies have come a long way and have revolutionized many companies’ supply chains and marketing. Besides saving time, using such a subscription based on a one-time payment negates human effort, often accompanied by human errors.
For example, one can use a SKU generator to assign alpha-numeric codes based on set parameters automatically. It allows one to save time and manual labor, not to mention the ability to ignore the steep learning curve. Apart from the mentioned tool, several other effective tools are just a click away from saving your time.
Collect employee feedback
Employee turnover has been at its peak in recent years, and with the onslaught of COVID-19, the problem has only increased. Collecting employee feedback can be considered a direct way of ensuring better employee satisfaction. Several companies fail to keep their promises to employees. So, when employee feedback is collected, a possibility of improvement is always expected when the feedback is handled with due importance.
Make more data-driven decisions
Assumptions were a thing of the past when the industry was filled with uncertainty and a lack of data. Only experienced and well-to-do companies had the luxury of such data-driven insights. But nowadays, with the rising availability of information, you can always choose to ignore the risk of assumptions. Statistics from Mckinsey Global Institute highlight business revenue growth by 8% for companies that rely on data to make decisions. Reliance on data has also shown an increase in the chance of acquiring a customer by 23 times more than the ones not using it.
Outsource the tricky parts
The biggest threat to any e-commerce business is considered to be the associated learning curve. With a particular financial target in mind, creating several processes through macro tasks, such as the creation of several dedicated departments, is a daunting task that requires time and knowledge.
In the face of a new problem, it is easy to lose sight of the big picture or the nearest financial target. Most businesses fail or underperform as the focus shifts from the big view to solving a minor problem. It increases the time required to achieve the macro goal. However, with the rise of dedicated third-party companies, the easiest way to ensure the success of any e-commerce business is to outsource the tricky tasks, thus allowing the owner to use the saved time on more significant tasks.
Conclusion
A substantial growth might seem imminent with the implementation of e-commerce operations. However, it would be best if you remember that a company’s future depends on its operations department’s success. There is no such thing as the most critical operation. Every operation forms the backbone and provides any business with a revenue-positive equilibrium. Furthermore, a company can achieve high scalability and unrestrained growth with proper fund allocation and required financial analysis.
FAQs
How can I improve my e-commerce operations?
Inventory management, supply chain planning, warehousing management, and shipping logistics are the fundamental operations in the B2B e-commerce business. Irrespective of the departments, analyzing specific KPIs such as Inventory Turnover rate (ITR), Days on Hand (DOH), and Sell-through Ratios can be considered. Furthermore, optimizing the order fulfillment cycle by decreasing the turnaround time and the incurred cost can help improve e-commerce operations management by leaps and bounds. The best approach is to consistently use KPIs and look for areas that you can improve.
What are the primary operations of an e-commerce company?
Depending on an e-commerce company’s size and industry, some variables might exist. However, inventory management, supply chain management, customer service, order fulfillment, and shipping logistics are the minimum necessities for a product-based online business.
What does an e-commerce operations manager do?
The e-commerce operations manager takes up the cohesive role of unifying and aligning the tasks accomplished by all the third-party operators. Aligning departments such as marketing, finance, and any other in-house operating system is an important responsibility for an e-commerce manager. The main goal for such a position is to achieve the utmost fluency in work, managed by several departments.
What is the impact of e-commerce on operations management?
The inclusion of automation with real-time traceability has revolutionized the supply chain. The resulting e-commerce operations strategy is fluent, more cost-effective, and provides a very high level of control.
What is the difference between traditional commerce and e-commerce?
Traditional commerce has witnessed significant changes in the supply chain, thus allowing you more power and control over movement and cost. The primary difference between traditional commerce and e-commerce is the platform. While traditional commerce is limited to offline means of supply chain management and marketing, e-commerce can tap into both the online and offline realms.
What roles are needed for a small e-commerce team?
Building an e-commerce fulfillment operations team requires a thorough analysis of ROI based on the position of the business. The mentioned factors are then aligned with the financial targets of a specific business. While some roles need to be fulfilled with the addition of an employee, others fare best when outsourced to a third party. For a small e-commerce business operations team, here are some essential roles:
- Director of Operations: It is another name for an Operations Manager. The business owner can initially fill in this post. With more control and oversight over every department, the director of operations is a good starting point.
- Digital Marketing Manager: Creating the content, writing the copy, and planning the required digital campaigns, either with the help of a freelancer or an agency, are the responsibilities of the mentioned post. As marketing is necessary, one with a good understanding of the overall digital space might add immense value to the business.
- Business Analyst: Dealing with the numbers related to finance, marketing, and inventory are the primary deliverables of this role.
- Logistics Manager: Working with any third-party shipping and logistics company while ensuring the proper disbursal of products from one factory to another are some tasks managed by the logistics manager. The logistics manager is crucial for any e-commerce operations team, irrespective of size.
