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October 12, 2007

E-commerce and the Flexible Supply Chain

Traditional retail models are moving more and more to add an e-commerce aspect to their business models. However, adding this aspect of the business is not as simple as just creating a website and listing all of your products on it. There are a large number of distribution concerns that need to be taken into account to seamlessly tie the internet into an existing business; concerns above and beyond the new technology requirements for e-commerce. If your business is currently looking at adding e-commerce as a growth driver, make sure that your supply chain is setup and capable of handling it.

The first thing to remember about e-commerce is that there are many ways that the venture could fail. Any number of costs could spiral out of control. Your inventory management processes are not able to keep up. Customers continually fail to find your website. Orders are constantly placed against product you don't have and can't get. Be careful! The internet can be a dangerous place to play for the unwary business.

A sound strategy for how to enter the game is key. This is not the same world that you have been in, this is something strange and new with different rules. The first thing you must realize is that your customers could come from anywhere in the US (forgetting the global aspect for a second) and that your distribution must be able to handle the geographic swings. If you are an established company then your internet presence will likely continue to mimic that same distribution. As your online ads and popularity begin to spread this could change quickly.

Once your internet sales surpass your brick and mortar sales, a new change will have to take place through your network. Now you have to reprioritize all the orders that come into your facility. Should you expand your product offerings? Do you expand them online only or in store as well? Should you contract some of your retail fronts and move more focus onto the internet? Do online sales have the same seasonality patterns as store sales and what's my Christmas swing going to be? There are going to be some growing pains but if you put the right plan in place early you will be able to weather through those to gain new levels of success and profitability.

Remember that there are companies out there to help you set your business up for success. Not every company can have a core competency in every aspect of business that they come across.

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