What CoronaVirus Means For eCommerce Companies

The Most Important Thing

You might think that the most important thing would have been to diversify your supply sources away from China. A lot of companies now, both big and small, are suffering from significant supply disruptions.

While it would have been useful during this period to have alternative supply sources, I think the most important thing is to anticipate and plan for disruptions of all kinds generally. That means having a strong buffer built into the business.

As the pandemic is still ongoing and a major concern for people around the world, it may yet bring further supply disruptions around the world. For example, the US and Germany are also significant manufacturing countries and if the government chooses to enforce a national lockdown, it’ll bring manufacturing to a grinding halt. In such a case, it wouldn’t really matter where your manufacturing base is.

The most important thing therefore is to have a strong reserve during this period to be able to weather the storm as not only will your supply chain get tested, but your sales may also get impacted should consumers decide to cut back in an uncertain environment.

Inventory

Having additional inventory in advance is a double edged sword.

On the one hand, it would be useful to have lots of stock during supply chain disruptions to ensure steady sales.

On the other, the additional inventory represents tied up capital which is not good for cash flow management and might not even be feasible for smaller businesses that struggle with cash flow. It’s also extra risk in case the inventory is no longer moving (e.g. the tech is out of date or clothes go out of fashion).

It’s ultimately a balancing act that needs to incorporate your company’s financial position and the risk that your inventory may not maintain the same volume of sales.

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