A round up of the concerns and considerations surrounding the significant shift towards customer-centric supply chains, as discussed at The Manufacturer’s latest Manufacturing Directors’ Forum Dinner, sponsored by GT Nexus.
The manufacturing landscape is undergoing a fundamental change. Industry 4.0 is bringing together key processes and digital innovation that are revolutionising the way businesses design, manufacture, market, and service products. As this paradigm shift narrows the gap between mass-production and mass-customisation, the notion that ‘the customer is always right’ has never been more applicable.
Mick Jones, former Supply Chain Executive at Lenovo and guest speaker, called the impact on the supply chain a “tsunami of change” that will alter the way we approach business in the future.
Jones identified three key areas where this “digital disruption” is happening: cultural, social and geo-political. According to Jones, these are changes which subtly pervade the landscape of UK industry, but perhaps aren’t prioritised in manufacturers’ business strategy.
The creation of a ‘consumer democracy’ has pushed businesses, particularly manufacturers to become more customer centric, responding to fluctuating customer demands and adjusting processes accordingly.
This consumer democracy is what has driven the omni-channel business model. Typically thought of as being a retail concept, increasingly, omni-channel is moving back upstream to manufacturers.
Business giants the likes of Facebook, Amazon, Google, Alibaba and e-Bay have created an environment where speed is the key. What do you want? When do you want it? How would you like it? Businesses can now respond to such questions with increased efficiency and accuracy thanks to modern digital technology, delivering high-quality, customised goods to customers across the world.
Jones continued by noting that the data contained within supply chains has almost become as significant as the products being supplied, with the analysis of said data raising in both importance and value.
The links between supply and demand are becoming more difficult to manage. Supply has become more volatile, with businesses sourcing components across a wider scope of suppliers, spread across vast geographies, producing many different product versions to appease consumer demand for personalisation.
At the same time, demand has become more variable and difficult to predict.
The supply chain is forced to take up the slack of being able to deal with the differential. It has to become more flexible, agile (without increasing cost), resilient to risk, and reactive. In order to successfully achieve these requirements, we need to start thinking of supply chains as networks across the entire value chain.
Jones referred to Lenovo as the “biggest business secret on earth”. Representing the world’s largest global PC manufacturer, the company annually produces 50 million PCs; 15 million tablets; 60 million phones; 40 million accessories, and 15 million spare parts.
Formed by the acquisition of IBM’s personal computer business by Chinese company, Legend, little more than a decade ago, many said the venture would fail. Today, Lenovo stands atop a hugely intense and competitive market, and forms a major component of one of the most complex supply chain operations in the world.
“The biggest part of my role was managing everything within the supply chain; from inbound to manufacturing to outbound, all the returns and process. Lenovo insources 85% of its manufacturing operation, while the rest of the industry – the likes of HP and Dell – outsource manufacturing. We do this because of cost, quality and innovation,” Jones said.
This change isn’t just happening within electronics, it’s affecting sectors across the board – from automotive to food and beverage. Hiba el-Mohbi from Kelloggs highlighted granola as a product with the potential to be highly customised. “You go on-line to choose your granola. Do you want chilli? Do you want chocolate? What do you want the label of the box to say? And you get that shipped to you,” she said.
Steve Whittle from Rolls-Royce interjected to explain the change in customer habits. “People now properly manage their shop. I have these goods in my shopping baskets from this store, but these goods I will have to cross town to pick up. This structured shop, based on the product you’re looking to pick up is pervasive across everything.”
GT Nexus is confident that technology and, in particular, cloud-based collaboration across the supply chain will facilitate a more agile and flexible response to this new market demand. “We have a commerce cloud, a global network, a community, across different industries collaborating with all their supply chain and trading partners.” said Claire Milner of GT Nexus
“Most of your supply chain these days is out of your control. How do you get a single view of information on your supply chain to start making decisions and to answer those primary questions of when will it arrive, where will it arrive and when do I get paid?”