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What Will Digitally Empowered Customers Mean to Your Supply Chain?

Posted By Jeff Moad, October 10, 2012 at 12:24 PM, in Category: The Adaptive Organization

There's little doubt that the Internet, social networks, and mobile technologies have endowed consumers and other customers with more information and higher expectations, altering the power dynamic between manufacturers and their customers. And, according to a recent survey of 1,350 supply chain executives, this rise of the digitally empowered customer will increase complexity, forcing manufacturers to cope with greater SKU variety, new fulfillment alternatives, the need for greater production flexibility, and other demands.

The newly released (Chief Supply Chain Officer Report 2012 ) study by SCM World found that digitally empowered customers will expect manufacturers to provide a wider range of product choices that allow them to select between paying a premium price for high-value products and services or accepting less convenience in return for a lower price. In fact, 61% of supply chain executives said digitally empowered customers will be more receptive to such increased choice. Only 14% said e-commerce- and mobile-savvy customers will be interested only in lower prices.

But the customer interest in such choice will mean increased product, production, and supply chain complexity, survey respondents predicted. Sixty-one percent of supply chain executives predicted their companies will be forced to cope with a larger or much larger assortment of SKUs and product/service bundles in order to meet customer expectations. Retailers, CPG, and high tech product providers were most concerned about this increasing complexity.

But there was little consensus among supply chain executives on the operational implications of this increased product complexity being brought about by digitally empowered customers. Most agreed that the trend will have implications for their companies' manufacturing functions. But they were uncertain what those implications would be. Some 35% predicted manufacturers would be required to develop mass customization manufacturing strategies. But 39% held the opposite view: that increasing complexity and product variety would force manufacturers to develop lowest-possible-cost mass manufacturing strategy.

Nor did supply chain executives agree about the implications for their companies' distribution networks. About 41% predicted larger, centralized distribution centers serving many channels. But 36% foresaw smaller, more locally distributed distribution points serving seperate channels.

One thing the supply chain executives did agree on however: A majority (56%) said the rise of digitally empowered customers will force their companies to develop direct-to-customer fulfillment channels. Another 23% predicted brand owners will be forced to rely on e-commerce retailers for fulfillment.

What's your view? Do you see the rise of digitally empowered customers increasing product variety and complexity? If so, what pressures will this place on manufacturing? The supply chain?

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit


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