Y2010 & Ahead – value chain trends in emerging economy – Part 1
1. Customer side equations will take prominence over rest of value chain: This is one of the key shifts I have observed to be happening across the cross-section of the clients I have worked with in 2009. The customer focus seems to have taken a fundamental shift and I observe that organizations today are not just focusing only on standard pre-sales (SFA – lead generation, lead capture, lead qualification and conversion) and post-sales case management activities, but are also looking to find deeper insights into customer behavior, segmentation and develop deeper relationships. Customer service function, which traditionally used to be a peripheral function, is becoming more central (most of my customers are increasing spend in augmenting customer service capabilities and integrating customer service with backend functions) to organizations as part of the new customer acquisition and retention strategy.
2. Supply Chains will get more integrated with marketing and service chains: While supply chains will continue to become more organized and get more attention in the new ecosystem, my opinion is that the supply chain function itself in undergoing a fundamental shift and the boundaries between traditional planning and execution functions is almost becoming non-existent. Demand Planning has come a long way from just being statistical forecast driven numbers to consensus & collaboration based forecast to now also include market intelligence, competitor analysis and getting directly plugged into the upstream CRM function – lead generation and lead qualification. Similarly supply planning is no longer a batch oriented process where plan which gets created first, then shared and then modified and re-planned. Supply signals today are more received, processed in real time and corresponding supply decisions – new order, supply transfers / deployments happen much more frequently in some cases on hour- to-hour basis. Today the focus is more on improving the execution efficiencies and strengthening the visibility through better and real time connections with suppliers, channel and distribution partners and customers. There are clear signs of convergence of supply chains with the marketing & sales whether it’s forecast consensus or collaboration or determining the shipment plans from manufacturers to retailers (the shipment based on historical patterns are being replaced more by weekly store / shelf plans based on sell-through as well as marketing calendars). Similarly the post-sale customer service integration with supply chain function is also tightening – whether it pertains to quick replacement of a service part or cutting lead time on repair of a defective part. Some of my clients are clearly investing in these areas and focusing on improving service capabilities by restructuring supply chain function to strengthen in reverse logistics and post sale customer service operations.
3. Speed and responsiveness will be key drivers for spend on new initiatives: As the economic recovery sets in, I see clients focusing on improving the capability to sense and respond to the new growth opportunities and make investments in every area of value chain to enable speed and responsiveness. This includes augmenting lead management capabilities to also drive rapid growth through channel partners, to rapid product introduction leveraging design partners, to ensuring supply coverage of critical commodities, to enhancing capabilities to provide more customized offerings based on modular configuration, pricing and quoting ,to tighter and effective allocations management, smaller and frequent replenishment loads through distribution partners, enhancing customer service and leverage social media to control returns, recalls as well as find new opportunities to increase cross-sell and up-sell through customer service centers.
While I find the above trend to be shaping up in almost all sub-sectors of manufacturing, it’s especially more visible in the high-tech and consumer electronics sectors where rapid product introduction every 3-4 months means there is only one chance to plan & execute the entire plan including inventory levels, allocations, supplier / manufacturing orders. The “plan driven execution” strategy is giving way to “execution driven re-plan”. As Dan Gilmore of SC Digest describes this as “shortening of gross margin” cycle, the need for improving speed and responsiveness is no longer a differentiator but a necessity in today’s extremely competitive environment.
4. Cost will continue to play critical role in decision making: While the recovery is onset, focus on keeping costs low will not only continue but will take on new levels including looking for complete outsourced model for not only peripheral functions (payroll, accounting etc), but also for mainstream functions such as supply chain planning, customer service & support. Another key trend is sharpening focus on breaking the silos in multi-divisional / LOB structure and standardizing / automating processes and reduce duplication and management overheads. On-demand / pay-as-you-go barriers are seems to be getting lowered, however the skepticism around data security & privacy are still prevalent. Another dimension of cost prudence is reflected in the cost of (non-)compliance and maintaining reliable business partners (increase in supplier risk in the downturn has made most of the organizations re-look at their sourcing strategy and evaluate supplier viability for continued business). I have also observed another shift in most of my clients in terms of signing up for new initiatives. Most of these are short term initiatives with well defined ROI. Even large initiatives are being chunked up into several smaller ones with deployment not exceeding more than 8-9 months at a time (the average initiatives these days are now 2-3 months at max).
5. Asset Management will gain more prominence and will help in accelerating “green” initiatives: Asset management which has traditionally been more dormant or passive function seems to be gaining traction with more and more organizations focusing on leveraging assets (plant, fleet, machinery, buildings, office equipment) to not only support the ongoing operations, but also to change the mix to incorporate more “green” and reduced carbon footprint. The US federal initiatives and incentives on Smart-grid is already generating significant momentum from the industry bellwethers such as HP, GE and IBM. Quite a few of my clients are making investments in new projects ranging from understanding the existing carbon footprint to determine what / how they should invest in new assets and / or leverage the new assets to meet their new “green” goals. The journey in this direction has just started!
In the next part of this blog I will share some insights on technology / IT trends linked to the above themes.
As always, will be curious to know your thoughts and comments!