Run Supply Chain Like a Startup

By October 29, 2019Power of the Profession
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“If your customer base is aging with you, then eventually you are going to become obsolete or irrelevant. You need to be constantly figuring out who are your new customers and what are you doing to stay forever young.”

— Jeff Bezos, Amazon CEO

With such a continuous innovation principle in mind, Amazon and other companies started as small startups, blossoming to become digital giants and establishing themselves as leaders in their respective industries.

Uber is an interesting example. It started business with Uber Ride, which revolutionized the taxi industry. It has been so disruptive that it has been banned in many cities around the world so that it can’t harm established businesses. Uber didn’t stop there — Uber Freight is now taking logistics by storm. Similar to what happened with Uber Ride, clients appreciate the convenience, ease of doing business and great level of supply chain visibility that Uber Freight can provide. Incumbent transportation providers lack these key features, according to many clients we interact with.

Many more startups are emerging, including online grocery retailer Ocado, additive manufacturing service provider Fast Radius and designer dress and accessory rentals provider Rent the Runway, just to name a few.1,2,3 Startups have flooded the market in recent years — launching innovative products faster than traditional corporations, easily bending their supply chain capabilities to accommodate customer expectations and nimbly adjusting to new marketplace conditions through new business and operating models.

Preliminary results from the 2019 Future of Supply Chain survey show that large corporations feel that emerging startups and digital giants represent high risks of disrupting their business. How can large corporations win this competitive battle? Well, they have to run their supply chain like a startup! They must play on the same battleground, creating the same supply chain capabilities that make successful startups formidable competitors. Thinking to startups and digital giants, what make them successful is disruptive innovation in product, supply chain and operating models.4

Here are three large corporations that are leading the way to run their supply chain like a startup:

  • Product innovationHershey has adopted a startup approach to product development by creating a small entrepreneurial team called The Garage, which is developing and incubating new brands, adopting an agile methodology.5 The idea is moving away from taking huge bets on new product development. Instead, it’s about embracing a test-and-learn approach. This reduces risks while the market is being tested. In case of positive market response, the company invests more. Otherwise, it will take the new product out the market and move to the next idea. One such product is Cocotopia, a line of chocolate truffles with fewer calories.6 For now, this brand is managed separately to test the market via a direct-to-consumer business model.
  • Supply chain innovationBritish American Tobacco launched an initiative called “innovate” that is designed to foster participation from the broader supply chain community to think about new ideas and propose to solve supply chain challenges and improve performance.7 The approach is based on a crowdsourcing environment which provides a formal process for people to submit innovative ideas, put them to a vote from the crowd and then get them developed and tested through funding and technical support. The whole process follows an agile development approach in that the idea development process is segmented in discrete intervals with clear targets, deadlines and measured pilots along the way.
  • Operating model innovationLevi’s Eureka Lab is a place where the company explores innovation in 360 degrees.8 The lab developed a new operating model called F.L.X. to address volatile customer demand for the latest jeans trends and styles. Through a new imaging tool, Levi’s can digitally design new worn looks and transfer those to manufacturing processes directly. By employing lasers and automation, it eliminates the lengthy hand-finishing process. These capabilities allow a shift from a “sell-what-you-make” model to a “make-what-you-sell” model. F.L.X. allows the company to delay the final product decision until receiving a more accurate customer demand trigger, reducing lead times to deliver on customer expectations.

Disruptive innovation across product, supply chain and operating models is the guiding principle of running a supply chain like a startup. Hierarchical and siloed organizational structures and people’s skills focused on functional specialism are the most critical stumbling blocks for traditional corporations.

Pierfrancesco Manenti,
VP Analyst,
Gartner Supply Chain
[email protected]

Evidence
1 Ocado
2 Fast Radius
3 Rent the Runway
4 “Disruptive Innovation,” Wikipedia.
5 “Hershey Adopting Agile Approach to Innovation,” Baking Business, SOSLAND Publications.
6 Cocotopia
7 “Video: British American Tobacco — Crowdsourcing”
8 “Using Future-Led Execution to Redefine How Jeans Are Designed, Made and Sold”

 

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