Comment: Reimagining the supply chain in an Amazon age

Years of working in the supply chain has firmly established my belief that customer satisfaction only really comes through the experience of buying a product, which in turn forges loyalty to the brand. Increasingly central to this is the way in which retail companies visualise a product to the personal environment of an individual customer – driving buying behaviour. Above all, however, the key differentiation in fulfilling the needs of today’s consumers lies in creating new needs and sensing them well in advance to be ahead of the game.

The retail industry currently finds itself in a state of constant and profound change. Retailers are grappling with the challenges of achieving profitable growth despite rapidly evolving consumer demand, an ever-changing supplier base, and multiple fulfilment channels. However, a much larger challenge for retailers is reimaging innovative ways of working and re-engineering existing operating models to be fit for the future.

There are four key drivers disrupting the way the retail industry engages with the consumer, and which are transforming how the supply chain must function to drive profitable growth. These are:

But what do these transformations entail? In what ways are retailers addressing these drivers at a supply chain level in order to future-proof their consumer experiences?

Self-learning algorithm-based demand sensing

With “Amazon-like” now an industry standard for customer experience, good service not only meets the immediate requirements of customers, but creates a need for something a customer might not even have been aware of until it was recommended. Looking to Amazon for proof of concept, this has opened up sales avenues and created a phenomenal growth trajectory.

However, achieving customer experience at this level requires an entire digital ecosystem in the background to make it happen. In this ecosystem data is the new currency, and retailers are investing in artificial intelligence (AI), machine learning and cognitive analytics for guided intelligence on consumers and to help drive the transformation of supply chain processes.

Leading retailers are moving away from the traditional way of forecast-led supply chains to self-learning algorithm-based demand sensing using real-time demand signals. Demand sensing provides a step change in both forecasting added value and reducing extreme error.

The use of real-time signals in demand prediction is a game changer, as it creates forecasts that are synchronised with current market conditions instead of relying on historical shipments and well-meaning but often biased input from sales and marketing. As a result, short-term forecast error is typically cut by around 20–30% compared to traditional demand planning.

Creating a single version of the truth

As channel boundaries fade away, consumers are able to exercise an increasing variety of purchase options such as ordering online with in-store pickup, accessing an endless inventory regardless of how, what and where they shop, and having the flexibility to return products across channels.

Although companies have invested heavily in omnichannel platforms to leverage enhanced customer interactions and drive increased revenue growth, however, they still need to go a stage further – converging views across channels to create a single view of the customer and a single version of the truth, which will enable them to respond promptly with a unified experience.

With many supply chains now having moved from being linear to something more complex and convoluted, organisations must collaborate and integrate suppliers and partners to improve time-to-market, fulfil customer demands promptly and arrive at this single version of the truth. In addition, this must be supported by an operating base that leverages a collaborative multi-enterprise model.

Another supply chain challenge that will further propagate with “on-demand” buying is last-mile delivery. And again, disruptive technology advancement will come to the rescue here with the Internet of Things (IoT), autonomous vehicles and uberisation all aiding the delivery of an enhanced consumer experience while reducing operating costs.

Leveraging blockchain

In a security conscious world, consumers and partners are becoming ever more vigilant of social ethics and environmental compliances that influence their association with a product and brand. In a networked supply chain ecosystem that can be overly complex, and hinder both visibility and transparency.

Blockchain, however, which is new to supply chain, could offer the answer to resolving challenges around visibility, transparency and accountability across any number of partners.

Compliance, for example, with stringent regulations around product quality, safety and environmental impact has created huge obligations for organisations. Blockchain can provide a comprehensive solution through the tracking and traceability of goods and services at each step, thereby facilitating trust. It is truly a next-generation tool for smart contracting.

Looking ahead

In the coming years, the entire concept of convenience, immediacy and satisfaction for the consumer will be transformed. To this end, reimaging the supply chain is critical for retailers who wish to thrive in the race to deliver improved customer value and profitable growth in the future.

By Raman Katyal, Capgemini’s head of supply chain business services