Industry Insight

As business-to-consumer companies continue to make customer satisfaction their top priority, their business-to-business suppliers are following suit. Increasingly sensitized to the need to keep their business customers happy, as well as help their business partners meet consumer demands, suppliers are focusing on becoming demand-driven businesses. That’s according to IDC Insight’s 2014 Supply Chain Survey, which polled retailers and manufacturers on their supply chain practices. The survey found that customer centricity was the second highest priority for both manufacturers and retail suppliers, beat out only by cost reduction, a perennial favorite. 

How are suppliers becoming more demand-driven? According to Simon Ellis, IDC’s practice director for IDC Manufacturing Insights, and Leslie Hand, vice president of IDC Retail Insights, in their remarks during a webinar on Sept. 10, suppliers are reacting to this need in four ways: 

q Making better use of the large amounts of data that pass through their IT systems – They’re investing in analytics tools to leverage their data by identifying customer buying behaviors, as well as spotting inefficiencies in their internal processes. These B2B companies are also beginning to collaborate more with partner companies to fulfill orders at the faster speeds, lower prices and with the wider array of product features that customers want.

q Improving their product quality and brand image – The 2014 Supply Chain Survey asked whether people considered their companies primarily cost-focused, service-focused or product-focused. The smallest segment, at 30.3 percent, was product-focused, compared to 36.2 percent service-focused and 33.6 percent cost-focused. Yet the product-focused group grew by 4.8 percent over 2012, suggesting more of them are focused on improving their products’ quality, depth of features and uniqueness in the market. 

If a company is competing solely on price, it needs a different business model. “Create a brand that isn’t just about price but something unique, something the consumer wants to come back for over and over,” Hand said. 

Greater collaboration with supply chain partners –  Retailers, manufacturers and distributors can reduce their costs and fulfillment times by agreeing to ship products to each others’ customers when needed, whether it’s due to depleted inventory or to achieve a faster shipping speed. With everyone needing a “just-in-time” level of responsiveness – but not the overhead of maintaining thousands of warehouses with bulging inventories – collaborative supply chains are the most likely strategies for many businesses.

“We’re moving towards a more converged format,” said Hand, noting that that will make the “endless aisle” concept possible – with seemingly limitless choices of products and product features – provided by a network of suppliers with ready-to-ship goods. 

Another big benefit is a greater ability to react to unexpected events. The last few years of hurricanes, earthquakes, Avian flu and other unforeseen disasters have heightened business sensitivities to the real possibility of doing business without sufficient workers, transportation, fuel, electricity or other resources. Collaboration among manufacturers, retailers and other partners can help all of them better survive such an event. Likewise, retailers will need to leverage their stores to fulfill online orders from customers in their area, thus speeding delivery time. 

q Migrating to the cloud for their supply chain platform – To accomplish this degree of networked collaboration, partner companies will need a flexible, always-on, remotely accessible and easily adaptable cloud-based platform. Without one, they can’t possibly achieve the visibility that all partners will need into product information, shipping status, order details and other critical information. 

That seems to be what suppliers are planning to do. IDC’s survey shows that modernizing supply chain infrastructure is a top priority for suppliers, many of whom also intend to implement global trade management, B2B networks and omnichannel distributed order orchestration.   

As Ellis envisions it, the future supply chain is likely to be a cloud-based network of partners – small warehouses, shipping facilities, retail stores and manufacturing outlets – all serving as inventory nodes. “The future of the supply chain is the micro-warehouse,” he said. “And it already exists in the form of a retail store.”  

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