Taking stock: understanding the supply chain

In today's digital world, more and more entrepreneurs are choosing to run their own online businesses - and it's no wonder why. The online marketplace has a vast number of customers every day, and by catering to their specific needs, you can start building a successful company.

Of course, there are plenty of things to consider if you've decided to start an online business, and the supply chain is one significant matter that can also sometimes prove tricky - especially if you're dealing with overseas suppliers - and the final decision that you make should be thoroughly researched.

While scrutinising each option may seem time-consuming or even frustrating to begin with, in the end it will help you to ensure that the products you supply are ones that you will want to sell and that your customers will want to buy. And by taking the time to carefully think about manufacturing, purchasing, procuring and distribution of goods or raw materials, you'll be well on your way to creating a lucrative business.

The practicalities of sourcing your inventory

When choosing a manufacturer, an importer, an exporter or a distributor, you should always remember that while price is crucial, it should never be the only reason for your decision. Yes, a low price is extremely attractive and could win you sales. But if the product is poorly made, or the supplier is difficult to deal with, you may end up paying far more than you expected.

In addition, you should look into the terms of the contract that the supplier offers. Consider things such as the distribution agreements and who pays for shipping. You should also enquire about what happens if a consignment is not delivered or if it arrives in a damaged condition and ensure you thoroughly understand the inspection, rejection and returns policy.

Many of these elements will be negotiable with the supplier, so be sure to discuss your requirements with them before reaching an agreement. It may also be useful to check out what several different traders are offering so you can ensure you're getting the best deal.

The options available when sourcing stock

There are a number of options available to online retailers who are looking to source their stock, the most popular of which is probably buying in bulk. When you choose this method, you'll receive a large number of a single product - usually from a wholesale distributor and at a reduced cost.

Bulk buying is the ideal option for those with a large amount of storage space, as well as the overheads to purchase expensive inventory. It also means that you will have greater control over your stocks and since you will be in charge of fulfilling and shipping orders, you can rest assured that customer service is carried out appropriately.

Drop shipping is another business option, which seeks to cut out as many middlemen and as much transportation time as possible, thus resulting in reduced prices. With this option, you won't hold any inventory yourself. Instead, you'll process the orders and then have the supplier send the item directly to the customer.

With drop shipping, you won't have to worry about pre-purchasing products or storing them and the tasks of packaging and shipping items will no longer be yours. However, with this option you will also be relying on another company to fulfil the orders correctly and on time, meaning you won't have as much control over your business or the service that your customers receive.

Avoiding the common pitfalls of stock sourcing

When sourcing products or materials for your business, there are plenty of things that can go wrong. But by taking steps to manage risks - and ensuring that any issues that do arise are dealt with swiftly - you'll be able to continue turning around orders without your customers noticing any delays.

Always ensure that you understand the details of your agreement with the supplier - from when payment is taken, when goods are shipped and how long delivery should take. If possible, be sure to get tracking information for all deliveries - this will give you peace of mind that the products have in fact been sent, and you'll be able follow their status carefully.

Knowing your responsibilities when it comes to import and export duties and other taxes is also vital and if you need help with this, be sure to get the appropriate assistance.

You should also try to do analysis to figure out how much stock you should be holding at any one time. Keeping too much can be a strain on your storage facilities and could cause cash flow difficulties. Alternatively, not having enough may mean that you have problems fulfilling orders to the agreed timescale. Maintaining careful records so you know how much inventory you have can be a useful way of dealing with this issue.

Global economic conditions and fluctuations in the value of international currencies could have a strong bearing on your budget and even the smallest changes could result in you paying far more than you had originally planned. If this is a concern for you, be sure to speak with your bank - options like forward foreign exchange contracts could be the solution.

Finally, remember to keep abreast of what's going on in the world. If you're getting inventory from an international partner, things like government regulations in the countries involved, as well as political and social events, or even the weather, can all have an impact on whether your supplies get to you as planned. If you suspect there might be a problem, don't hesitate to contact your supplier, and be ready to make fast decisions to avoid interruption to your service.

Alibaba.com: helping you navigate the supply chain

Whether you're starting a new online business, extending your current bricks-and-mortar business to the web or thinking about becoming a seller on eBay or Amazon, Alibaba.com can be the perfect way to find the worldwide suppliers you need.

We have spent more than ten years building a sourcing centre for sellers around the world and during that time, we have attracted more than 53 million members from over 240 countries and regions including the UK and Europe, as well as places further afield like Japan, China and the US.

Our members represent a wide range of wholesalers, manufacturers, importers, exporters and B2B suppliers from nearly every sector. We are dedicated to making it easy for you to source whatever product you plan to sell, from fashion and accessories to consumer electronics and even consumables like food or cleaning products.

To find out how Alibaba.com can help you, simply start by searching for the products you want to sell. Even if you haven't chosen a specialty yet, browsing our listings is free and could give you the inspiration you need to make a decision.

For even more assistance from Alibaba.com, why not register today? Joining is free and gives you access to our comprehensive database, along with additional tools and useful guidance. And if you'd like to keep up with the latest news and developments, be sure to find us on Facebook.