Guest Blog by Matt Davis
Demand volatility is the number one risk for retailers and consumer product manufacturers with 83% stating that is a concern. Visibility to risk is the challenge for 2015.
SCM World’s 2014 CSCO study asked respondents about their companies’ visibility of potential risks across the retail and consumer value chain. Each respondent was asked to rate visibility within its operations and then further into the supply base and demand channel.
Layering visibility for each of these industries together provides insight into where companies in the consumer value chain have good visibility. As the figure below shows, manufacturers across the board say they have better visibility into their operations than retailers do for themselves and, with the exception of food and beverage, better visibility into the retail channel as well.
Visibility across the retail and consumer value chain (% of respondents with “good” visibility of potential risks at each level)
Some takeaways from the holistic view of the retail and consumer value chain:
- Apparel and consumer electronics manufacturers have the best visibility into the tier-1 supply base. Both of the industries are challenged with extremely fickle demand and short product lifecycles. Look here for benchmarking opportunities on using processes like integrating suppliers into sales and operations planning and tiered supplier relationship management to create better visibility.
- Retail is the premier source for consumer insight. There is much value to be gained for manufacturers when they can prove value in collaboration. But don’t overlook electronics manufacturers as the #2 best source for visibility to consumers.
- Visibility is a consistently discussed pain point for supply chain organizations and yet, according to this data, most executives feel like they have good visibility within their operations. The clear challenge for all layers of the consumer value chain is to find ways to improve external visibility.
A retail opportunity with the Internet of Things (IoT)
Cisco estimates that there will be 60 billion connected “things” in 2020. That is nearly 10 things for every human now on the planet. For the retail value chain, IoT is going to shake up demand and is already changing the purchase experience.
IoT is already permeating its way up and down the retail and consumer value chain. Existing IoT use cases include:
- Food and beverage supply. Coca-Cola Freestyle vending machines are using device-monitoring technology to provide early warning on supply replenishment. Each machine can monitor consumption of its supply and automatically send requests for service replenishment. Consumption patterns can be analyzed at the individual machine level, across a bank of machines, at store level, at regional level and at the net sum to better predict future demand as part of forecasting.
- Demand sensing and shaping. In 2014, Disney released a wearable device called the Magic Band to enhance customers’ experience at its parks. The band, which has an embedded RFID chip, can be used to access rides and your hotel room and as a means of payment throughout the park. Guests can log into a website, MyMagic+, to preload itineraries, store credit card information and even sync planned activities with other individuals and groups. In addition to better forecast accuracy and an improved personalized experience, Disney can welcome an additional 3,000 guests per day based on efficiencies related to Magic Band and MyMagic+.
- Connected retail displays. British retailer Marks & Spencer released a new room customization technology in its stores that enables consumers to sync their tablets to a showroom display. Using an app, a consumer can design his or her ideal room by loading dimensions and then selecting from furniture and color options. Choices update in real time on the showroom display and, when final selections are made, both the consumer and the store have itemized lists of planned purchases.
A digital path forward
Use these recommendations as a plan to enhance your visibility now and into 2020:
- Tap into existing good visibility. Visibility is a hot buzzword in supply chain and yet the great majority feel like they have good visibility internally. Use the data in the figure above as a guide to benchmarking opportunities for external visibility across the consumer value chain.
- Solve the process constraint. It might be time to revisit CPFR. While it fell out of favor between retailers and consumer products manufacturers, the same concept has re-emerged in the hi-tech value chain between device manufacturers and carriers. Advances in technology, analytics and a pointed focus on customer value have made CPFR more viable than it was 15 years ago.
- Declare your role in the Internet of Things. The majority (51%) in retail and consumer products already agrees that IoT will be both important and disruptive. Consider partnering with device manufacturing industries to see how they are using the data for improved visibility and analytics.
Matt Davis is Senior Vice President Research at SCM World