When on-demand is the norm, can your supply chain respond?

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In the era of omni-channel shopping, supply chain capability is a key differentiator with the power to determine the ultimate shopper’s experience.

EY - Supply chain management must evolve

Yet traditional supply chains can’t meet 21st century service expectations. Companies know this: 81% of senior supply chain executives say their supply chain is not fit for purpose for omni-channel1.

The digital world has shattered two fundamental assumptions of the traditional supply chain: unknown demand and limited capacity. Connected shoppers, devices and objects reveal real-time demand, while a web of connected carriers, contractors, service providers and suppliers make capacity almost infinite.

To succeed in these new conditions, companies need to evolve their supply chains into demand response networks (DRNs) that are built to motivate, sense, modify and respond to demand in real time and in an agile, efficient and sustainable way.

 

EY infographic showing What shoppers expect today

What shoppers expect today

  • Anytime, anywhere shopping
  • Seamless shopping across all channels and devices
  • Personalized interactions and products
  • Transparent, holistic information about the product, including price
  • Free shipping and returns

The challenges of meeting consumer expectations

  • Controlling the cost to serve. EY - Controlling the cost to serve The cost of getting goods to omni-channel consumers on their terms is spiraling as demand increases, and many consumer goods manufacturers and retailers are experiencing continued margin erosion.
  • Fulfilling dynamically. EY - Fulfilling dynamicallyCompanies are struggling to address questions of where best to store inventory and how to order fulfillment from any channel to any location in the network.
  • Understanding big data. EY - Understanding big data Connected consumers, shoppers, equipment and devices all generate petabytes of data, which many companies are unable to fully interpret or exploit.

From a linear chain to a dynamic network

A DRN can help meet these challenges. It is a dynamic web of processes, technologies and companies that all work toward a common objective: satisfying demand. The DRN is capable of delivering superior levels of service in a segmented and customized way that would be impossible for a single company.

DRNs are driven by algorithms that embed transparent business rules to optimize the network’s resources. In such a network, every node is connected and intelligent, allowing the business to read fluctuations in demand and decide how to modify and respond to them with unique market activities.

A properly formulated and well-executed demand response strategy offers superior levels of service, enables service innovation and captures more value for all members of the network. All this happens at a cost to serve that can be managed easily, boosting profitable growth.

A dynamic web of companies, technologies and business processes that are interconnected and working toward a common objective of sustainable demand fulfilment.

EY - From a linear chain to a dynamic network

Evolving to a DRN: three essential tasks

  • 1. Harness real-time demand signals

    Businesses need to capture and interpret demand signals so they become meaningful to the organization. Teams in both operations and IT must lead the digital transformation, investing in sensors, beacons, listening campaigns and remote order entry.

    When demand signals are captured, the organization can decide what customized response to trigger in the rest of the network. Ultimately it can build and understand the “demand curve,” finding effective ways to modify demand behaviors and using the information to drive future decisions.

  • 2. Align operational and commercial functions

    Businesses must enable their commercial and supply chain functions to collaborate closely in order to understand demand and modify it before responding. This means going back to basics: planning and executing forecasts that integrate the demand and supply sides of the business to make sure the right products flow through the right channels to the right markets. 

    When companies integrate go-to-market commercial strategies with route-to-market supply chain strategies, they can work through demand volatility challenges and drive agility and effectiveness. They can also focus their investments for the short, medium and long term to generate profitable growth.

  • 3. Actively manage the capacity network for maximum profit-to-serve

    To handle the demands of emerging channels and markets, companies must plan and execute projects that integrate the demand side and supply side of their business. This will help tap those accounts and channels with the biggest opportunities at an optimal cost to serve, fueling profitable growth.

    Segmenting channels based on service requirements and determining commercial value are critical. Companies that can accurately calculate the service and cost implications of requests from channels and customers, as well as undertake joint value-creation initiatives, will witness a major impact on their bottom line.

Find out more on how we can help create a fit for future supply chain

  1. EY in collaboration with the Consumer Goods Forum, Re-engineering the supply chain for the omni-channel of tomorrow, February 2015.

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