Traditionally, the supply chain has been a vehicle – in both the literal and the metaphorical sense – for getting goods from A to B, from manufacturers to stores. Although supply chains have gotten longer, more complex and undoubtedly faster, the same A to B mentality is still hegemonic in the logistics sector, which can, at times, act as a barrier to real, tangible innovation.
As time has moved forward, and as technological innovation has left no stone unturned, this traditional mind-set in logistics is no longer fit for purpose. Gone are the days when the retailer or reseller dictates to the manufacturer what to make, how much of it to make and where to sell. Under the trajectory of current consumer trends, it is the customer that rules the roost as the ultimate end-user, demanding personalised products, a customised shopping experience and ever-faster, cheaper delivery.
Technology has fundamentally altered the way in which consumers purchase goods, how those goods get to their endpoint and how quickly they arrive. E-commerce platforms have been a central driver for this consumer trend, using delivery times as a means of market differentiation and, in the process, feeding a burgeoning consumer appetite for instantaneous delivery.
The desire for instant gratification among consumers is putting significant strain on the traditional supply chain and creating a growing wedge between consumers’ expectations and the supply chain’s ability to deliver goods. Research conducted by Gartner, found that only 27% of companies believe that they are providing a superior service than their competitors, emphasising the level of strain and pessimism many stakeholders find themselves operating under.
At the same time, consumers’ altering relationship with the retail sector has led most retailers to change tact, offering a progressively holistic service, where customers can browse and purchase in both the virtual and physical worlds.
All-channel fulfilment, sometimes referred to as omni-channel commerce, is challenging the traditional notion of the supply chain as a conduit for goods to move from A to B and as a cost-centre built for this purpose only. When you have consumer demand for different goods in multiple locations, ordered through different mediums, the supply chain becomes less about the A to B and more about the A, B, C, D, E and F, and how each fulfilment point interacts with the end-user.
Currently, touch points in the supply chain are seen as a cost that should be cut out or minimised. Yet, in an omni-channel world, these touchpoints present customer experience opportunities, with some providers romantically dubbing them “business moments”. For the logistics providers of the future, these transient and fleeting moments will be crucial for businesses to engage with their customer base, helping improve satisfaction and service, while building up a more substantial picture of their customer base.
Furthermore, in a retail world dominated by the omni-channel experience, the traditional notions of B2B and B2C begin to crumble. The digitalisation of the supply chain and the maturing power of the customer throws up numerous advantages of manufacturers to go direct to consumer, cutting out resellers and interacting directly with their end-users.
By 2020, IDC estimates that 50% of all manufacturing supply chains will have the capability – whether it’s in-house or outsourced – to go direct to consumer with home delivery. And with advancements in additive 3D manufacturing, there is no reason why manufacturers can’t move their productive base closer to key their logistics hubs to dramatically reduce supply chain risk and delivery latency.
So, a different type of supply chain requires both a different approach and a different philosophy. Now, in our omni-channel world, the supply chain is a customer experience medium, with multiple fulfilment points. If merchants and their logistics partners get it right, they have happy customers all round. If they get it wrong, disgruntled customers will look elsewhere. And in an increasingly saturated market, this can be make or break for commerce firms as over the next decade, 90% of industry growth will be captured by companies that successfully engage with their customers, according to IDC’s FutureScape.
To do this, merchants and logistics partners need the right technology, such as the internet of things (IoT) and real-time data analytics for forecasting product and demand cycles. Integrating technology of this sort takes time and incurs a cost. But, when done right, the supply chain is transformed from a one-dimensional means of getting goods from A to B, in to a seamless and multifaceted channel, built for the purpose of improving customer experience. According to Gartner, improving and investing in customer experience is a top priority for many CEOs, which makes it clear that, sooner or later, some firms are going to be playing catch-up.
The transition the supply chain is currently undertaking is the most dramatic and affecting in its long history. As traditional models of practice and understanding break down, and new concepts and ideas permeate the sphere, the gains to be captured from providing an integrated, customer-centric supply chain cannot be underestimated. For supply chain operators, the race to the customer is most certainly on and - as we all know - the customer is perpetually right.