It is becoming more and more challenging for manufacturers, distributors and retailers to launch new products and better services that react flexibly to shifting demand, while still maintaining or trying to improve their margins and profitability.
If we were to go deeper, we realise that there are 3 key areas to be simultaneously tackled:
- A-Improving supply chain, enhancing service levels while maintaining or growing margins
- B-Understanding and imbibing the rapid digital and technological transformation
- C-Understanding the new age customer
A-Improving supply chain, enhancing service levels while maintaining or growing margins
On the one hand, brands, manufacturers, distributors, retailers and all in the chain need to be faster, more innovative, or closer to customers.
It’s no surprise that leading players are focused on improving their supply chain—especially when it comes to enhancing service levels, cutting costs, or optimizing inventory levels.
To succeed in the digital age, companies need an upgraded model for their supply chain. They must rethink their operating model, particularly in light of the following dominant trends:
Customer preferences have greatly changed as the influence of digital sales channels has increased.
Consumers are more and more beginning to value immediate access to information, short lead times, and high levels of service. These new channels and increased consumer demands have reshaped the structure of the supply chain and added layers of complexity. Yet the underlying operating model has challenges of keeping the same pace, causing, at times, for no fault of anyone, inefficiencies and fissures along the value chain.
The second consideration is the increasing pressure on supply chain functions in terms of cost and productivity. New market conditions frequently result in a growing number of products, warehouses, and logistics service providers, requiring more frequent and more detailed planning. This also puts pressure on the system to scale up personnel resources in indirect functions like billing, coordination, scheduling and distribution management.
B-Understanding and imbibing the digital and technological transformation
The use of new digital technologies and advanced analytics also affect supply chains design, creating both opportunities and challenges. Advanced analytics allow more precise planning, and efficiency and effectiveness also rise when planners are freed up from repetitive tasks and can concentrate on value-adding activities.
However, innovative technologies and methods are beginning to place new demands on the capabilities of employees, management, and IT infrastructure along the supply chain: all of these elements need to be continually realigned to reflect the latest trends. Companies that do not respond to these challenges by radically reshaping the structures and processes of their supply chain will extract few of the benefits that the transformation promises.
Another aspect of digital and technological transformation is the investment cost and returns.
C-Understanding the new age customer
While catering to the baby boomers, the Gen X, Gen Y, we now have to also keep in mind the new Gen Z.
Members of Gen Z— typically those born between 1995 to 2010—are true digital natives: this is the generation who, from their very youth, have been exposed to the internet, to social networks, and to mobile systems. This therefore is a generation very comfortable with collecting and cross-referencing many sources of information. They also seamlessly shift between virtual and offline experiences.
Coupled with the complexities of the Covid pandemic, businesses and organisations must need to seriously rethink how they deliver value to the consumer, rebalance scale and mass production while keeping in mind aspects of personalization, and—more than ever—practice what they preach when they address both the issues of marketing as well as their work ethics.
Consumption has also gained a new meaning. For Gen Z—and increasingly for older generations as well—consumption is more and more beginning to mean having access to products or services, not necessarily owning them.
As access becomes the new form of consumption, unlimited access to goods and services (such as car-riding services, video streaming, and subscriptions) creates value. Products become services, and services connect consumers.
Car manufacturers, for example, are renting out vehicles directly to consumers, so that instead of selling a few thousand cars, these companies may sell one car a few thousand times. The role of sporting-goods businesses, likewise, has shifted to helping people become better athletes by providing access to equipment, technology, coaching, and communities of like-minded consumers.
Similarly, traditional consumer-goods companies should consider creating platforms of products, services, and experiences that aggregate or connect customers around brands. Companies historically defined by the products they sell or consume can now rethink their value-creation models, leveraging more direct relationships with consumers and new distribution channels. The same thumb rules would apply to the property business which forms a significant part of business in any market.
As the online and offline worlds converge, consumers expect more than ever to consume products and services any time and any place, so omnichannel marketing and sales must reach a new level. For consumers who are always and everywhere online, the online–offline boundary doesn’t exist.
For decades, consumer companies and retailers have realized gains through economies of scale. Now it is very likely that those who wish to succeed better may have to accept a two-track model: the first for scale and mass consumption, the other for customization catering to specific groups of consumers or to the most loyal consumers. In this scenario, not only marketing but also the supply chain and manufacturing processes would require more agility and flexibility for each model.
For companies and organisations who wish to continue to survive long term, this shift will bring both challenges and equally attractive opportunities. And remember: the first step in capturing any opportunity is being open to it.
Authored by Niranjan Gidwani, Independent Consultant Director and Former CEO Of Eros Group Dubai.