Many see Amazon as the Great Disruptor of the retail space. But the real disruptive forces have been the countless changes in consumer lifestyles. Case in point? The shift in consumer demand from brick-and-mortar to ecommerce.
The most successful businesses will have a practice of experimentation in place to sense, define, and then effectively respond to disruption.
Your supply chain can lead the way in doing just that by engaging in three practices:
- ✔ Collaboration
- ✔ Continuous improvement via the plan–do–check–adjust (PDCA) cycle
- ✔ Cultivating a spirit of experimentation
But before we get into these practices, let’s take a look at what supply chain disruption is and the key factors contributing to disruption.
What is supply chain disruption?
Disruption is at once destructive and creative. It displaces an existing market or industry to produce something new, worthwhile, and more efficient.
Historically, supply chain disruption is defined as event-based: a breakdown occurs, and the reaction to the event is the recovery of the supply chain. Changes in consumer technology—such as the rise of ecommerce—have added a new dimension to that definition.
Today, supply chain disruption is the repurposing and realigning of existing capabilities to support changing consumer lifestyle demands. The waves of disruption in the market are driven by supply chain participants that recognize and develop features and functionality designed to meet customer expectations, partner needs, and financial requirements.
Next we’ll look at the factors driving disruption and the features and functionality produced as a result.
Key factors disrupting the extended supply chain
As mentioned above, shifting demands from all corners of the market—ranging from product and consumer services to supply chain partners—contribute to supply chain disruption.
Let’s look more closely at the key factors:
New consumer lifestyle technology
Consumers are intimately aware of today’s newest and most ubiquitous technologies. As technology has advanced, consumers have fully embraced the new tech, weaving cloud, mobile, social, big data, and Internet of Things (IoT) technologies into their lives to create a new “social economy.”
Consumers now have a hands-on role in reshaping the market as a result of this highly integrated technology. Retailers of all types are now forced to meet fluid customer expectations or else lose out to more innovative competitors.
Shared services and point solution providers
Point solution providers offer products that address a single issue in a supply chain. They can provide the experimentation tools and services that help define consumer needs before consumers recognize them themselves. This makes point solution providers an integral part of any disruption-sensing culture of experimentation.
Businesses that work with point solution providers can experiment with new capabilities at lower risk to the overall supply chain due to the smaller investment required. Solid partnerships with these providers have the potential to transform the retail marketplace—and early adopters will reap the benefits.
Delivery and shipping expectations
Delivery disruption is driven both by rapidly changing customer expectations, and by the simplification of the consumer experience—rather than the retailer experience. Here’s how some major players are responding to a shifting landscape:
✔ Amazon: After setting new delivery expectations, Amazon is now developing new imaginative delivery services like unattended in-house delivery or delivery to a consumer’s car trunk.
✔ Uber: You can contract a “ride” for your purchase to the location of your choice for food purchases. In addition, Uber is shaking up the less than truckload (LTL) shipping market with contract delivery services.
✔ UPS and FedEx: Parcel delivery services have begun implementing scheduled delivery and delivery to locker locations where the consumer can pick up at their convenience.
✔ Parcel carriers: Last mile delivery is buffeted with the same demands as parcel deliveries. This demand is being met through technology to track and schedule deliveries.
Subscription purchasing is changing the retail market by eliminating the need to overcome consumer hesitations over match and style. Businesses reap benefits by delivering products on a schedule: it’s the 21st century Fruit of the Month club, fitting seamlessly into consumer lifestyles.
The retail disruption here is, yet again, the extension of an existing offering (think Uber contracting food deliveries via rideshare drivers).
The most radical case of subscription purchasing disruption would result in a business offering a concierge-style menu of available products that customers choose from as the need arises. The products offered would dovetail with whatever has been made available via automation and delivery scheduling.
3 best practices for driving supply chain disruption
Businesses that ignore the following best practices, to be blunt, risk their existence.
Like sharks, businesses must remain in motion to survive, continuously reacting and responding to changing market conditions and practices. The level and speed of market disruption means the market will never “settle” long enough for a business to catch up. Falling behind makes recovery near impossible, and lagging businesses will eventually wither and die.
To avoid this fate, you need to implement the following practices:
Spirit of experimentation
Change in consumer behavior yields the demand for new goods and services. The drive to experiment reveals this untapped demand, and the disruption takes root once new goods and services are on offer.
The best change agents in the extended supply chain implement new features and functionality (like the four factors mentioned above) before the consumer recognizes the need.
This spirit of experimentation can be difficult to cultivate because it requires two things:
- A long term view anchored by patience
- A willingness by leadership to invest without a high degree of certainty in the success of the experiments
Encouragement to experiment and acceptance of failure are two key concepts leadership should focus on in order to effectively react to and further support disruption.
These concepts can best be developed by creating a disruption task force—a team that meets monthly to brainstorm on future focused ideas that are derived through atypical means, such as social outlets like Facebook or Twitter trends. This team could even manage a Facebook page that encourages customer interaction and direct suggestions.
Amazon’s culture of experimentation helps the ecommerce giant meet—and seemingly create—new customer demands. The greatest result of this spirit of experimentation is Amazon Prime shipping, which was so impactful that it pushed the idea of ecommerce squarely into the mainstream.
Another great example is subscription purchasing for consumable necessities like pet food, laundry detergent, and cleaning supplies. When combined with Prime shipping, Amazon works to support consumer lifestyle demands that were not previously recognized.
As consumer purchasing habits change, retail businesses must develop an omnichannel retail vertical and practice that reacts and drives the disruption. The supply chain is the engine that supports this vertical channel. Amazon couldn’t just provide an omnichannel shopping experience—it needed a supply chain that could drive its offerings.
Supply chain partners develop a wealth of collaborative experience simply by participating in the extended supply chain. Growing a robust extended supply chain is no easy task, and partners should turn to each other to better support disruption.
Collaboration tools have grown up with Internet technology to allow near real-time interaction. They range from shared load planning capabilities to collaborative internet portals that integrate with partners and share updates and forecasts. Some of the most useful collaboration tools are based on Google Docs or Microsoft Sharepoint, which allow users to collaborate directly within documents and on workflow processes.
These tools can be combined with and augmented by other big data tools to help sense and respond to individual disrupting events and larger, more permanent disruptive forces.
Communication and collaboration serve as the foundation for a successful continuous improvement process.
By following Lean Principles, you can evaluate your workflow and surface steps—and even whole procedures—that provide no value. Once you’ve evaluated your workflow, PDCA continuous improvement practices provide a framework for implementing the refinements you’ve identified.
The combination of Lean Principles and PDCA practices provides the basis for continuous improvement: together, they help you sense, define, and respond to disruption. And the glue that connects these procedures is found in the collaboration tools described above.
How to survive market disruption
The great recession tested and then fortified the collaborative capabilities of the extended supply chain. The retail marketplace can use the tips and information in this piece as a roadmap to guide their own survival reaction.
In fact, the one common element of any market disruption is that the extended supply chain touches all cases.
Supply chain partners have spent years honing their ability to quickly sense and respond to changes in the supply chain—and they have begun to collaborate on solution delivery in cooperation with new point solution providers.
As you extend your supply chain by incorporating more partners (or by deepening relationships with existing partners), focus on visibility and communication in order to best support supply chain disruption. The most successful businesses experiment radically and then humbly learn from failures, from competitors, and—most importantly—from consumers, as they ride the waves of disruption.
Tom Brouillette is a leader in supply chain management with a major third-party logistics provider in the US. He has spent a distinguished 25 years delivering strategic enterprise solutions in the supply chain, ecommerce, CRM, B2B, and B2C spaces for some of the largest retailers.
This post represents the author’s individual opinion and does not necessarily represent the research position of Software Advice.