Recalibrating the Supply Chain in 2013

Everything changes.  From the sports team that completely befuddles its opponents with an unexpected strategy; to a catastrophic storm that impacts every facet of a population’s life in a matter of hours, we are consistently challenged by the unknowable that lurks just beyond the horizon. The ability to respond to these outliers with resilience and flexibility is increasingly the foundation for business success.  From a supply chain perspective, 2012 was the year that change and the required recalibration hit a record pace. This dynamic has been driven by the new master of business -the connected consumer.  Let’s take a look at 2012 and what is coming in 2013.

Looking Back at 2012

I will probably remember 2012 as the year that the drive to enhance infrastructure came under strategic scrutiny.  This is interesting because it is hard to think of what could be wrong with standardization and simplification; basic tenants of the supply chain.

For the last decade manufacturers and wholesalers made large investments in infrastructure projects for both existing operational needs as well as to support future business growth opportunities.  The simple goal of these projects was to reduce complexity by replacing and standardizing internal systems. Now that many of these ambitious projects have come to completion, a surprising set of circumstances has greeted these organizations. With the rise of the connected consumer and the scope of the associated business demands, they have found that infrastructure changes alone are not enough to match the shifting business dynamics. They also discovered they did not realize the pure ROI they had expected from their infrastructure projects.

In particular they found:

  • They put too much emphasis on infrastructure at the expense of understanding the differentiation they needed to compete with their supply chain
  • They need more responsiveness and the ability to manage more efficiently on a global basis
  • They need better integration and collaboration with suppliers and partners to meaningfully meet the demands of the end customer
  • They need better capabilities to leverage the supply chain to deliver speed, agility and efficiency

On the up side, many view their investments as solid if incomplete. They now see the need to leverage their investment by incorporating analytics to gain a better understanding of who their customers are and to allow them to better segment their businesses. They need to better leverage their supply chain because of the strategic importance of managing costs, and building speed and responsiveness.

Looking at 2013

  • The Reign of the Consumer – The reign of the consumer will continue and intensify in 2013. For decades the discussion of business power revolved around the roles of the brand owner or the channel master / retailer. This discussion has now radically changed. The consumer and their “always on” mentality are accelerating the pace of business change considerably. There is a new transparency that has emerged for the consumer; transparency of price, transparency of quality through consumer driven review, and the ability to locate alternative sources. This is placing pressure on both retailers and brand owners to deliver the choice the consumer wants.
  • Private Label Challenges to Drive Collaboration – During the recession there was great growth in house brands and private labels. We are now starting to see signs that this has leveled off and that there is a return to the major labels. In 2013 this trend will drive a burning desire for retailers and CPGs to collaborate to satisfy the consumer. The consumer is now firmly in the driver’s seat.
  • Data Collaboration – Look for more from Big Data in 2013. In the beginning only bleeding edge companies were investing in collecting and sharing data for business advantage. With the emerging availability of cloud technology and its broad deployment, many data barriers have been removed.  It is becoming viable, more efficient, and it is becoming a reality.  Companies are increasingly willing to connect outside of their customer.  
  • Breaking Supply Chain Barriers – Over the last two years severe storms and geopolitical challenges have raised supply chain awareness.  This is causing companies to look at managing risk to get ahead of supply disruption. They are discovering that they must think upstream and downstream, not just within their organization. The result is a broadening of the supply chain mindset.  Businesses are learning that the Supply chain is not merely within four walls.
  • Big Data – To effectively forecast and succeed, manufacturers and retailers will have to become better at utilizing data. When companies do not have connections and visibility into what is driving business they will inevitably build up inventory. Using Big Data to gain real-time visibility into demand and consumer insights to ultimately make smarter business decisions will be crucial in getting ahead.

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