It’s a New Digital World – Is Your Supply Chain Ready?

The pace of digital innovation is increasing rapidly, and it’s estimated that the new digital technologies and capabilities being developed will have as great or even greater impact on society than the Internet. Recent research published by SCM World on behalf of JDA Software Group, Inc. (The Digital Transformation Directive) shows that digital technologies and the potential impact on supply chain are top of mind for many in the C-suite.

According to the SCM World Future of Supply Chain survey 2016, a majority of supply chain executives identified the following primary digital technologies as disruptive and important:

  • big data analytics (81 percent)
  • digital supply chain (66 percent)
  • cloud computing (64 percent)
  • Internet of Things (63 percent)

Companies need to start thinking about how they can harness these digital technologies to deliver transformative business results. One way to accomplish this is by developing a digital playbook.

Crossing the digital divide

A playbook maps out the strategies, or “plays,” a company should employ to better compete and win. For years, companies have operated successfully from the old playbook.  Let’s review the old and new playbook across three key dimensions – the offer, the supply chain and the asset.

  • The offer typically included fixed product assortments based on the demographics of a particular region or group of stores, and the available physical space. Pricing was static and relatively consistent, and promotions were created 6-12 weeks in advance and built for mass consumption (such as TV/radio ads for B2C, or catalogs/buyer tradeshows for B2B).

For many B2C companies, the customer relationship ended when the shopper left the store with the product. For many B2B companies, and even wholesalers, it was a high-touch customer experience, with very little visibility into the other competitors’ offers. 

  • The supply chain was a linear, batch-oriented process. The way product flowed from the factory to the end customer followed a defined network path of buy-make-move-store-deliver steps, and the interrelationships between these supply chain steps were relatively static.
  • The asset had a singular purpose. For instance, a store was just a store. Companies leveraged economies of scale to protect profit, and the assets – especially those dedicated to inventory transportation and storage – were owned by the company.

While valuable at the time, this approach is no longer competitive. A new digital playbook has emerged:

  • The offer is changing radically. Today, intelligence is being built into the product itself. Companies are building products that monitor consumption post-purchase, and have already started bundling that digital consumption data with reordering services to ensure automatic replenishment. Retailers are using endless aisle tactics to save the sale, and advanced category management technology to assort products and allocate space based on the demand patterns of unique shopper demographics at the individual store level.

Pricing is more dynamic, as companies are using machine-learning algorithms to scan for competitive offers and adjust prices. Promotions are more shopper-centric, with retailers publishing apps that deliver personalized promotions to customers.

The customer experience for B2B companies is shifting toward self-service models. Additional value is being delivered around each transaction; customers are receiving real-time status updates after an order is placed. In addition to real-time promotions, B2B customers are receiving deeper levels of product education – delivered on their terms, when they are ready to consume it – prior to making the purchase.

  • The supply chain structure is no longer linear. Today’s grid-based supply chains are characterized as a set of assets that “surround the customer” and dynamically assemble to process and fulfill orders. This supports dynamic information sharing with and across trading partners, distribution and fulfillment points, providing business units with greater visibility to upstream and downstream nodes.

The type and amount of information shared across nodes will grow dramatically as the availability of real-time and predictive data increases. Integrated supply chain collaboration between manufacturers and retailers will become increasingly important as companies seek ways to address the Amazon effect (the expectation consumers now have to buy anything, from anywhere, and receive it in two days or less). 

  • The asset now has multiple purposes. For instance, the store is also a multichannel fulfillment center; online orders can be shipped from the store, or fulfilled via in-store pickup. Economies of scale are less important as companies move distribution centers closer to market demand. Leading companies are looking to Uber-ize their transportation assets by leveraging third-party logistics providers or portals to deliver the last mile more effectively. Others are leveraging 3D printing, or additive manufacturing capabilities, to avoid transporting and storing materials altogether.

What plays are included in your company’s digital playbook will depend on your company’s strengths and weaknesses, the competition and the overall business environment in which you operate.

To learn more about how to approach this digital transformation, download the SCM World report and register to attend the SCM World webinar on Tuesday, March 21.

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