Heraclitus, a Greek Philosopher, said, “Everything changes and nothing stands still.” Since this was said almost three millennia ago, the pace of change has increased exponentially. Technology has propelled and disrupted all areas of society, driving changes from the way people interact with each other to how businesses interact with customers.
The rise of omnichannel is the result of our connected, always-on world. How we deal with these changes will determine our trajectory for the next decade. This begs the question: How dowe deal with all this change? We need to figure out what we can do today to make omnichannel more cost effective. We need to think about what can we do to position our supply chains to deal with future changes in the retail climate.
The answer: co-operation.
Data is being collected everywhere
Everyone is familiar with loyalty cards. They are so ubiquitous that almost every chain has one or is part of a program (such as Flybuys, Qantas Frequent Flyer, Virgin Velocity) that covers multiple brands. There are so many cards there are even phone apps to hold them all.
Originally a way for businesses to retain and reward repeat customers, with technology, loyalty programs have evolved into data gathering platforms. In 2012, there was a story out of the U.S. where Target sent a young lady offers and discounts on baby products even before her family was aware she was pregnant. While we don't recommend being so brazen, this example shows that we can know more about our customers through their purchasing habits, and analyzing demographics with finer granularity. Using this information tactfully and co-operating with our customers allows us to predict their needs and provide the seamless service omnichannel demands.
One industry that has built their business on knowing their customers is insurance. Insurers are making policies more and more personalized. Recent advertising for insurers claim to optimize your premiums by asking more questions providing cover tailored specifically to your risk profile. More critically for the insurer, this enables them to reduce their risk, control costs and improve margins. What does this mean for you? While many companies can relate to the insurer's goal of understanding their customers, some neglect the importance of providing information to their suppliers; paying a premium through greater unit costs and increased inventory. While we strive for our customers to be open with us about their consumption habits, most of us remain closed to our supplier base.
Visibility beyond the backyard
In the omnichannel environment, the relationship with suppliers needs to move from a (sometimes) adversarial one of co-operation. It is vital that there is visibility for all stakeholders along the supply chain. If currently the only data from you to your suppliers are purchase orders, or as a supplier all you know for sure is their delivery address, then it is time to come together and work towards a data sharing policy. Replacing expensive inventory with inexpensive information where possible. Supplier visibility of inventory levels, store level sales data, everything from order shipment to the sale at a register.
Deriving insight, avoiding information bias
Unfortunately, it's not enough to just have data. To influence the bottom line, we need to draw out actionable conclusions from the data. With varying levels of sophistication, most companies are doing some form of demand and supply planning, using the data they have for their inventory. Where the co-operative supply chain really shines is it opens up the possibility to optimize end-to-end. Optimizing raw materials, production, warehousing and retail from a shared source of data, leveraging the planning capabilities of all the stakeholders along the supply chain. The grocery retailers Woolworth's and Coles and one of the pioneers, Walmart do this well. Providing access to register sales data, store-by-store customer profiles and all the necessary information for their suppliers to optimize inventories and innovate beyond what the retailers could do by themselves across thousands of product lines. Co-operating with their suppliers, working together to optimize the limited shelf space to maximize sales.
The changing shape of supply chains
Retail will continue to evolve in the next decade, in all this change what stays constant are the needs of the customer. What we have to accommodate are the changes in behaviour due to the changes in technology around the customer. More personalized service and products. Convenience and on-demand are being more engrained in the customer's psyche. The result of this is we are seeing a growth in click-and-collect as well as customers placing more emphasis on shorter lead times all within a smaller delivery windows that suits them.
In the past, because of single channel models, the majority of businesses have pursued efficiency measures to reduce costs into stores, having stores as the dominant customer facing operation. Now, the supply chain is closer and more exposed than ever to the customer, with poor performance more obvious to customers. Last mile costs traditionally not factored into the price or on the customer's minds are now spelled out in black and white. On top of that, it is regarded as being the most expensive, problematic and least efficient part of the delivery process. This has made last mile delivery a major target for innovation and we are seeing many developments in this area.
The last mile is a fertile playground for innovation
One of the frustrating things about waiting for a package is not being home to receive it during the delivery window. The need for another delivery also adds costs. Recently DHL and Audi are trialling direct-to-car deliveries, providing a convenient way to receive parcels. During a set delivery window, the owners of the car provide consent for the vehicle to be tracked. This information is provided to the DHL driver. The driver is also given a single use access code that will open the trunk and only during the delivery window.
On the other hand, not all customers require their orders delivered to their homes. Incentivized by price and convenience, the popularity of click and collect and parcel lockers are increasing. Woolworth’s has partnered with eBay to provide collection points in their stores. This reduces the number of possible delivery locations from practically unlimited to a select number of stores, simplifying the network. Woolworth's benefits from increased foot traffic through their stores and added convenience for their customers.
Developing these solutions independently are full of risk and costs. Co-operation between businesses through partnerships, leveraging each other's strengths and capabilities enables greater flexibility, faster to market at a reduced cost.
Make a start today
Catching an Uber, I am reminded of the disruptive forces that technology can bring. Uber started as a way to fill the gaps between jobs for limo drivers. Partnering with existing drivers, they were able to enter the market with minimal investment in a short two years from conception. The right partnerships give your business more power to change the market as well as allowing your businesses to respond to unforeseen changes with greater agility.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin
In this transforming market, incremental changes to supply chains are not enough. Transformational changes are required. The good news is that you don't have to do it alone.