9 min
Wholesaler Backorders: Why and What To Do Chris Malta's EBiz Insider Podcast
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- Business
When you’re selling online, whether you use Drop Shipping or you physically stock and ship your products, wholesale backorders from your supplier are always a real possibility. As a business owner, it’s really important for you to understand why this happens and what you can do to avoid damage to your online reputation.
Be sure to Subscribe to the Show!
Find much more TRUTH about ECommerce on my site.
EPISODE TRANSCRIPT
Welcome to Chris Malta's EBiz Insider Podcast, where we don't have to PRACTICE telling the truth, because we don't know how to do anything else!
When you’re selling online, whether you use Drop Shipping or you physically stock and ship your products, wholesale backorders from your supplier are always a real possibility.
Wholesale backorders often seemingly come out of nowhere, and leave you holding the bag, trying to explain to your customer why you suddenly can’t deliver what they bought.
To some degree or other, this is almost always the result of the Butterfly Effect, where one small problem in the Supply Chain ripples out across the entire product market.
As a business owner, it’s really important for you to understand why this happens and what you can do to avoid damage to your online reputation.
So please bear with me as we go through a how a hypothetical "Butterfly Effect" wholesale backorder situation might occur. Sometimes the reasons for these problems are simple, and sometimes they're more complex. I'm going to use a more complex example that touches every aspect of the Supply Chain, because a Supply Chain is something you should understand as a business owner.
Then we'll talk about what to do about the problem.
Let’s say you’re selling Coffee Makers.
The US-based Manufacturer of the coffee makers orders different parts for those coffee makers from different specialized suppliers around the world, and assembles those parts into the finished product in the US.
One day, somewhere in China, the machine that punches out the metal bands for the coffee pot handles breaks down.
As with many companies in the largely unregulated manufacturing space in China, it’s a very small manufacturing company using a very old machine to punch out those metal bands. The breakdown is a crack in the pressure cylinder that drives the press, and the fix is very difficult. Parts for that machine are impossible to come by, because this small Chinese company bought the 50 year old machine at a cheap price from a Russian surplus equipment dealer and there aren’t any replacement parts to be had.
The Chinese company can’t manufacture the metal bands until they repair or replace the machine. They can’t replace it because there aren't any cheap surplus presses to be had, and a newer machine is too expensive for this small manufacturing operation to buy.
The small Chinese company is down for 3 weeks while they remove the old cylinder and have a replacement specially made for it by an equipment fabricator in Thailand.
This one breakdown and repair delay sends a ripple effect across the entire Supply Chain for your coffee makers.
The small Chinese company is operating on a (very common) 3 month lead time. That means that the metal bands they make today, for example, don’t arrive on a ship and get offloaded to a US Customs Port for about 3 months.
Because they have that lead time, the Chinese company decides not to notify the US-based manufacturer that they have a problem. They’re afraid of losing their contract, so they keep the delay a secret for as long as they can while they scramble to fix the problem and hope to catch up to their quota in time.
The US-based manufacturer happily goes along assembling coffee makers with the parts they have from the delivery of thousands of metal bands that just came in on the last shipment, unaware that one critical part is about to be delayed.
Because the Chinese company didn’t tell the US company that there would be a delay, the US company doesn
When you’re selling online, whether you use Drop Shipping or you physically stock and ship your products, wholesale backorders from your supplier are always a real possibility. As a business owner, it’s really important for you to understand why this happens and what you can do to avoid damage to your online reputation.
Be sure to Subscribe to the Show!
Find much more TRUTH about ECommerce on my site.
EPISODE TRANSCRIPT
Welcome to Chris Malta's EBiz Insider Podcast, where we don't have to PRACTICE telling the truth, because we don't know how to do anything else!
When you’re selling online, whether you use Drop Shipping or you physically stock and ship your products, wholesale backorders from your supplier are always a real possibility.
Wholesale backorders often seemingly come out of nowhere, and leave you holding the bag, trying to explain to your customer why you suddenly can’t deliver what they bought.
To some degree or other, this is almost always the result of the Butterfly Effect, where one small problem in the Supply Chain ripples out across the entire product market.
As a business owner, it’s really important for you to understand why this happens and what you can do to avoid damage to your online reputation.
So please bear with me as we go through a how a hypothetical "Butterfly Effect" wholesale backorder situation might occur. Sometimes the reasons for these problems are simple, and sometimes they're more complex. I'm going to use a more complex example that touches every aspect of the Supply Chain, because a Supply Chain is something you should understand as a business owner.
Then we'll talk about what to do about the problem.
Let’s say you’re selling Coffee Makers.
The US-based Manufacturer of the coffee makers orders different parts for those coffee makers from different specialized suppliers around the world, and assembles those parts into the finished product in the US.
One day, somewhere in China, the machine that punches out the metal bands for the coffee pot handles breaks down.
As with many companies in the largely unregulated manufacturing space in China, it’s a very small manufacturing company using a very old machine to punch out those metal bands. The breakdown is a crack in the pressure cylinder that drives the press, and the fix is very difficult. Parts for that machine are impossible to come by, because this small Chinese company bought the 50 year old machine at a cheap price from a Russian surplus equipment dealer and there aren’t any replacement parts to be had.
The Chinese company can’t manufacture the metal bands until they repair or replace the machine. They can’t replace it because there aren't any cheap surplus presses to be had, and a newer machine is too expensive for this small manufacturing operation to buy.
The small Chinese company is down for 3 weeks while they remove the old cylinder and have a replacement specially made for it by an equipment fabricator in Thailand.
This one breakdown and repair delay sends a ripple effect across the entire Supply Chain for your coffee makers.
The small Chinese company is operating on a (very common) 3 month lead time. That means that the metal bands they make today, for example, don’t arrive on a ship and get offloaded to a US Customs Port for about 3 months.
Because they have that lead time, the Chinese company decides not to notify the US-based manufacturer that they have a problem. They’re afraid of losing their contract, so they keep the delay a secret for as long as they can while they scramble to fix the problem and hope to catch up to their quota in time.
The US-based manufacturer happily goes along assembling coffee makers with the parts they have from the delivery of thousands of metal bands that just came in on the last shipment, unaware that one critical part is about to be delayed.
Because the Chinese company didn’t tell the US company that there would be a delay, the US company doesn
9 min