Early this month, Amazon made waves when it announced the next generation of its at-home connected products, the Amazon Dash Button.
The Dash Button is marketed as convenience driver. Running out of detergent? Hit a button. Need more coffee? Press the button. Yet, the announcement received a host of negative backlash – check out some of the headlines in reaction:
Amazon Wants to Shut Off Our Brains, BostInno
The Horror of Amazon’s New Dash Button, The New Yorker
The Dash Button does heed a warning for supply chain organisations: wearables, the Internet of Things and new digital value propositions mean greater volatility in an already volatile environment. It is also an indicator that early movers with digital are finding new ways to steal demand.
Dealing with demand volatility
Demand volatility is the number one risk for retailers and consumer product manufacturers, with 83% stating that it is a concern. Visibility to risk is the challenge for 2015.
SCM World’s 2014 CSCO study investigated companies’ visibility of potential risks across the retail and consumer value chain. Respondents were asked to rate visibility within their company’s operations and then further into the supply base and demand channel.
Layering visibility for each of these industries together provides insight into where companies in the consumer value chain have good visibility. As the figure below shows, manufacturers across the board say they have better visibility into their operations than retailers do into their own and, with the exception of food and beverage, better visibility into the retail channel as well.
Visibility across the retail and consumer value chain (% of respondents with “good” visibility of potential risks at each level)
Some considerations from the holistic view of the retail and consumer value chain:
• Apparel and consumer electronics manufacturers have the best visibility into the tier-1 supply base. Both industries are challenged with extremely fickle demand and short product lifecycles. Look here for benchmarking opportunities on using processes like integrating suppliers into sales and operations planning and tiered supplier relationship management to create better visibility.
• Retail is the premier source for consumer insight. There is much value to be gained for manufacturers when they can prove value in collaboration. But don’t overlook electronics manufacturers, as they are the second best source for visibility to consumers.
• Visibility is a consistently discussed pain point for supply chain organisations, and yet, according to this data, most executives feel like they have good visibility within their operations. The clear challenge for all layers of the consumer value chain is to find ways to improve external visibility.
The key takeaway for this view on visibility is that there is an opportunity to steal demand at each layer of the chain. Amazon Dash and the Amazon Dash Button are a bold attempt to steal demand at the last mile, by cutting off the traditional point of sale for consumables that typically don’t make profitable sense in a direct delivery model. Those who can address the whole value chain are less likely to lose control of demand by harnessing the value of the end-to-end network.
A retail opportunity with the Internet of Things (IoT)
Cisco estimates that there will be 60 billion connected “things” in 2020: that is, nearly 10 things for every human now on the planet. For the retail value chain, IoT is going to shake up demand and is already changing the purchase experience.
IoT is already permeating its way up and down the retail and consumer value chain, including:
• Food and beverage supply. Coca-Cola Freestyle vending machines are using device-monitoring technology to provide early warning on supply replenishment. Each machine can monitor consumption of its supply and automatically send requests for service replenishment. Consumption patterns can be analysed at the individual machine level, across a bank of machines, at store level, at regional level and at the net sum to better predict future demand as part of forecasting.
• Demand sensing and shaping. In 2014, Disney released a wearable device called Magic Band to enhance customers’ experience at its parks. The band, which has an embedded RFID chip, can be used to access rides and hotel rooms and as a means of payment throughout the park. Guests can log into a website, MyMagic+, to preload itineraries, store credit card information and even sync planned activities with other individuals and groups. In addition to more accurate forecasts and an improved personalised experience, Disney can welcome an additional 3,000 guests per day based on efficiencies related to Magic Band and MyMagic+.
• Connected retail displays. British retailer Marks & Spencer released a new room customisation technology in its stores that enables consumers to sync their tablets to a showroom display. Using an app, a consumer can design his or her ideal room by loading dimensions and then selecting from furniture and colour options. Choices update in real time on the showroom display and, when final selections are made, both the consumer and the store have itemised lists of planned purchases.
A digital path forward
Want to prepare yourself for the onslaught of new digital competitors? Visibility is the common thread for challenges today and into 2020. Use these recommendations as a plan to enhance your visibility:
• Tap into existing good visibility. Visibility is a hot buzzword in supply chain, and yet, the great majority feel like they have good visibility internally. Use the data in the figure above as a guide to benchmarking opportunities for external visibility across the consumer value chain.
• Solve the process constraint. It might be time to revisit collaborative planning, forecasting and replenishment (CPFR). While it fell out of favour between retailers and consumer products manufacturers, the same concept has re-emerged in the hi-tech value chain between device manufacturers and carriers. Advances in technology, analytics and a pointed focus on customer value have made CPFR more viable than it was 15 years ago.
• Declare your role in the Internet of Things. The majority (51%) in retail and consumer products already agrees that IoT will be both important and disruptive. Consider partnering with device manufacturing industries to see how they are using the data for improved visibility and analytics.