You’re sitting on a balcony, scanning the news on your mobile. You tap the app of your favorite local coffee house to order your caffeinated beverage of choice. Based on your preferences, the app recommends an exotic coffee sourced from Indonesia, and you decide to try it. Ten minutes later, you hear a distinctive buzz coming towards you. You take your double latte from the drone hovering at your elbow, sip and sigh. Life is good.
Hype? Hardly. This scenario represents a brave new digital supply chain world that is turning traditional business models on their head, and it’s happening today. It’s an exciting new world that means profound structural, strategic and executional changes for your business and your supply chain.
A wave overtaking all industries
Consider Nike, which recently started to deliver customized-to-spec shoes in just 3-5 weeks to customers who order online. This new sales model basically blows up the traditional footwear supply chain of global low-cost sourcing, merchants buying and building inventory for a season, and clearing excess inventory through markdowns and factory outlets.
These changes aren’t limited to the retail industry. Banks, which once enjoyed the luxury of established brands and higher margins, are challenged by FinTech to keep up with digital-based competitors; the advent of self-driving trucks, robotics and the Internet of Things means big changes for the logistics industry; and the list goes on. Different industries are at different places in this transformation, but it will affect us all.
It’s the era of small
Gone are the days of putting products on the shelf that you innovate—your customers are doing the innovating. It’s the era of small brands producing smaller lot sizes and distributing smaller quantities through different channels to reach customers directly. Same-day delivery is here, and the true holy grail of commerce—producing and delivering a lot size of one—is within reach. The barriers to entry for sleek digital competitors are getting lower and lower.
Supply chains calibrated to cost reductions through global volume-based sourcing, manufacturing, transportation, and warehousing efficiency, must become demand driven. “Demand driven” isn’t a buzzword; it’s a necessity, and companies must figure out how to adjust, plan and execute their supply chains accordingly.
What does this mean for your business? A sea change in the way you use technology; make decisions about sourcing, manufacturing, distributing and customer servicing; and collaborate with vendors and customers. You’ll need to buy differently, make differently and sell differently when innovation and constant change are the new normal.
It’s no wonder that executing the digital supply chain is the biggest challenge we hear from customers. How can you prepare? Here are some areas to consider: