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A New Framework For Turning Transformational Business Trends Into Sustainable Competitive Advantages
An Executive's Guide to Commerce in Motion
This Executive’s Guide to Commerce in Motion has been developed for
supply chain and retail executives as they strive to achieve and sustain
competitive advantage in an era of relentless globalization and
ever-changing market demands.
Within this guide you will find commentary, research, and insights into the
challenges faced by organizations that span all aspects of today’s global,
hyper-connected supply chains.
The goal of this report is to help you develop a framework for commerce
excellence in your business. To make it easy to absorb, the guide has been
broken up into four sections, each representing a core operational
competency required to keep Commerce in Motion: Products, People,
Presence, and Process.
Each section contains insight into current challenges to achieving
operational excellence as well as best practice guidance from thought
leaders around the globe, resulting in a roadmap linking these best
practices to your business objectives. To help you establish that linkage,
each section concludes with specific recommendations for transforming
those challenges into competitive opportunities.
ABOUT THIS
GUIDE
2
PREFACE:
SECTION 1:
PEOPLE THE NEW REALITIES OF BALANCING PRODUCTIVITY AND PROFITS
SECTION 2: PRODUCTSOPTIMIZING INVENTORY ACROSS ALL TOUCH POINTS
CONCLUSION
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4
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3
1. Matching staff to customer demands and needs
2. Adding agile scheduling
3. The world of workforce management is flat
4. Empowering the workforce
5. Turning transformation into advantage
SECTION 3:
PRESENCE ENGAGING AND ENABLING CUSTOMERS AT ALL TOUCH POINTS - IN VIRTUALLY ALL INDUSTRIES
361. Mobile presence: putting power in customer’s hands
2. Social presence: the power of peer-to-peer
3. Cross channel presence: consistency and integration critical components
4. B2B presence: providing consumer connectivity to business buyers
5. Turning transformation into advantage
SECTION 4:
PROCESSCONNECTING, COORDINATING & COLLABORATING TO ACHIEVE VISIBILITY & VELOCITY IN UNPREDICTABLE BUSINESS CLIMATES
501. Collaborating to address market volatility
2. Containing costs via tighter controls
3. Increasing controls to address risk management
4. Turning transformation into advantage
1. New realities: new tools and processes required for a single view of product across extended supply network
2. The new rules of inventory management
3. Streamlining the flow of goods to improve speed to market & control costs
4. Sensing and responding to demand signals
5. All channel availability and fulfillment
6. Turning transformation into advantage
Inventor and futurist Ray Kurzweil pointed out that we were entering an “age of
acceleration” in a 2003 article in Perspectives in Business Innovation. Kurzweil
predicted that the rate of change in the 21st century would be “equivalent to
20,000 years of progress” by traditional standards, and he stressed...
“organizations have to be able to redefine themselves at a faster and
faster pace.”
Not surprisingly, Kurzweil’s forecast couldn’t have been more accurate. Business
leaders in all sectors today are faced with new realities and increased
complexities, which have brought with them a new set of rules and command
new strategies and approaches.
In order to “redefine themselves” in today’s unpredictable and complex
markets, organizations now must quickly spot sales trends across a variety of
channels, and adapt to serve their customers by delivering the products they
want, when they want them.
COMMERCEIN MOTION
4
PREFACE
THE REALITIES OF GLOBAL COMMERCE
Over the past five years, businesses have been operating in an increasingly global marketplace,
where sourcing and supply networks have become significantly more complex and layered, less
predictable, and more difficult to manage, all while customer expectations are being re-written
almost daily as new devices, platforms, and channels emerge.
Additionally, disruptions from natural disasters and political unrest around the globe have
unfortunately become constant challenges, forcing businesses to adapt, react, and attempt to
“plan for the unplanned.”
Considering the radical changes taking place in today’s business world, the winners that
emerge from this period will be those companies that develop strategies and solutions that
respond to these transformational shifts. Winners will emerge with fluid, adaptive supply
networks that are inherently collaborative, that are efficient and yet resistant to disruption, that
expect and anticipate change as the “new normal,” and that connect with customers on their
customers’ terms.
However, in today’s fluid business world, moving parts that were once addressed separately
are increasingly viewed as interdependent and interconnected entities. They are now
focusing on improving their visibility across the shared supply network, integrating and
optimizing every step from sourcing to shipping to customer support.
5
Historically, companies have been able to develop dominant market positions by excelling in a specific area of business, such as supply chain execution (Wal-Mart), product innovation (Apple), customer service (Nordstrom) or cost efficiency (Lowe’s).
This Executive’s Guide to Commerce in Motion has been developed for
supply chain and retail executives as they strive to achieve and sustain
competitive advantage in an era of relentless globalization and
ever-changing market demands.
Within this guide you will find commentary, research, and insights into the
challenges faced by organizations that span all aspects of today’s global,
hyper-connected supply chains.
The goal of this report is to help you develop a framework for commerce
excellence in your business. To make it easy to absorb, the guide has been
broken up into four sections, each representing a core operational
competency required to keep Commerce in Motion: Products, People,
Presence, and Process.
Each section contains insight into current challenges to achieving
operational excellence as well as best practice guidance from thought
leaders around the globe, resulting in a roadmap linking these best
practices to your business objectives. To help you establish that linkage,
each section concludes with specific recommendations for transforming
those challenges into competitive opportunities.
In order to deliver the unique products to customers when they want (and via the sales and service
channels of their choice), more companies now realize that they can no longer succeed with a singular
focus on product and inventory management without developing an integrated strategy to better
serve expanding channels and labor requirements.
In fact, most companies are recognizing that they need new tools and strategies to manage internal,
cross-functional, cross-channel distribution realities, as well as the demands of interconnected,
international, and interdependent supply networks and value chains.
Illustrating this point in a recent Gartner “First Thing Monday” newsletter, Analyst Jim Shepherd wrote
about the emergence of “multi-enterprise commerce” as a potential replacement to the enterprise
resource planning approach companies have traditionally taken. “The real business problem that
today's manufacturers and distributors are struggling to manage takes place between companies, not
within them. Planning, sourcing, production, costing, tracking and fulfillment must take place in an
environment that can be accessed and updated by all the players in the value chain,” Shepherd said.
He added that while individual applications have shown progress towards improved collaboration,
“they need to extend the scope to include finance, asset management, traceability, order management
and service. In a multi-enterprise environment, these activities will need all new business processes,
and the expectations for control, visibility, and efficiency will be quite different.”
6
THE 4 P’S: A FRAMEWORK FOR COMMERCE EXCELLENCEIn an era when commerce is in perpetual motion, characterized by rapidly changing market
dynamics, rising customer expectations, and unpredictable shifts in demand, organizations
must find new ways to keep their extended supply networks – from raw materials to the
consumer – adaptive and fluid.
While the basic calculations of supply and demand still apply in today’s business world, new
more complex formulas must be mastered as 21st century companies develop holistic
strategies to better serve customers across an expanding channel and distribution set, while
still maximizing their ability to source and distribute products efficiently as possible.
The competitive landscape requires companies to develop a new strategic framework that
fuels both their ability to keep pace with the ever-changing dynamics of global supply chains
as well as hyper-connected customers. This accelerated rate of change demands that
companies address the resulting realities of “Commerce in Motion.”
To achieve sustainable competitive advantage, a framework for commerce excellence must
include strategies that streamline and optimize the movement, management, and
measurement of people, products, presence, and processes.
COMMERCE IN MOTIONA FRAMEWORK FOR COMMERCE EXCELLENCE
ALL-CHANNEL SALES & SERVICE
RETURN ON INVENTORY
VISIBILITY& VELOCITY
P R E S E N C EProvide relevant & personalized experiences no matter when, where, or how customers choose to interact.
P R O D U C T SMaking every piece– in every location – available to every customer, channel, store & touch point.
P R O C E S SConnect, coordinate, and collaborate to foster visibility and ever-increasing velocity.
P E O P L EMatch staff to demand with tools that help deliver loyalty-building sales and service.
RETURN ON LABOR
7
The First Pi l lar in the Commerce in Motion Framework
1PEOPLE
1. P
EO
PL
E
Traditionally, when businesses decided to focus on “labor management,” the net
results were typically limited to reduced headcounts and other cost cutting
measures. However, as modern organizations look to gain market share based on a
differentiated customer experience, many are realizing they need to invest in
solutions and processes that enable them to go beyond simple cost-cutting
measures and find ways to better manage and empower their workforce.
Case studies in industries from retail to distribution to manufacturing have proven
that extending the productivity of every employee and synchronizing staffing levels
with peaks in demand often results in enhanced customer loyalty and increased
revenue, as well as improved margins and profitability.
In addition, where companies once attempted to optimize labor within separate
areas of their business, many are now evaluating their ability to influence the
workforce at the enterprise level. Boardroom discussions now factor in how staffing
and productivity improvements can impact everything -- from the way products
are sourced and shipped, to the way they are supported after the sale is complete.
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Case studies in industries from retail to
distribution to manufacturing have
proven that extending the productivity
of every employee and synchronizing
staffing levels with peaks in demand
often results in enhanced customer
loyalty and increased revenue, as well
as improved margins and profitability.
1. P
EO
PL
E
PEOPLE: THE NEW REALITIES OF BALANCING PRODUCTIVITY & PROFITS
Most businesses have been attempting to walk the tightrope of investing in the customer
experience while at the same time looking to better manage labor costs. In order to realize
these seemingly opposing goals, leading companies are focusing on driving productivity to
improve return on invested labor.
From manufacturing plants to distribution centers to retail sales floors, leading organizations
are improving productivity by investing in tools and processes that provide greater visibility
and deeper intelligence into customer timelines, preferences, activities and histories and then
aligning that visibility and intelligence with new demand signals.
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From manufacturing plants to distribution centers to retail sales floors, leading organizations are improving productivity by investing in tools and processes that provide greater visibility into and deeper intelligence on customer timelines, preferences, activities and histories and aligning that intelligence with new demand signals.
However, transforming an organization to align talent and strategy is often a delicate balancing
act. Some of the new realities companies are dealing with as they look to optimize this critical
people component of the Commerce in Motion Framework include:
• Aligning talent and strategy, both from matching staffing to demand, as well as hiring and
training for new skill sets;
• Developing agile scheduling systems that allow organizations to address shifts in
demand/production and also serve an increasingly empowered workforce who are looking for
increased flexibility in their schedules.
• Serving an increasingly global customer base, with an equally dispersed workforce;
• Managing compliance and labor laws on a regional level around the globe;
1. P
EO
PL
E
MATCHING STAFF TO CUSTOMER DEMANDS & NEEDS
Operating in a climate of hyper competition and product commoditization, progressive
companies in a range of industries are prioritizing and investing in the customer experience.
Whether they operate in fast moving industries such as consumer products, complex markets
such as life sciences or high-touch sectors such as retail, the experience is now the critical
differentiator and people are one of the most important components of that strategy.
According to 2011 research from consultancy Workforce Insight, improving customer
experience/customer satisfaction was the top driver companies cited for investing in workforce
management, selected by 85% of respondents. In order to improve the experience, these
organizations are realizing the need to integrate their Workforce Management solutions and
processes into their entire supply network.
Scott Knaul, VP Strategic Services at Workforce Insight, recommends that organizations take a
scientific approach to managing the customer experience, and that they must first “define and
quantify” their strategy. “Companies must first determine their clients’ expectations and
determine the experiences they are going to provide to meet or exceed those expectations,”
Knaul said. “Then, just as importantly, they must establish metrics that support how they are
going to deliver on that experience.”
The desire to have the right staff on hand to meet peaks in demand is a consistent goal for all
businesses today, whether it is a manufacturer managing production lines or a retail store
staffing its sales floors. .
Knaul added that workforce management is just as critical to strategic execution for
transportation, distribution and logistics providers. “In these industries, their success and
entire service model relies on their ability to work faster, cheaper and smarter than the
competition in getting products from origin to destination,” Knaul said. “Given these realities,
efficiently managing the storage and movement of inventory, with impeccable timing at
minimal cost is no small task...and is essential. Intelligent and efficient people and systems are
essential to better managing inventory, cutting transportation costs, and expediting delivery.”
of organizations cite improving the customer experience as the top driver for investing in workforce management– Workforce Insight
85%11
1In [transportation, distribution, and
logistics] industries, their success and
entire service model relies on their
ability to work faster, cheaper and
smarter than the competition in getting
products from origin to destination.
Intelligent and efficient people and
systems are essential to better managing
inventory, cutting transportation costs
and expediting delivery.
–Scott KnaulVP Strategic Services, Workforce Insight
However, one of the common breakdowns that occurs when companies attempt to take a more
analytical and scientific approach to managing people is that disparate systems and manual
processes make it impossible to create a common and consistent view of staffing versus
demand cycles. According to Workforce Insights 2011 research, over 60% of respondents
indicated their Labor Budgeting System had “room for improvement” or was “unacceptable.”
In fact, the top drivers identified by Workforce Insight’s study that ranked right behind
customer experience were:
72%
55%
Improved Workflow Efficiency/Productivity
Optimizing Staff Scheduling Allocation
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”
However, the Aberdeen report revealed that the goal of matching schedules to strategy is not
yet aligned with current capabilities. The survey found that only 33% of retailers are currently
able to integrate time and attendance with scheduling, while 51% of respondents are planning
to add coordination of scheduling processes with key organizational goals.
Successful scheduling requires organizations to not only align people and strategy, but they
must also address the changing realities of today’s workforce. Even with high unemployment
rates, finding and keeping good people is an ongoing challenge, particularly for industries
that employ a high percentage of hourly and part-time and workers.
A recent paper titled “Improving Work-Life Fit in Hourly Jobs,” authored by Joan C. Williams
& Penelope Huang for The Center for Work-Life Law, argued that “widely accepted ways of
cutting labor costs have unintended consequences that can hurt, rather than help, an
organization’s competitive position.”
The paper underscored the fact that both business conditions and the needs of hourly and
part-time workers have changed substantially, and therefore employers must look for new
ways to provide more flexible scheduling options. “High attrition and absenteeism stem from
outdated assumptions, the most basic of which is that any responsible and committed
employee is always available for work. This was a reasonable assumption in the 1960s’
economy of breadwinners married to homemakers. Today that assumption is sorely outdated,”
the Work-Life paper stated.
ADDING AGILE SCHEDULING
Scheduling has become a top priority in industries where hourly workers are the norm and
demand can shift dramatically based on seasonality, economic conditions, special promotions,
or the popularity of a new product line. A recent Aberdeen Research report titled “Next
Generation Retail Store-Level Workforce Management Strategies,” found aligning schedules to
business needs was the top strategic action retailers planned to take (cited by 38%).
Source: Aberdeen Group, July 2011
Ensure that staff schedules are aligned with actual business needs
Standardize the workforce management processes across the entire organization
Implement business intelligence software to improve scheduling visibility
Empower employees to be more self-sufficient
Percent of Respondents
38%
36%
28%
23%
0% 10% 20% 30% 40%
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A recent posting by Nikki Baird, Managing Partner at Retail Systems Research, titled
“Workforce Optimization and Unintended Consequences,” pointed out that workforce
management systems can present a solution to the outdated scheduling set-up many
businesses have followed. “One of the best features of today's WFM systems is the ability to
easily track employee availability,” Baird said. “Employees can indicate their availability, their
ideal hours, and when they simply are not available. They can do this on a computer at work,
online from home, and increasingly on their mobile phones as well. When this happens, it's not
managerial preference that drives who gets staffed when, but the careful ranking and
consideration of availability, performance, seniority, experience, and any other skills or
constraints that go into a schedule.”
Employees can indicate their
availability, their ideal hours, and
when they simply are not available.
They can do this on a computer at
work, online from home, and
increasingly on their mobile phones
as well. When this happens, it's not
managerial preference that drives
who gets staffed when, but the
careful ranking and consideration of
availability, performance, seniority,
experience, and any other skills or
constraints that go into a schedule.
– Nikki Baird, Retail Systems Research
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”
Within the retail sector, for example, progressive organizations are beginning to prioritize
employee access to scheduling options. The Aberdeen “Next Generation Retail” study found
49% of retailers are planning to give employees access to real-time scheduling and profiling
information. The Aberdeen research also found that retailers are providing more access via
mobile devices, as 30% of those retailers using non-legacy systems were planning to enable
associates to bid on shifts, and 29% of retailers are providing visibility to available shifts on
mobile devices.
Source: Aberdeen Group, July 2011
Integrate time and attendance with scheduling
Self-service scheduling training requirements for all store-level employees
Employees have access to sign up for open or available work shifts
Incentivise accurate scheduling
Percent of Respondents
33%
33%
26%
20%
Coordination of scheduling process with key organizational goals
Managers are notified of potential overtime before it occurs
Employees access to real-time scheduling / profiling information
Scheduling training requirements for all store-level managers
Current Planned
51%
45%
49%
40%
0% 10% 20% 30% 40% 50%
TOP CURRENT PROCESS CAPABILITIES VERSUS TOP PLANNED PROCESS CAPABILITIES
151
. PE
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Source: IBM Chief Human Resource Officer Study
THE WORLD OF WORKFORCE MANAGEMENT IS FLAT
With more companies seeking growth by serving markets around the globe, workforces are
quickly spreading across different time zones and geographies. This worldwide focus on
growth requires organizations to rethink how they manage the workforce to overcome borders
and to consider different approaches for attracting and retaining key talent. As new borders
open, so do the requirements to rethink the location, skill set, and management of the
workforce.
A recent report in Bloomberg BusinessWeek titled, “Managing the Global Workforce,” pointed
out that the war for talent is now stretching from China to Central Europe to Bangalore – for
management as well as line workers. The report cited the growing challenge to “find the right
talent in the right location,” in order to gain an edge in productivity. “Today, global
corporations are transforming themselves into ‘transnationals,’ moving work to the places with
the talent to handle the job and the time to do it at the right cost,” the article stated.
Consequently, the ability to mobilize the workforce for speed and flexibility is vital to
generating growth in today’s competitive global marketplace. Unfortunately, many companies
are not keeping pace. In the 2010 IBM Chief Human Resource Officer study, “Working Beyond
Borders”, the HR executives surveyed indicated that despite the emerging importance of
connecting and tapping into insights around the globe, the majority of executives struggle to
effectively connect their workforce.
Today, global corporations are transforming themselves into ‘transnationals,’ moving work to the places with the talent to handle the job and the time to do it at the right cost.
–Bloomberg Business Week
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EMPOWERING THE WORKFORCE
In a world where customers of all types – B2C and B2B – are constantly connected to
information via their mobile phones, netbooks and tablets, they often have access to
information on pricing and product availability even before internal staff members. To stay
competitive, organizations are extending their resources, data, and connectivity to people
wherever they are…whether that is in face-to-face customer engagements or in an operational
setting, such as a retail store, supply chain logistics, or field service.
In addition, users are demanding access where ever they happen to be...whether they’re in their
car, on a plane, in a hotel, or on a weekend camping trip. Illustrating this point, a 2011 shopping
survey conducted by Motorola found 55% of retail store associates believe consumers had
more information about products than they did. The Motorola survey also showed consumers
were equally frustrated with the imbalance of information, as 28% of consumers wound up
leaving a store because they couldn’t find information or someone to ask.
To overcome this disconnect, more companies – both B2C and B2B -- are arming their
workforce with mobile devices and access to other technologies that provide workers with
visibility into product availability and fulfillment options as well as background into customer
history to make it easy for associates to offer relevant recommendations and cross-sell offers.
Additionally, B2B enterprises, from manufacturers and distributors to warehousing and logistics
providers, are also faced with new challenges (and new opportunities) to engage their
workforce on their terms. Recent studies indicate that 72% of the U.S. workforce is mobile, and
Empowering manufacturing and warehousing workforces with mobile technologies can make it easy to model and standardize business processes, connect those processes to people and systems, manage process exceptions, and monitor their effectiveness as the foundation for achieving continuous process improvement and organizational efficiency.
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most workers today expect to be able to interact with their phone for analytics, tasks, alerts,
and training tools. It is time for enterprises to truly embrace mobile and social tools as agents
of engagement and productivity.
Empowering manufacturing and warehousing workforces with mobile technologies can make it
easy to model and standardize business processes, connect those processes to people and
systems, manage process exceptions, and monitor their effectiveness as the foundation for
achieving continuous process improvement and organizational efficiency.
Source: RSR, June 2011
Maintain and/or improve the customer experience
Make our employees “smarter” and better informed
Increase revenue while holding down operational costs
Put actionable information into the hands of managers
Help the company win new customers and retain current customers
Create competitive advantages and new sources of revenue generation
React quickly to changes in the business environment
Help us keep up with the competition (avoid competitive disadvantages)
Further illustrating the point, a recent report from Retail Systems Research titled “The 21st
Century Store,” showed that educating employees was a key part of technology investment
strategies. When asked to name their top priorities for in-store technology investments, 51%
cited making employees smarter and better informed (a 16% increase over 2010), and 32%
listed the desire to put actionable information in the hands of store managers.
181
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Empowering employees, whether that be with information, technology, scheduling flexibility, or
product and process input has benefits that extend far beyond the sales cycle. Research shows
that companies who successfully foster employee engagement are rewarded with employees
who have the opportunity – and motivation – to directly impact total company performance.
2011 2010
TOP THREE USES OF IN-STORE TECHNOLOGIES
Source: Towers Perrin Global Workforce Study
A recent Towers Perrin Global Workforce study of 86,000 employees from 14 countries attempted to quantify the impact that engaged employees can have on total performance, and the responses were eye-opening:
Since almost every employee can directly impact quality, cost, or service through the execution of his
or her daily tasks, the potential impact of increased engagement on top- and bottom-line performance
is tremendous. Additionally, companies with more deeply engaged employees have, as one might
expect, much lower turnover rates, which typically translates into higher productivity.
The bad news in this research is that employees today do not feel engaged by their employers. In the
same Towers Perrin study, only 14% of the employees indicated that they felt fully engaged in their
work. The good news? There are significant opportunities for organizations to empower, engage, and
expand the role of their employees in their success, and those that do have an opportunity to gain
critical competitive advantage.
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ENGAGEMENT AND HIGH-PERFORMANCE BEHAVIOR
I can positively impact quality
I can positively impact cost
I can positively impact customer service
31%62%
84%
19%42%
68%
27%50%
72%
Disengaged Moderately Engaged Highly Engaged
KEY TAKEAWAYSTURNING TRANSFORMATION INTO ADVANTAGE
Clearly, businesses are struggling to thrive in the complex, global, and fluid field of workforce
management. Collectively we are underachieving: the average warehouse or distribution
center operates at approximately 65% to 70% of capacity, and similarly underwhelming
metrics apply to call centers, manufacturers, and retail stores. Businesses in all sectors must
find new ways to embrace strategic workforce management strategies that turn transformation
into competitive advantage by aligning business and talent strategy, minimizing the gaps
between workforce supply and demand, fostering a culture of creativity and innovation, and
empowering employees to drive engagement. Aberdeen’s 2010 recent Executive’s Agenda
report shows how Best-in-Class companies have integrated these priorities into their strategic
plan and, perhaps more importantly, their corporate culture:
continually align business and talent strategy
identify gaps between workforce supply and business demand
foster a culture of innovation and creativity
Organizations that successfully implement these strategies to extend the productivity of every
hour by matching staff to demand and arming every associate with productivity and
conversion tools can expect long-term success through improved productivity, improved
customer experiences, and maximum return on invested labor.
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51%
46%
43%
The Second Pi l lar in the Commerce in Motion Framework
2
2. P
RO
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S
PRODUCTS
2
Supply networks have gone through dramatic changes. Over the past few decades,
new concepts such as lean manufacturing, CPFR, just-in-time delivery systems, and
demand driven forecasting have all re-written the rules of inventory management
and brought dramatic changes as well as business improvements.
However, as transformational as these new business processes have been, none
have adequately prepared organizations to manage the dramatic changes now
being ushered in by the mix of rising customer expectations and increasing
complexity across sourcing and distribution networks.
On one end of the spectrum, companies of all sizes, from all industries, are being
challenged to enable customers to place orders and have them fulfilled across an
ever-expanding array of channels and touch points. Many businesses are still
getting caught up managing the intricacies of Web commerce, but customers are
already moving ahead to new channels and expecting – even demanding - access
and connectivity via mobile and social platforms as well.
PRODUCTS: OPTIMIZING INVENTORY ACROSS ALL TOUCH POINTS
2. P
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These changing customer expectations are further compounded by the fact that most
businesses are working with a more diverse network of partners for sourcing and distribution
across new areas of the world, and most are struggling to balance these changes with higher
costs for fuel and raw materials.
These new market dynamics can wreak havoc on outdated supply chains, but market leaders
are viewing this transformative period as an opportunity to distance themselves from the
competition. Progressive companies are developing integrated supply chains that provide
end-to-end visibility and intelligence all the way from manufacturing plants to distribution
centers to the store shelf.
Market leaders are viewing this transformative period as an opportunity to distance themselves from the competition. Progressive companies are developing integrated supply chains that provide end-to-end visibility and intelligence all the way from manufacturing plants to distribution centers to the store shelf.
This single view allows leading companies to “sense and respond” to shifts in market demand
and also develop more adaptive supply networks, which can react more efficiently and
effectively when disruptions occur.
2. P
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NEW REALITIES—NEW TOOLS & PROCESSES REQUIRED FOR SINGLE VIEW OF PRODUCT ACROSS THE EXTENDED SUPPLY NETWORK
Acquiring a single view across a supply network seems like a logical concept that every
business should be adopting, but putting it into practice requires tools and processes that
enable seamless collaboration.
Businesses today need deeper visibility into the extended supply chain. The need for visibility
and actionable intelligence extends from the raw material stage to the transportation of
finished goods to where products can be most efficiently delivered – whether that be from a
distribution center, store or other third party location.
In order to address the new realities of Commerce in Motion, businesses from discrete
manufacturing to distribution need to optimize warehouse and manufacturing productivity and
visibility to leverage all inventory in all channels. Achieving this single view of product flow
means businesses must re-engineer their current processes and tools in the following areas:
• Providing actionable intelligence around inventory management so that every piece of inventory can be tracked and made available to every customer in every channel;
• Streamlining the flow of goods so that every order can be fulfilled in the most efficient manner possible;
• Improving forecasting capabilities so that businesses can sense a new set of demand signals, and then respond by sharing that intelligence across their extended supply network;
• Extending inventory availability across all channels and offering a variety of flexible fulfillment options.
2. P
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2THE NEW RULES OF INVENTORY MANAGEMENT
The inherent principles of commerce—taking a customer’s order and finding the most time-
and cost-efficient path to deliver the goods—still apply in today’s world. However, those
principles have become exponentially more difficult to manage as sourcing, delivery options
and costs have multiplied.
For example, consider the scenario of a distributor who receives an order for 5,000 microchips.
Traditionally, that distributor would check local inventory and if that quantity were unavailable,
they would have lost the order.
With an integrated view of its end-to-end supply network in place, that same distributor would
not have been limited to the physical inventory within their four walls, but would have visibility
into inventory positions across its extended supply network. They would be able to see their
own in-stock information, as well as availability within their suppliers’ inventory.
In addition to in-stock information, end-to-end supply chain visibility also allows that distributor
to locate other product options by providing in-transit information, allowing the distributor to
know that a shipment of those microchips is scheduled to arrive in their distribution center
within days, and to notify the client that products can be shipped with the week.
New business models will focus on ‘collaborating to compete,’ as brand-independent and ‘smart’ supply chains emerge where information (including POS, forecast and inventory data) as well as assets (technologies, facilities and fleets) are shared across the value chain.
–The Consumer Goods Forum 2020 Future Value Chain Report
The 2020 Future Value Chain Report published by The Consumer Goods Forum (TCGF)
predicts that a more collaborative and integrated approach to product visibility and actionable
intelligence will emerge as a competitive necessity. “New information technologies will enable
new ways of collaboration and information sharing among all partners in the value chain,” the
TCGF report stated. “New business models will focus on ‘collaborating to compete,’ as
brand-independent and ‘smart’ supply chains emerge where information (including POS,
forecast and inventory data) as well as assets (technologies, facilities and fleets) are shared
across the value chain.”
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Pointing out that 73% of fast-moving consumer goods companies have already implemented or
improved logistics-related technology tools or enablers, the report forecasted new supply
chain and logistics technologies will provide information transparency and “enable a more
synchronized value chain with greater visibility and traceability.”
Ultimately, this wider lens will provide all players in the value chain with actionable intelligence,
which will help to reduce lead times and provide the flexible fulfillment options customers are
now demanding. “We will see an increasing ability to constantly read, analyze, exchange and
react to information inside and outside the company boundaries,” the 2020 report predicted.
“Visibility will be enhanced by suppliers that have access to better demand signals, enabling
them to efficiently use their capacity and other resources.”
26
of fast-moving consumer goods companies have already implemented or improved logistics-related technology tools or enablers–The Consumer Goods Forum 2020 Future Value Chain Report
73%
STREAMLINING THE FLOW OF GOODS TO IMPROVE SPEED TO MARKET & CONTROL COSTS
The ability to track product availability across all phases of the value chain can dramatically
improve cost efficiencies and response times. However, this integrated approach brings with it
the many challenges associated with reserving, selling and shipping product from a wide
variety of points – including many new points – along the product life cycle.
The new realities of perpetual inventory control are forcing many businesses to reevaluate their
current systems and processes for Warehouse Management Systems (WMS) and
Transportation Management Systems (TMS). In order to make every piece of inventory
throughout the network available to every customer, companies are realizing they need more
advanced capabilities and network-wide integration.
The 2011 Market Trends Report: Warehouse Management Systems, from Software Advice
pointed out that there is a growing demand for integrated WMS and TMS solutions to address
the new complexities of selling and shipping to an array of points. “Integrated systems can
notify an incoming truck to cross-dock its contents onto an outgoing truck, while at the same
time coordinate warehouse labor to position stored containers for loading onto the same
vehicle,” wrote Michael Koplov, ERP analyst at Software Advice. “Integrating WMS and TMS
means better coordination between warehousing and shipping, which reduces costs. The
shipping destinations of containers can be changed as they arrive, containers going to the
same location can be easily spotted and combined, and less-than-truckloads (LTLs) can
be reduced.”
Integrating WMS and TMS means better
coordination between warehousing and
shipping, which reduces costs. The
shipping destinations of containers can
be changed as they arrive, containers
going to the same location can be
easily spotted and combined, and
less-than-truckloads (LTLs) can
be reduced.
–Michael KoplovERP Analyst at Software Advice
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”
Recent research from Accenture titled “High Performance through Supply Chain Planning,”
illustrated that network-wide integration capability is quickly emerging as a competitive
advantage in the marketplace. Contrasting the maturity practices and capabilities of different
companies across key areas, the Accenture report found significant gaps in performance
among the leading firms classified as “masters” versus “laggards.”
For example, customer order fill rates were nearly 10 percentage points higher for masters
(99%) versus laggards (90%) and media lead times for customer delivery were reduced by
almost a full week (5 days for masters versus 9 days for laggards).
“The companies with the best- performing supply chain planning functions were far more
aggressive in reaching out across the entire supply chain to their counterparts in key customer
and supplier organizations,” the report stated. “As a result, they integrated planning across
distribution tiers, from raw materials to the end customer. Nearly three-quarters of masters
include suppliers in their planning efforts, while only half the laggards do so.”
The companies with the best- performing supply chain planning functions were far more aggressive in reaching out across the entire supply chain to their counterparts in key customer and supplier organizations. As a result, they integrated planning across distribution tiers, from raw materials to the end customer.
–Accenture “High Performance through Supply Chain Planning”
“”
28
Median inventory turns per year
Median customer order fill rate (percent of orders filled completely)
Forecasting plant production (i.e., production adherence to schedule)
Forecast accuracy
Median lead times for customer delivery
Median throughtput time
30
99%
98%
82%
5 days
7 days
Masters Laggards
5
90%
90%
75%
9 days
15 days
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Source: “High Performance through Supply Chain Planning” - Accenture
In addition to improving speed to market, companies are also looking to integrate their WMS
and TMS as a way to address the rising costs most companies are facing in fuel and
commodities. A recent Aberdeen Group report titled “Integrated Transportation in a Capacity
Constrained Global Market” found 57% of the executives in the survey cited transportation
cost relative to overall supply chain performance as the top pressure they face.
Given the increased globalization companies are seeing in their supply networks the report
noted that many firms are looking for centralized platforms to collect and share data across
regions, divisions, and operating silos. Aberdeen noted that some companies have identified
as much as 35% in cost-savings directly attributable to cross-region optimization.
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Some companies surveyed have identified as much as 35% in cost savings directly attributable to cross-region optimization.– Aberdeen “Integrated Transportation in a Capacity Constrained Global Market”
35%
However, even in cases where cost reductions are the top motivator, visibility is still a critical
factor for improving the flow of goods. The Aberdeen survey showed more than 50% of
respondents indicated that they were “investing in process or technology improvement to
heighten the degree of visibility they have with outside groups.”
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”
SENSING & RESPONDING TO DEMAND SIGNALS
Perhaps the most dramatic change that has impacted supply networks over the past decade is
the rate at which customers now change their behaviors, preferences and buying patterns. To
keep pace with today’s hyper-connected customers, businesses can no longer rely purely on
historical data for their forecasting and planning needs.
Addressing this new reality, progressive companies are expanding their demand forecasting
capabilities to better predict changes in actual demand. “There is a broader set of demand
signals available and there is a strong desire from supply chain executives to identify those
demand signals earlier on in the process so they can be more responsive to them,” said Ken
Claflin, Principal of Consumer Products, Retail & Distribution at Capgemini Consulting.
There is a broader set of demand signals available and there is a strong desire from supply chain executives to identify those demand signals earlier on in the process so they can be more responsive to them.
–Ken Claflin, Principal of Consumer Products, Retail & Distribution, Capgemini
Claflin pointed to “social media, web crawling and unstructured data analytics” as a few of the
new sources of demand signals. He also pointed to a tire retailer who was factoring the impact
of gas pricing on the number of miles driven, and the negative impact that could potentially
have on demand.
Across the retail and consumer products sectors, more companies are expanding on their use
of POS data to feed forecasts, and are beginning to formulate their missed sales on fast moving
items.
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In a recent post titled “Improving On-Shelf Availability for Retail Supply Chains Requires the
Balance of Process and Technology,” Gartner analyst Mike Griswold stressed that brands need
to “recognize that sales and demand are different.”
In order to solve the out-of-stock epidemic that continues to plague the retail and consumer
product sectors, Griswold pointed out both sides of the value chain need better visibility into
actual demand levels. “Sales represent what the consumer purchased. Demand is what would
have sold had consumers found everything they desired. Most forecasting products don't
account for lost sales and forecast based on historical sales. ” Griswold wrote. He
recommended companies “begin using out-of-stock data to calculate lost sales” and
incorporate that information into future forecasting processes.
In a recent Gartner case study, the analyst firm highlighted the progressive work consumer
goods giant Kimberly-Clark has done in incorporating “demand sensing” into its end-to-end
supply chain planning.
Gartner defines “demand sensing” as using “customer and channel data to identify demand
trends.” Traditional sources have yielded structured data, but unstructured sources, such as
weather patterns and chatter on the social Web, are increasingly important sources of insight.
The case study highlighted impressive results Kimberly-Clark achieved, including a 20%
improvement in forecast accuracy, which reduced the need for safety stock. The performance
improvements have the potential to have a significant impact on the bottom line, as Gartner
pointed out that a one-day reduction in safety stock equates to a $10 million dollar savings
within Kimberly-Clark’s supply chain network.
Based on the financial payoff of reducing out of stocks and safety stock levels, as well as
improving customer experience, improving demand sensing capabilities and integrating
that data with other supply chain intelligence is becoming a growing priority.
According to the “2011 Chief Supply Chain Officer Report” from SCM World, demand
management is a growing priority. The survey of over 750 executives found 77% of
respondents ranked demand management, including forecasting and demand shaping, as
a top lever for improving supply chain performance.
Based on the financial payoff of reducing out of stocks and safety stock levels, as well as improving customer experience, improving demand sensing capabilities and integrating that data with other supply chain intelligence is becoming a growing priority.
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”ALL CHANNEL AVAILABILITY & FULFILLMENT
An integrated supply network doesn’t end at sharing intelligence on product availability and
demand signals with sourcing patterns. Truly end-to-end networks are extending the power
and value of a single view to their customers by providing transparency into inventory levels
and flexible fulfillment options.
While some companies are still struggling to manage the realities of cross-channel commerce,
progressive organizations are readying for Commerce in Motion by operating in all-channel,
all-network mode all the time.
This connectivity and flexibility is especially important in retail and consumer goods, where the
hyper-connected consumer is constantly looking for more information, and more options. For
these demanding consumers, tolerance for out of stocks is disappearing and the convenience
to shop and ship in the channel of their choice is now an expectation. A large percentage of
retailers now offer buy online/pick-up in store, buy in-store/ship direct, and buy online/return
to store.
While many retailers and consumer goods firms are still in catch-up mode to keep pace with
the expanding channel preferences of the connected consumer, those companies that have
the capability to operate all-channel, all-network, all the time are establishing an early lead.
According to the 2011 Retail Systems Research benchmark report, “Enabling Buy
Anywhere/Get Anywhere: The Future of Cross-Channel,” the companies qualifying as winners
are using their supply chain capabilities to make purchasing more convenient for their
customers.
of retail winners enable buy online/return to store of laggards
79%
vs.55%
of winners allow customers to buy via mobile device of laggards
68% 18%
of winners have tackled buy online/fulfill from store
The report found:
of laggards
42% 27%
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Source: “Enabling Buy Anywhere/Get Anywhere: The Future of Cross-Channel” – Retail Systems Research
of winners cite cross-channel fulfillment as a very important opportunity– RSR Research
76%
of winners want cross-channel inventory leverage– RSR Research
65%
Just as integration is a key component of the back-end of the supply chain, the RSR report also
found it is the biggest challenge for retailers in addressing Commerce in Motion. The RSR
research found 45% of respondents cited their biggest challenge in this area was integrating
cross-channel processes into the store.
In addition to improving the customer experience, the RSR report found winners are also
viewing the all-channel, all-network future as a way to operate more efficiently, with 76% citing
cross-channel fulfillment as a very important opportunity and 65% wanting cross-channel
inventory leverage.
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KEY TAKEAWAYSTURNING TRANSFORMATION INTO ADVANTAGE
Vertically integrated companies have traditionally been viewed as having an upper hand on
their competitors because of their internal ability to control every area of the value chain.
However, all of these organizations still rely on raw materials suppliers in their extended supply
networks. And at the front end, these brands are all still aggressively working to get closer to
the end customer by reading and responding to demand signals and providing more flexible
options to place and fulfill orders.
The reality is all progressive organizations are moving to integrated supply networks, where a
single view can be shared from the point a product is originally crafted all the way until it is
delivered to the customer.
This end-to-end visibility across the supply network is becoming a competitive necessity as
companies look to control transportation and distribution costs, manage the increased
complexity of global sourcing partners, and track and respond to rapidly changing shifts in
demand among connected customers.
In analyzing the different approaches between supply chain “masters” and “laggards,” for its
“High Performance through Supply Chain Planning,” report, Accenture found a significant
disparity in cost effectiveness, inventory turns and fill rates. The report highlighted “major
differences” in the way the two groups operated around the following areas:
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– Collaborating with customers and suppliers
– Creating a dynamic planning model
– Sensing and shaping demand
– Instituting total product lifecycle planning
– Planning by market, customer and product segment
– Using information technology to transform planning processes
– Managing and developing planning talent
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KEY TAKEAWAYS (CONTINUED)TURNING TRANSFORMATION INTO ADVANTAGE
The Accenture report highlights the fact that market leaders are responding to the new rules
and realities of a global economy and turning the challenges of complex product management
into competitive advantage.
Inventory management practices that simply track availability at regional distribution centers
are no longer sufficient in today’s marketplace. The new rules of Commerce in Motion dictate
that companies have access to actionable intelligence from their entire value chain in order to
leverage all inventory in the network in all channels.
The Third Pi l lar in the Commerce in Motion Framework
3PRESENCE
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Building an integrated supply network offers companies from all walks of
commerce significant advances in serving today’s connected customers with
expanded fulfillment options and inventory visibility. However, before organizations
can realize the benefits of that deeper integration, they must truly operate
“end-to-end” by engaging and enabling their customers across all channels and
touch points.
The massive expansion of mobile and social channels over the past decade has
dramatically increased customer expectations for relevant and personalized
experiences across a menu of media, devices and platforms.
Customers now not only expect the convenience of connecting with brands and
suppliers across all channels, they presume those interactions will be seamless and
customized, based upon their past purchases, histories and profiles.
PRESENCE: ENGAGING AND ENABLING ALL CUSTOMERS AT ALL TOUCH POINTS – IN VIRTUALLY ALL INDUSTRIES
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Those rising expectations include deeper levels of relevance, connectivity, responsiveness,
and consistency, even as customers cross channels and interaction points. In order to meet
these new expectations for engagement, organizations will need to re-evaluate their tools
and process for connecting the “customer-facing” front-end of commerce into the extended
supply network.
These new realities of commerce of in motion have grown up out of the fast-moving consumer
goods and retail sectors, where hyper-connected consumers are constantly searching their
social networks and mobile devices for the lowest prices and latest viral daily deal offers.
And, while many of these new shopping trends have only been recently adopted, they are
quickly moving beyond the consumer world and migrating into B2B purchases in
manufacturing, distribution and other sectors. There has been a “consumerization” of B2B
buying, as business customers are transferring their at-home behaviors into their research,
interaction and selection process for solutions and products for business.
This new reality means no enterprise, in any industry or geography, is immune to the rising
expectations for immediate and all-channel access to the companies they do business with,
whether live in person or through web sites, call centers, mobile phones, social networks, or
tablets.
The challenge going forward for businesses in retail, consumer goods, life sciences and other
sectors is to not only extend their brand presence across multiple channels, but to do so in a
way that meets every customer’s increased expectations – whether the customer is a B2B client
or a consumer.
Customers now not only expect the convenience of connecting with brands and suppliers across all channels, they presume those interactions will be seamless and customized, based upon their past purchases, histories and profiles.
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Whether customers are completing a transaction in a physical location, through a web site, via
a call center, on a mobile device or a social network, they now expect companies to recognize
them and engage them with relevant offers and up-to-the-minute product, inventory, and
pricing information.
Therefore, just as actionable intelligence is important to driving efficiency in the back end of
the supply chain, it is arguably even more critical at customer-facing stages where pricing
information is now transparent and loyalty is fickle…at best.
Therefore, just as actionable intelligence
is important to driving efficiency in the
back end of the supply chain, it is
arguably even more critical at
customer-facing stages where pricing
information is now transparent and
loyalty is fickle…at best.
Given these new realities, all-channel marketing is fast becoming an essential piece of a
Commerce in Motion framework. In order to extend their presence and meet customer’s
increased customer expectations, companies must address the following new rules of
engagement:
• The power is in the customer’s hands, literally. Businesses now must have a presence on the
mobile channel and one that is integrated into their end-to-end supply network so that
customers can place orders, track inventory availability, deliveries, etc.
• The ability to interact with other customers, share information on products, and receive
special deals is now an expectation of all customers. Businesses now need a social strategy.
• Channels and experiences must be synchronized. It’s no longer enough to simply have a
presence on different channels; the channels must be integrated to provide a seamless
experience.
• All-channel presence is not just essential for connecting with consumers. B2B buyers are now
conducting research and conducting commerce online, on mobile devices and turning to
social media for peer feedback, which makes all-channel presence vital, regardless of
business size or industry.
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3
Mobile devices and applications are
again rewriting the rules of engagement.
Small screens are now having a big
impact in how companies connect with
their customers.
Companies that fail to extend their presence onto mobile devices run the risk of losing
customers to competitors who are making it easier to find products and complete purchases
from anyplace at anytime. Mobile subscribers check their phone up to 40 times a day, and the
devices have become essential tools people use for a variety of personal and business
functions.
To fully appreciate the new realities of the mobile channel, consider the following statistics:
– Morgan Stanley Research recently estimated sales of smartphones would surpass PCs in 2012;
– According to July 2011 data from Nielsen, 40% of mobile consumers over 18 in the U.S. now have smartphones, and that is expected to climb to over 50% by the end of 2011;
– IDC recently forecast total smartphone sales in 2011 to reach 472 million across the globe, rising to 982 million in 2015.
MOBILE PRESENCE: PUTTING POWER IN CUSTOMER’S HANDS
Just as the Web transformed how all companies manage their businesses and connect with
their customers, mobile devices and applications are again rewriting the rules of engagement.
Small screens are now having a big impact on the way companies connect with their
customers.
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Another recent study from Google validated that even while consumers increase their use of
mobile devices, they are still being influenced by a variety of channels. The study, conducted by
market research firm Ipsos OTX, surveyed more than 5,000 U.S. smartphone users and found:
As the computing power and functionality of smartphones has advanced, the mobile channel
has already begun to have a game-changing effect on the retail and consumer goods channels.
The introduction of apps that can accompany consumers while they shop and provide access
to competitive pricing and insights into location-based product availability has turned the
mobile device into an integral part of the all-channel shopping and buying process. For
example, the recent “Marketing to the Mobile Shopper” report, conducted by Arc
Worldwide and Leo Burnett, determined that half of surveyed shoppers consulted their phones
while shopping and 80% used their phone in-store.
of shoppers surveyed consulted their phones while shopping and 80% used their phone in-store– “Marketing to the Mobile Shopper” Arc Worldwide and Leo Burnett
50%
of smartphone users search because of an ad they’ve seen either online or offline
of shoppers made a purchase as a result of research conducted on their mobile device
71%
68%
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Given the rapid expansion of mobile
applications, retailers aren’t the only
businesses that need to answer the call
of smartphone shoppers. Consumer
packaged goods (CPG) firms also have an
opportunity to connect with consumers
via the mobile phone.
As consumers become more comfortable with the expanded functionality of their mobile
device, the other new reality is that the mobile channel is not only being used to research
purchases, but also to complete transactions. Whether they’re browsing, completing online
transactions, or seeking detailed product information while in store, today’s on-the-go
shoppers are looking to the small screen for a rich, meaningful brand interaction.
Illustrating this point, at the 2011 Shop.org Summit Rue LaLa CEO Ben Fischman indicated the
mobile channel now represents 28% of the invitation-only deals site’s business, a figure that
climbs to 38% on weekends.
Tablet devices are also having a growing impact on commerce. Online retailer Gilt Groupe
reportedly now drives nearly 25% of its total sales via the media-rich iPad application the
company developed.
Other top e-commerce brands have also seen substantial sales growth from the mobile
channel, led by eBay, which reported its global mobile sales generated almost $2 billion in
2010, up from $600 million in 2009.
These impressive figures are only scratching the surface in terms of the mobile channel’s
potential, according to industry analysts. Forrester Research’s Mobile Commerce Forecast,
2011 To 2016, projected the mobile commerce industry will hit $6 billion by the end of 2011,
and reach $31 billion by 2016.
Given the rapid expansion of mobile applications, retailers aren’t the only businesses that need
to answer the call of smartphone shoppers. Consumer packaged goods (CPG) firms also have
an opportunity to connect with consumers via the mobile phone. According to recent research
from mobile advertising data platform provider Millennial Media, CPG brands from food to
cosmetics had seen a 33% and higher increase in responses to mobile campaigns.
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Anticipated online CPG sales by 2014– Nielsen Research
25 Billion
The move to mobile is emerging just as the consumer products industry is expanding its online
footprint as well. According to Nielsen research, online sales in the U.S. for the CPG sector are
expected to grow by 25%-30% per year over the next two years, climbing from $12 billion in
2010 to $25 billion in 2014.
By building out their web presence and extending their presence with mobile applications,
CPG brands are developing more direct, personalized relationships with end consumers.
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2006 2008 2010 2012 2014
$5$8
$12
$17
$25
U.S. ONLINE CPG SALES ($ BILLIONS)
2006 - 2010 CAGR:20% - 25%
2011 - 2014 CAGR:est: 25% - 30%
Source: Nielsen Research
Companies that fail to extend their presence onto mobile devices run the risk of losing
customers to competitors who are making it easier to find products and complete purchases
from anyplace at anytime. Mobile subscribers check their phone up to 40 times a day, and the
devices have become essential tools people use for a variety of personal and business
functions.
To fully appreciate the new realities of the mobile channel, consider the following statistics:
– Morgan Stanley Research recently estimated sales of smartphones would surpass PCs in 2012;
– According to July 2011 data from Nielsen, 40% of mobile consumers over 18 in the U.S. now have smartphones, and that is expected to climb to over 50% by the end of 2011;
– IDC recently forecast total smartphone sales in 2011 to reach 472 million across the globe, rising to 982 million in 2015.
SOCIAL PRESENCE: THE POWER OF PEER TO PEER
Social media is now part of the fabric of how people communicate. Facebook members share
more than 30 billion pieces of content each month. An estimated 95 million tweets are written
each day, as Twitter’s user base has soared to over 175 million.
Consumers are now using media to follow their favorite brands and companies and are quickly
becoming trained to receive special offers and deals in exchange for being a loyal follower.
The Facebook “like” option has become a way for companies to engage with customers and
share updates with loyal followers. According to research conducted by Wedbush Securities
and reported by eMarketer, the overall number of adults “liking” brands increased from 47%
to 59% between September 2010 and April 2011.
Another survey from Chadwick Martin Bailey and iModerate found 51% of Facebook and
Twitter users are more likely to make a purchase from brands they follow. The survey also
found 60% of Facebook members and 79% of Twitter users are more likely to recommend
brands to friends and family as a result of social media participation.
Consumers now not only shop collaboratively via Facebook, Twitter and other channels, they
are increasingly looking to complete purchases right within the channel via dedicated social
commerce solutions.
Social media is also extending into the B2B space, as LinkedIn membership has soared to 100
million users. The explosion of social media has also transformed how businesses share data
and collaborate.
The more that businesses become comfortable sharing information and collaborating via the
web, the more rapidly they are changing the way they expect to share and deliver data across
their supply network. The expansion of cloud computing environments has made collaborating
around actionable intelligence much more accessible, as businesses are now sharing data with
decision makers via portals, dashboards and intranets.
51% of Facebook and Twitter users are more likely to make a purchase from brands they follow.
– Chadwick Martin Bailey and iModerate
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CROSS CHANNEL PRESENCE: CONSISTENCY & INTEGRATION CRITICAL COMPONENTS
It’s no longer enough to simply have a presence on the web, social media and mobile; all
channels must be integrated to provide a seamless customer experience. Customers expect a
fluid experience whether they are connecting with a brand on its web site, Facebook page or
via a mobile device.
In many cases the lines separating the channels are being blurred. For example, more than 200
million users now access their Facebook page through their mobile device, making it
imperative that businesses have a consistent and unified strategy across both channels.
Unfortunately, most organizations are struggling to keep pace with their customers. Even
retailers, who always have to manage (and live up to) extremely high customer expectations,
are struggling. Executives surveyed recently by Retail Systems Research report the inability to
deliver cross-channel capabilities, integrating new processes (driven by cross-channel
strategies) into the store, and customer expectations outpacing their ability to deliver
cross-channel capabilities among their top 3 business challenges.
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TOP–3 BUSINESS CHALLENGES
Source: RSR Research
Internal challenges prevent us from delivering cross-channel capabilities
Effectively integrating new processes driven by cross-channel strategies into the store
Consumer expectations outpace our ability to deliver cross-channel experiences
A good customer experience in one channel is not enough to maintain customer loyalty
We are not doing enough to leverage our assets (digital, inventory, or otherwise) across channels
2011 2010
0% 10% 20% 30% 40% 50%
51%46%
45%
41%
NA
20%
39%34%
35%45%
The addition of the smartphone and new
technology like geo-targeting and Near
Field Communication (NFC) technology is
going to enable new dialogue between
retailers and their customers — much
more of a one-on-one dialogue.
– Stephanie Tilenius VP of Commerce, Google
Rue LaLa CEO Ben Fischman recently reported that 80% of the invitation-only shopping site’s
members come through social media, and emphasized that integration of the social to its
other channels is vital. “The only way social works for us is if it’s a completely integrated
experience,” Fischman noted.
During a keynote presentation at the 2011 Shop.org Summit, Stephanie Tilenius, VP of
Commerce for Google, suggested that merging online and offline channels should be a top
priority. “The lines between online and offline are going to blur and become one,” she noted.
“The addition of the smartphone and new technology like geo-targeting and Near Field
Communication (NFC) technology is going to enable new dialogue between retailers and their
customers — much more of a one-on-one dialogue.”
In order to develop closer connections with consumers, Tilenius recommended that retailers
and brands develop a strategy focused on personalized offers based on past transactions and
browsing behavior. “What you’re going to see is a whole new set of formats where you’re able
to talk to your loyal customers with personalized offers,” Tilenius said.
By leveraging a fully integrated, cross-channel strategy with mobile payment and social
engagement, brands now have the ability to create a memorable shopping experience. “This
push-pull connection is very important,” Tilenius explained. “You don’t want to overwhelm the
consumer. You want to push them very targeted, personalized information. But when you
always have your phone and you’re checking it 40 times a day, and you walk into a retailer and
they push you something very personalized and targeted, it's a great experience.”
For retailers and CPG brands, providing an integrated presence across all channels is quickly
becoming an imperative. Customer tolerance for inconsistent experiences across channels is
quickly shrinking. Therefore, companies not only need transparency into pricing and inventory
availability across their supply networks, they need to share that visibility consistently with
customers across all channels.
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Because customers have become
accustomed to receiving
recommendations and personalized
promotions from retail sites, business
customers are now looking for the same
collaborative experience from
manufacturing sources.
B2B PRESENCE: PROVIDING CONSUMER CONNECTIVITY TO BUSINESS BUYERS
The power and convenience of the web and online commerce is also extending beyond
consumer-facing industries, such as manufacturing. A recent research report from Cognizant
titled “From Brick to Click: E-Commerce Trends in Industry Manufacturing,” pointed out that
the expansion of e-commerce presents a “huge opportunity for both industrial manufacturers
and their end customers.”
Because customers have become accustomed to receiving recommendations and
personalized promotions from retail sites, business customers are now looking for the same
collaborative experience from manufacturing sources.
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“The future of effective e-commerce lies in the ability to deliver a buyer-centric and engaging
online experience that enables customers to interact and transact with the brand and allows
manufacturers to reduce administrative costs, increase sales and improve brand loyalty,” the
Cognizant report stated.
In order to extend their presence via online channels, the Cognizant report recommended
manufacturers take the following steps:
• Aggressively adopt B2C and retail best practices.
• Target customers with buyer-specific online promotions, recommendations and messages.
• Increase brand visibility by utilizing social networking tools.
• Open new markets and channels through alternate business models, such as mobile commerce.
Mirroring trends seen in consumer and retail sectors, business buyers are now starting their
shopping on the web, conducting comparison price research and tapping into social networks
for peer feedback before they ever send out an RFP or call a sales rep.
According to the Endeca 2011 B2B e-Commerce Trends Survey, 93% of B2B executives
highlighted the online channel as the number one tool used when asked which touch points
customers use most to make decisions. The online channel significantly outpaced the direct
sales channel, which was cited by 75% of respondents. The survey also found 70% of B2B
professionals agree or strongly agree that their customers’ expectations follow at-home
consumer practices.
48
of B2B executives highlighted the online channel as the number one tool used when asked which touch points customers use most to make decisions.–2011 Endeca B2B e-Commerce Trends Survey
93%
KEY TAKEAWAYSTURNING TRANSFORMATION INTO ADVANTAGE
Put simply, the proliferation of web-enabled mobile devices has forever transformed the way
people research, evaluate and complete transactions. Even in complex industries where orders
traditionally required stacks of paperwork and manual processing, interactions with leading
organizations are now being completed at any point, from any location, on any device.
Businesses that are able to engage their customers across all channels with a seamless
experience are gaining a distinct advantage over competitors by providing greater
convenience and flexibility.
To remain relevant in this highly connected world, organizations in all industries now need
connected channels and experiences. The future of commerce will be a fluid environment and
the ability to interact and transact on any device and any touch point will be mere table stakes.
Customers now demand all-channel access to products and services, and they are sharing their
experiences with friends and peers across social media. Therefore, those organizations that
build true end-to-end supply networks will not only have a presence in all channels, they will
provide a seamless all-channel customer experience, from the moment a customer first makes
contact, all the way through order fulfillment.
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To remain relevant in this highly
connected world, organizations in all
industries now need connected channels
and experiences. The future of
commerce will be a fluid environment
and the ability to interact and transact on
any device and any touch point will be
mere table stakes.
The Fourth Pi l lar in the Commerce in Motion Framework
4
4. P
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PROCESS
”
4A strong collaboration platform is now imperative at the center of a Commerce in Motion framework in order to share timely reporting of shifts in supply and demand and to respond quickly and effectively by reconfiguring workflows.
PROCESS: CONNECTING, COORDINATING & COLLABORATING TO ACHIEVE VISIBILITY & VELOCITY IN UNPREDICTABLE BUSINESS CLIMATES
As more companies expand to lower-cost sourcing partners across all corners of the world,
they dramatically increase the complexity of balancing supply and demand. In addition,
organizations with globally dispersed supply networks have greater exposure to cost variability
as well as the risk of frequent interruptions in their supply chains. These new realities make
relentless visibility and ever-increasing velocity essential capabilities as businesses attempt to
redefine themselves for the global marketplace.
Further, connecting customers across all channels to an integrated supply network requires
companies to have greater control over a growing list of business dynamics, which are
constantly getting harder to predict and manage.
Only by enhancing collaboration capabilities, both internally and externally, are businesses able
to monitor and measure all of the interconnected components of the value chain. A strong
collaboration platform is now imperative at the center of a Commerce in Motion framework in
order to share timely reporting of shifts in supply and demand and to respond quickly and
effectively by reconfiguring workflows.
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In order to align inventory management with raw materials, manufacturing operations,
transportation management, labor scheduling and customer-facing channels, companies need
the ability to more effectively connect, coordinate and collaborate.
A recent supply chain management executive report from IBM Global Business Services, titled
“New Rules for a New Decade,” pointed out that supply networks are still lagging other lines of
business in terms of sharing information. “At a time when the free flow of information is readily
available to most of the world through the Internet, supply chain managers still struggle with
getting accurate and timely information to run their global operations,” the IBM report stated.
“Effectively capturing, managing, and analyzing information – and collaborating with global
partners to make real-time decisions – are major concerns and require substantial effort.”
In order to keep actionable intelligence flowing through the value chain, companies now must
combine remote carriers, raw material suppliers, distributors and shippers into single networks.
Collaboration is essential in order to provide visibility and communication across the entire
supply network.
A single view of the network must be merged with increased communication capabilities in
order to enable companies to track and trace shipments, initiate stock transfers, plan staffing,
and more importantly, to react to unforeseen disruptions in the supply chain.
At a time when the free flow of information is readily available to most of the world through the Internet, supply chain managers still struggle with getting accurate and timely information to run their global operations.
– “New Rules for a New Decade” IBM Global Services Report
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Given the increased variability of today’s supply networks, collaboration has emerged
potentially as one of the most important pieces in a Commerce in Motion framework. In order
to drive process improvements, strengthen supplier relationship management capabilities and
increase controls of the interconnected components of the value chain, companies must
address the following new rules of engagement:
Market Volatility Alternatives: Increasing commodity prices, combined with an uncertain
global economy, have increased the focus on deeper collaboration with strategic partners and
on making alternative programs available to foster rapid adjustments when disruptions arise.
Cost Reduction Requirements: In order to offset rising fuel and commodity prices, companies
are forced to find any and every avenue possible to drive costs out of their supply chain.
Improving collaboration and control has proven to be a vital part of this process.
Risk Management: The interdependency companies now have on all suppliers – from raw
materials to distributors – requires them to actively monitor the financial health and business
operations of their partners, as well as their own. In addition to deeper supplier relationship
management, businesses also have to plan for the unplanned by building out a multi-source
network that can provide alternatives in the event that supplier failures, natural disasters or
political turmoil cause disruptions to any phase of the supply network.
PROCESS: COLLABORATING TO ADDRESS MARKET VOLATILITY
Operating in an unpredictable, fluid business environment is the new reality for businesses
today. Ten years ago, most supply networks were built around the model of manufacturing in a
handful of plants that then transported finished goods to regional distribution centers, who
fulfilled customer orders directly from those locations.
The model is infinitely more complex today, as the number of material suppliers and
manufacturers touching production cycles has grown exponentially, and the emergence of
cross-docking and other models has rewritten the rules of distribution.
In addition to supply networks becoming more dispersed, most organizations have had to
balance rising oil and commodity prices, as well as the effects of an uncertain economic
climate.
To address this added complexity, research from the IBM “New Rules for a New Decade”
report showed “visionary” companies are investing in business intelligence, performance
management and open collaboration tools to drive stability. “As supply chains become more
complex and interdependent, managers must find a way to offset growing complexity with
increased flexibility,” the New Rules report stated. By creating “virtual command centers” the
report described visionary organizations as able to “fuse real-time information, event
processing and advanced analytic technologies.”
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4
The report demonstrated that connectivity and control enables the end-to-end supply
network to plan and execute decisions collaboratively… “aggregating or segmenting
information for trend analysis, automating business rules and recommending actions based on
performance criteria.”
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Business intelligence and analytics
Performance management
Collaborative planning and execution
Interaction and visibility with partners
Real-time information with smart devices
Not applicable /Don’t anticipate having
6-10 years 3-5 years Next 2 years Already have
8% 5% 17% 41% 28%
11% 6% 17% 43% 23%
6% 5% 25% 37% 27%
6% 6% 29% 42% 17%
27% 17% 28% 16% 11%
Another approach companies are taking to address market volatility is by increasing their
visibility into all areas of the value chain. The March 2011 Aberdeen report on Supply Chain
Visibility Excellence found Best-in-Class companies are taking several strategic actions to
improve visibility, including:
• Streamlining processes for easier monitoring, enhanced usability or efficiency
• Improving internal cross-departmental visibility and integration into supply chain transactions
and costs
• Improving timeliness and accuracy of data exchange about supply chain transactions
• Increasing B2B connectivity/visibility into supplier-side processes.
The Aberdeen report also found that Best-in-Class companies are almost twice as likely as
Average and Laggard firms to have online trading partner collaboration and enablement.
Source: “New Rules for a New Decade” – IBM
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Best-in-Class companies are taking several strategic actions to improve visibility, including:
- Streamlining processes for easier monitoring, enhanced usability or efficiency
- Improving internal cross-departmental visibility and integration into supply chain transactions and costs
- Improving timeliness and accuracy of data exchange about supply chain transactions
- Increasing B2B connectivity/visibility into supplier-side processes
– Aberdeen Group
4
PROCESS: CONNECTING, COORDINATING & COLLABORATING TO ACHIEVE VISIBILITY & VELOCITY IN UNPREDICTABLE BUSINESS CLIMATES
As more companies expand to lower-cost sourcing partners across all corners of the world,
they dramatically increase the complexity of balancing supply and demand. In addition,
organizations with globally dispersed supply networks have greater exposure to cost variability
as well as the risk of frequent interruptions in their supply chains. These new realities make
relentless visibility and ever-increasing velocity essential capabilities as businesses attempt to
redefine themselves for the global marketplace.
Further, connecting customers across all channels to an integrated supply network requires
companies to have greater control over a growing list of business dynamics, which are
constantly getting harder to predict and manage.
Only by enhancing collaboration capabilities, both internally and externally, are businesses able
to monitor and measure all of the interconnected components of the value chain. A strong
collaboration platform is now imperative at the center of a Commerce in Motion framework in
order to share timely reporting of shifts in supply and demand and to respond quickly and
effectively by reconfiguring workflows.
Best-in-Class companies are almost twice
as likely as Average and Laggard firms to
have online trading partner collaboration
and enablement.
--2011 Supply Chain Visibility Excellence
Report, Aberdeen Group
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STRATEGIC ACTIONS FOR IMPROVING VISIBILITY
Best-in-Class Industry Average Laggard
Streamline processes for easier monitoring, enhanced usability, or efficiency
Improve internal cross-departmental visibility and integration into supply chain transactions and costs
Improve timeliness and accuracy of data exchange about supply chain transactions
Increase B2B connectivity / visibility into supplier-side processes with suppliers, trading
partners, managed service providers or 3PLs, carriers
31%
27%25%
33%45%46%
48%65%
60%
42%
64%
66%
Source: Aberdeen Group, July 2011
Percent of Respondents, n = 183
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Supply chain partners are finding innovative ways to make collaboration work for mutual benefit in previously unexplored ways…In fact, many companies credit their own survival largely to their working relationships with buyers and suppliers.
– Matthew Meyers, Nestlé Professor and Head of the Department of Marketing and Logistics at the University of Tennessee-Knoxville
PROCESS: CONTAINING COSTS VIA TIGHTER CONTROLS
Historically, collaboration has taken a back seat during challenging economic times, as
companies focus internally on driving efficiencies within their own organizations. However,
Matthew Myers, Nestlé Professor and head of the Department of Marketing and Logistics at
the University of Tennessee-Knoxville, pointed out in a recent column within Supply Chain
Review that the opposite trend has emerged during the recent economic downturn.
Myers stressed that the most significant efficiencies are being found across supply networks.
“First, most supply chains are finding enormous amounts of waste, which they are trimming
away to keep working margins. Second, supply chain partners are finding innovative ways to
make collaboration work for mutual benefit in previously unexplored ways…In fact, many
companies credit their own survival largely to their working relationships with buyers and
suppliers.”
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Myers added that the greatest benefits from supply chain collaboration are often the cost
savings uncovered from “routinized procedures” which are developed over time. “When
buyers and suppliers begin a relationship, their interactions often are fraught with inefficiencies
and expensive organizational idiosyncrasies, adding to the cost of doing business in year one.
In year two, however, procedures typically become more streamlined, kinks in IT are worked
through, and interpersonal relationships between organizations become more efficient.”
Progressive organizations are finding cost efficiencies through tighter collaboration and control
by reducing inventory and carrying costs and decreasing the labor costs from handling and
processing, as well as lower channel inefficiency costs.
The Aberdeen 2011 Supply Chain survey showed reducing costs and inefficiencies were among
the top pressures to improve visibility, with 29% of respondents citing the business mandate to
reduce supply chain execution costs, and 16% pointing to the need to reduce, proactively
allocate, or manage inventory at various stages in the supply chain.
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0% 10% 20% 30% 40% 50%
Growing global operations / complexity
Need to improve supply chain operational speed and / or accuracy
The business mandate to reduce supply chain execution costs
Increased stakeholder and customer demand for accuracy and timeliness of inbound / outbound
shipment event information
The need to reduce, proactively allocate, or manage inventory held at various stages in supply chain
Need to optimize the numbers of trading partners, suppliers, carriers, LSPs
44%
37%
29%
25%
16%
15%
Source: Aberdeen Group, February 2011
Percent of Respondents, n = 183
TOP PRESSURES TO IMPROVE SUPPLY CHAIN VISIBILITY
4. P
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PROCESS: INCREASING CONTROLS TO ADDRESS RISK MANAGEMENT
As companies have expanded their sourcing to areas where labor costs are lower, they have
also increased the risk of potential supply chain disruptions.
Given this new reality, visibility and insight into multiple sourcing options becomes essential to
avoid a breakdown in one factory from holding up an entire supply chain.
In their recent report on “Managing Supply Risk,” ChainLink Research pointed out that
organizations now need to manage “supplier risks” such as performance metrics and financial
health, as well as “supply risks” which include capacity constraints, disruptions, allocation
issues, etc. “The management of risk has taken on new dimensions of complexity and criticality,
demanding new approaches and methods for mitigating risks,” the report stated.
The management of risk has taken on
new dimensions of complexity and
criticality, demanding new approaches
and methods for mitigating risks,
– Managing Supply Chain Risks Report,
ChainLink Research
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The ChainLink Research report also emphasized that companies should collaborate with
suppliers to put disaster recovery/business continuity plans in place. “It is particularly
important during seasonal or end-of-quarter loaded timeframes when the majority of a
company’s products are shipped and profits made. If disaster happens during that window of
opportunity, it is vital to rapidly recover the critical processes and infrastructure or risk losing
huge amounts of revenue, profit, and shareholder value.”
The recent Accenture report titled “Strategic Supplier Relationship Management,” pointed out
that this increased volatility has forced many companies to collaborate more closely with
strategic partners. “Uncertainty has led these companies to get closer to their suppliers and
recognize interdependencies rather than maintain the adversarial relationships more prevalent
in times of plenty,” the Accenture report stated. “Working with strategic suppliers to share
information on market developments helps to more effectively anticipate and deal with
uncertainty.”
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Accenture’s report on “Achieving High Performance through Supply Chain Planning Mastery”
found supply chain “masters” are much more likely to collaborate with trading partners during
planning to address market volatility.
“Most companies have little visibility of what will affect them at either end of their supply
chain—on the demand side (the flow of customer orders) and on the supply side (the
operating condition of key suppliers). This limited visibility is due in large part to insufficient
levels of collaboration with suppliers and customers, which our survey found is common
among participating companies. Most organizations lack the information technology, linkage
of systems with suppliers and customers, and common measures that are essential for
effective collaboration.”
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Most companies have little visibility of what will affect them at either end of their supply chain—on the demand side (the flow of customer orders) and on the supply side (the operating condition of key suppliers)...
– Achieving High Performance through Supply Chain Planning Mastery, Accenture
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Nissan Toyota Honda
70
60
50
40
30
20
10
0
J F M A M J J
INDUSTRY NORM:60 DAYS
KEY TAKEAWAYSTURNING TRANSFORMATION INTO ADVANTAGE
More than six months after the devastating earthquake and tsunami that hit Japan in March
2011, supply chains in a variety of industries were still scrambling to increase production to
catch up with demand.
The automotive industry, which was probably hardest hit by the disaster, provided a clear view
of how deeply interconnected supply networks can present new efficiencies as well as
challenges. Considered to have some of the most advanced supply networks of any industry,
automotive companies seemingly had taken the steps necessary to reduce the risks disruptions
in any one region would have on global supply.
For example, Japanese car companies had moved to “near sourcing” where the majority of
cars being sold in North America were also manufactured at plants in that region. However,
because most of the electronic components used in those cars were produced at factories in
Japan, the disaster ended up having a long-term impact on inventory levels for the entire
industry.
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Source: Autodata
supply network, leading companies are able to make item substitutions and identify
alternatives throughout their sourcing networks.
The ability to monitor and measure all of the interconnected moving parts of the
end-to-end supply network is absolutely becoming a competitive necessity, as well a
competitive differentiator.
As these examples show, those firms with strong processes in place, supported by robust
collaboration platforms, will benefit from the strategic advantages of improved visibility
and will therefore have the ability to keep pace with the rapidly changing velocity of today’s
business environment.
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KEY TAKEAWAYS (CONTINUED)TURNING TRANSFORMATION INTO ADVANTAGE
Since many of those plants were damaged during the natural disaster, automotive companies
were forced to take orders and fill them once the required parts became available. Some
brands also had to delay the launch of new models and missed out on the opportunity to tap
pent-up demand for top-sellers.
The speed at which different vendors were able to respond to the disaster shows just how vital
collaboration and control are to succeeding in today’s fluid business climates.
The brands with deeper visibility and control over their supply networks were able to ramp up
production quicker and grab market share by promoting their favorable in-stock positions.
This scenario isn’t limited to the automotive industry. The same complexities exist for all
companies who source supplies, products, parts and raw materials from all over the world.
Businesses now have to collaborate closely with all of their partners to make sure their goods
stay in synchronized motion all the way from the manufacturing process to the delivery of
finished goods to a customer.
With defined processes and control over all of the levers in their supply network, agile
organizations are able minimize the risk of disruptions by “multi-sourcing” from different
geographies and suppliers. With deeper, real-time visibility and communication into their
CONCLUSION
As we have seen throughout this guide, for several years businesses have been operating in an
increasingly global marketplace, where sourcing and supply networks have become
significantly more complex and layered, less predictable, and more difficult to manage. We
have seen how ever-escalating customer expectations put relentless pressure on organizations
to adapt as new devices, platforms and channels constantly emerge.
Those organizations that emerge from this period as “winners” will be those companies that
respond to these transformational shifts with fluid, adaptive supply networks that are inherently
collaborative, that are efficient and yet resistant to disruption, that expect and anticipate
change as the “new normal,” and that connect with customers on their customers’ terms.
In short, long-term competitive advantage will be won by companies who adapt and
streamline their People, Processes, Products and brand Presence to keep Commerce in
Motion.
ABOUT REDPRAIRIE
RedPrairie Corporation, a global supply chain and retail technology provider, sponsors and
produces the CommerceInMotion program as part of its continuing Commerce Studies
initiative. RedPrairie’s goal is to help establish an ongoing, interactive, and thought-provoking
program built upon research, commentary, and content from thought leaders and industry
representatives around the globe to help organizations understand and implement operational
best practices that streamline the flow of goods, from raw materials to the consumer.
For more than 35 years, RedPrairie's best-of-breed supply chain, workforce, and all-channel
retail solutions have put commerce in motion for the world's leading companies. To learn more
about how RedPrairie solutions can optimize your inventory, improve employee productivity, or
increase sales, visit RedPrairie.com.
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