OPINION: How e-commerce giants secure supply chains during natural disruptions

Covid-19 was a bombshell for e-commerce companies in 2020. Companies around the world scrambled to navigate sudden, risky and insidious lockdowns that hit every element of their business, from manufacturing and packaging to transportation and home delivery. Even now, most stores still struggle to keep their supply chain healthy.

However, Covid-19 is not the only natural disruption affecting e-commerce companies. In 2023, Turkey was hit by a devastating earthquake that killed over 55,000 people and affected hundreds of companies, including e-commerce companies. This unforeseen event came on top of post-Covid-19 tensions, with e-commerce companies trying to regain their foothold in the country.

One thing we have all seen in the aftermath of any natural disruption is that it comes with a huge headache, impacting not only businesses but consumers as well. In fact, it’s safe to say that end-users bear most of the burden – from paying higher fees for the same product to weeks-long delivery delays due to clogged supply chains.

Despite these challenges, some e-commerce giants continue to expand their reach with an uninterrupted supply chain using these four strategies.

Cooperation with many suppliers

Manufacturing is most affected by disasters such as earthquakes and hurricanes in strategic locations. This is because it is difficult and more expensive for manufacturing companies to obtain the resources necessary to maintain production. This in turn affects the company’s inventory and leads to product shortages in the warehouse.

To avoid such situations, e-commerce giants such as Alibaba and Amazon constantly collaborate with multiple suppliers from different regions for the same or related products. This approach mitigates the impact of natural disruptions in the supply chain and ensures that customers get what they want – although in a few cases delivery may be slightly delayed.

Working with multiple suppliers of the same product category also balances supply and demand. If the number of suppliers decreases, there will be an immediate increase in demand pressure. This means higher purchasing costs for customers and lower return on investment for suppliers.

Solid logistic structure

As with manufacturing, logistics suffers losses whenever natural disruptions occur. Take Covid-19 for example – most companies have had difficulty managing inventory and fulfilling orders due to transportation restrictions or previously rare situations such as package thefts, which have increased during the pandemic.

Anticipating these restrictions, e-commerce giants such as JingDong (JD.com) have integrated nearly 30 operational drones for rapid delivery to regions with transportation restrictions. To date, the quiet e-commerce giant has completed over 1,000 drone deliveries. Amazon is also leading the way – it makes drone deliveries in College Station, Texas, and is scheduled to start similar operations in Arizona’s West Valley later this year.

In addition to drone deliveries, other e-commerce platforms such as Alibaba also provide an efficient freight forwarding service for suppliers without the resources to handle transportation. Amazon does the same thing, but spices it up by offering a freight factoring service for shipping companies that take suppliers’ products to work.

Effective lines of communication

While a solid logistical structure is essential, without good communication it will only be partially effective. Suppliers need to communicate with wholesalers, and wholesalers need to stay in touch with retailers and end consumers. Transportation companies also need to communicate with the appropriate fulfillment centers. Natural disasters, weather problems and pandemics can interrupt this line of communication and halt the supply chain.

With these implications in mind, eBay provides advanced communication tools on its platform. Suppliers and B2C companies can use these tools to quickly negotiate terms and even have a phone conversation. Alibaba goes a step further by providing access to its suppliers’ contact information in an effort to streamline off-platform communication.

Amazon gives suppliers access to a supply chain management tool that tells them who placed the order, inventory status, and custom status. All these details are essential to enable a smooth transaction and seamless communication.

Solid industrial infrastructure

The potential for damage from intense natural disturbances such as earthquakes and tornadoes is no longer news to companies. Production infrastructure that was destroyed or shaken by a storm often suffered the most. While technological advances help predict when and where the next earthquake will strike, they do little to prevent them.

As part of their risk management protocol, e-commerce giants like Alibaba carefully check each supplier’s location and quality of infrastructure before listing them. This is an attempt to set standards for the tools used in production and the safety of people working there. The more robust the factory, the easier it is to survive a hit if it happens.

When a solid infrastructure is combined with a solid logistics structure, effective communication and the availability of multiple suppliers on the platform, these reputed organizations effectively keep the wheels turning.