This article is published by Skoda Minotti’s Manufacturing & Distribution Group.
At a time when business-to-business (B2B) e-commerce represents approximately 25 percent of the global manufacturing trade, companies are increasingly choosing to only complete business transactions with companies working with an e-commerce system.
As I outlined in an earlier blog, 4 Steps to Overcome Gaps in Manufacturing Innovation, manufacturers that embrace new technologies can operate far more efficiently. When it comes to utilizing an e-commerce supply chain, the benefits far outweigh any disadvantages. Reliable, well-timed data is the important first step to succeeding in e-commerce. Your manufacturing business will be able to obtain data from across the supply chain, including:
- Your internal ERM system, which tracks inventory logistics
- Your internal management system
- Data from various vendors (e.g., utilities analysis; shipping and receiving analysis with your shipping carriers)
What do you do once you obtain various amounts of data? First, you will need to convert that data into a standardized benchmark. Using this data, you will be able to create a solo, comprehensive, wall-to-wall view of the B2B transaction, and complete the analytics needed to make suggestions regarding potential supply chain options, such as distribution and fulfillment. Finally, you will have the ability to disclose the actual cost and actual delivery date to your customer before they even place an order.
If this all sounds good, there are many additional benefits, including:
- You will have the ability to take a step back and evaluate how your supply chain logistics are doing. For example:
- Are your current costs too high?
- What do your current costs include?
- Are you getting the best bang for your buck from your current shipping carrier?
- Are they getting shipments to customers when expected?
- What is the average amount of time from the moment an order is placed to the time the customer receives the order?
- Are your suppliers getting you the goods that were ordered when expected?
- Are you paying the right price for those goods?
- Once you have converted the various data into a standardized benchmark, you can then find various areas for substantial cost savings and determine the best areas for improvements of costs and service.
- Your customers will appreciate and enjoy that you have the ability to disclose the actual cost and actual delivery date before they ever place an order. This will allow the customer to analyze how much product they should purchase depending on the type of Inventory system they are using and the current/future demand for the product.
When the proper systems are put in place and the data analytics are processed accurately, your customer will be pleased with the accurate information they will have available before placing an order. Most important, you will be able to achieve increased sales and decreased costs by analyzing their supply chain logistics. Further, the e-commerce capital investment can be offset with the depreciation expense deduction on their corporate tax return. These factors could potentially result in a healthy increase in after-tax cash flows in the long-term.