Preparing Your Supply Chain for the Omni-Channel World (Part 2): The Death of the Linear Supply Chain

For decades, supply chains have operated in a very linear way. Even today, the term supply chain connotes a series of buy-make-move-store-deliver steps that must be followed sequentially to satisfy an order.

While this traditional approach to supply chain management has worked fine for quite a while, it is no longer competitive in today’s rapidly evolving business environment. Demand volatility, along with ever-changing supply chain networks, make it very difficult for companies to stick to a forecast and still optimize their assets — while trying to meet the predicted sales and marketing numbers.

Very recently, with the emergence of global networks, lower trade barriers and e-commerce, companies across all industries have been experiencing an explosion of channels and options from which to fulfill orders. Producers can now choose from a multitude of local or global suppliers. Consumers can now purchase goods via a number of e-commerce models (such as apps, social platforms, mobile technologies, etc.) besides the traditional store. As a result, the linear supply chain has evolved into a grid-based supply chain to support the many different fulfillment options desired by the consumer, as well as the variety of ways that product can move across organizations (see Figure 1 below).

 

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Figure 1 – The omni-channel representation of the supply chain fulfillment process

This new omni-channel world drives the importance of the customer experience to the forefront. As companies leverage multiple channels to serve their customers, differentiation of service and harmonization of the customer experience must be much more carefully managed (see Figure 2). For instance, even though customers use multiple channels to purchase items, they expect a seamless experience across all channels. At the same time, even though some customers may use the same channels, not all of those customers are equally important to the supplier.

 

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Figure 2 – How omni-channel supply chains lead to micro-management of the customer experience.

This heightened focus on delivering personalized customer experiences in the omni-channel world does not mean we have truly re-embraced the one-to-one relationships between consumers and store personnel, which defined the retail experience before large shopping malls, outlets and supermarts became the norm. Local neighborhood shops with very personalized service are not the trend we see.

Instead, what is gaining momentum is the ability — through technology — to truly sense consumer demand based on a consumer’s digital interactions via websites and social media, or in the store (via loyalty card data), which companies are then using to influence that consumer’s purchasing behavior far beyond what has previously been possible (see Figure 3).

 

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Figure 3 – The transformation of demand from demand shaping to demand sensing

Experts call these interaction points, where we can sense consumer demand, moments of truth (MOT). MOTs occur when consumers interact with a brand, product or service and during these interactions, their impressions about that particular brand, product or service is shaped, and their desires to buy and consume take shape. By collecting these interactions, or MOTs, a retailer or manufacturer can truly sense demand from a specific consumer. The sum of these interactions is what comprises the customer experience.

The key takeaway to remember is that the consumer, through his or her feedback, is your ultimate marketer today. The consumer has the power to promote — and also destroy — your brand overnight, making the ability to sense MOTs absolutely critical for any manufacturer or retailer.

In the next blog post, we’ll discuss how companies can capture and react (in near real time) to MOTs.

View Part 1 of this blog series – Why We Need New and Better Technology Solutions to Address Today’s Supply Chain Challenges.

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