The electronics industry can capitalize on the disruptive concept of showrooming, but such a new supply chain business model requires novel ways of thinking to slim down and cut costs.
The electronics industry has a new opportunity to redesign manufacturing and distribution processes that can potentially cut production time and costs. The thinking stems from a retail model called showrooming that is causing problems for brick-and-mortar stores.
Despite retailers' best efforts to keep consumers buying in stores, 40 percent of Americans have looked up product information while standing in a store, then left to purchase it online, according to a recent Harris Poll.
For electronics, the idea means starting with lean manufacturing processes, building sophisticated online ordering platforms that tie to procurement and replenishment systems, taking advantage of cross-docking models, and enabling manufacturers to drop-ship products directly to consumers or shared distribution center rather than require retailers to stock the merchandise at the physical store.
I'm not saying this model works for component suppliers, but rather, original equipment manufacturers like Apple, Google, Microsoft, Samsung, and others that build and sell electronics either through their own retail stores or big box retailers like Best Buy or Wal-Mart. Investments might seem expensive in the short term, but companies will capitalize on long-term gains.
Here are three ways OEMs can lean into the disruption retailers call showrooming:
- Start with lean manufacturing principals and adopt made-to-order processes requiring little inventory. Streamlining pre- and post-production processes to move raw materials and finished goods can reduce the time from the receipt to shipment. While it lets some companies achieve same-day build and ship delivery times, the concept wouldn't work for rush orders.
- Implement a just-in-time cross-dock model to direct raw materials to production lines automatically from a replenishment trigger. Also, a direct shipment model that would bypass the distribution center and retail store, sending the items from the manufacturing facility to the consumer. The retailer would still get paid for selling the product from the showroom, but it would never take possession of the finished goods.
- Work with the retailer to develop a cloud infrastructure to share forecast and materials replenishment data, along with an e-commerce app that allows consumers to take a photo of a barcode next to a product on the shelf in a store. The barcode would facilitate an order for the product and allow the customer to pay for the merchandise. The items would ship to the consumer's home from the OEM's manufacturing facility.
Adapting to reality
Some retailers have begun to embrace the concept of showrooming, which will require OEMs to get on board or miss the boat. Sears recently opened a mattress and appliance store close to my home in Huntington Beach, Calif.
The big retailer moved into a small building that O'Reilly auto parts once occupied, and integrated technology to improve customer service. Consumers can look at the merchandise and purchase items in the physical store, but there's nothing to take home. All orders get delivered. It's a showroom for big-ticket goods.
Sony, which makes laptops, supports a similar model with one exception. The OEM showcases the machines in their local retail stores. Orders are placed in the retail store or online and they ship the machines to consumers from the distribution center, rather than direct from the manufacturing facility.
This model isn't easy to implement. It will take time and rethinking. Some features might not work the first time, but many are already being used by one company or another throughout the supply chain. The impact of mobile devices on electronics manufacturing will continue to challenge the industry. Whether or not companies embrace it will determine their success.
What would you do to build out this model?