Digital supply chain

DIGITAL SUPPLY CHAIN

How do you secure supply chain readiness for digital growth?

 

Traditional „brick-and-mortar“ oriented companies (retailers as well as consumer goods producer) who want to grow digital sales channels by closer integration towards the end consumer, quite fast realise that the needed supply chain is different. Requirements on supply chain capabilities can change dramatically and in combination with high digital growth rates lead to severe disruptions in supply chain costs and service levels. A typical warehouse operation could easily have to handle an increase in number of order lines of +300% just from transferring 10% of sales volume from a traditional store replenishment flow to a B2C flow, which will have a massive impact on costs and profitability if not handled correctly.

 

Based on previous experiences we see a couple of key steps to take in order to transform your supply chain operations for the digital era:

  1. First of all, every function in the organisation needs to realise that a shift from more traditional to digital sales channels can become an extreme change and therefore needs to be thoroughly assessed to identify gaps and define appropriate actions
  2. Instead of just trying to tweak existing supply chain setup and make the new fulfilment models fit into existing operations - make sure to take a customer view, in order to really understand what the key differentiators needed will be when operating in a digital environment and what your specific “customer promise” need to be (for example regarding order-to-delivery lead-times, real-time order handling, full transparency of stock levels and shipping options)
  3. Define what will make you the winner in the new market space and translate that into a set of core capabilities for your supply chain function that you need to develop to fulfil the customer promise
  4. Assess your capabilities to understand current gaps that you need to close in order to enable digital growth – make sure to cover all functions involved, from manufacturing and planning to warehousing and distribution, but also support functions like marketing, customer interaction and finance
  5. Secure internal alignment on trade-offs between costs and profits as well as investments needed – to make sure that sales and pricing forecasts correctly reflects the increased supply chain costs that typically comes from online flows

 

A disciplined approach as above will secure a true understanding of cost and service impacts from a digital sales shift and an internal alignment on 1) needed actions / roadmap and 2) impact on overall growth as well as profitability. You will also secure an ability to gradually shift volumes from offline to online without risking service levels or cost efficiency and have a clear rationale for initiating customer and consumer dialogues on digital business opportunities.

 

This perspective was initially written for COMATCH.

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