DSC Transformational Performance Goals

As was discussed in Chapter 1, successful firms must clearly define what they mean by digital transformation. If the supply chain sourcing function views digital transformation as automating supplier scorecards and manufacturing views it as using 3D printing while logistics views it as using IoT sensors to keep tabs on in transit inventory, then the supply chain leader will find it difficult to rally the firm around more integrated end-to-end goals. In our work with supply chain leaders, we have found it useful to clearly define digital transformation goals in terms of performance improvements, rather than technology deployment. The goals are:

  • • Fewer trade-offs between Costs and Customer Satisfaction
  • • New business models that enable revenue growth inaccessible for traditional practices
  • • Sustained competitive advantage gained through implementing “hard to replicate” integrated capabilities

These goals give supply chain leaders measuring sticks with which they can evaluate DSC segment designs. If a segment design does not deliver at least one of the targeted goals as a result, then that design should be reconsidered. As segment design actions and decisions are taken, these goals should always be evaluated to protect you from drifting away from them. The design actions can also be viewed as design constraints or principles, offering guardrails to decision-making.

With these goals in mind, let’s review the roadmap waypoints.

Step One - Who Are Your Customers?

Who are your customers? - What are their characteristics? - How can we meet/exceed customer expectations?

When meeting marketing professionals a renowned Wharton marketing professor who is considered a go-to thought leader for many global CMOs, has one simple question: “Who are your customers?” Being on the receiving end of this question may seem childish. “Of course, I know who my customers are” one might say. But then, after a somewhat uncomfortable moment or two, some sheepishly admit they may not have a finely tuned understanding of what is a central starting point for businesses. While marketers should have a good grasp of customer segments, it may not be the first thing to come to mind for supply chain leaders. Upon being handed a forecast or when called on to execute a manufacturing plan, supply chain leaders could overlook the notion of customer needs driving supply chain decisions. For DSC transformation, understanding your firm’s customer, consumer characteristics, demands, needs, and preferences by segment is the key to unlocking transformational performance. When interacting with your firm’s marketing team as you seek a better understanding of demand signals, be sure to zero in on specific customer segment characteristics. Do certain segments value quality or price? Speed and convenience or low cost? Individualized experiences or anonymity? Control over reordering safety stock or automatic replenishment? Undoubtedly, there is a long list of characteristics you should try to identify for your most critical current and prospective customers. The characteristics you uncover in your customer segments should be front and center as you design supply chains to meet or exceed their needs and expectations. A supply chain that is designed for low cost, for example, may frustrate a higher value segment customer that is counting the days until an order arrives. Customers who desire certain packaging and shipping requirements and are not configured to receive orders that are off-spec may become a flight risk if their needs continue to be unmet. These segments must be developed carefully and understood deeply for there are many other examples such as the ones above. If you are missing key insights about the segment, find a way to uncover them. Seeking data and information from internal as well as external sources is key. While you are at it, you can seek insights about your competitors’ segments that could very well be a critical source of information to help you design your own supply chains. As we will discuss in the next section, there are insights about segments which may not reside in the data available to us. Before fully designing a supply chain for a segment, you will need to find insights hidden from apparent view.

Step Two - Using Analytics to Uncover Segment Opportunities

What are The "Non-intuitive" Insights We Can Develop About Our Customers and Consumers?

The sophisticated use of analytics has become the hallmark of the high- performance digital enterprise and digital native companies have built their businesses around (Lund et al., 2013). Algorithms, platforms, and customer recommendation engines fuelled by real-time clicks are what we think of when we imagine a modern digital business whereby demand is often driven by machines rather than people. The recommendation engine is a clear example. Individual customer product recommendations generated by algorithms and data produce a high percentage of follow- on revenue increases. The specific recommendations generated may not always be completely intuitive, yet they often uncover a sales opportunity hidden from view. Similarly, marketing professionals and product innovators may use data analytics to discover nonintuitive insights about customers and consumers. For example, the buyer of a pair of signature athletic shoes may not be a young teenager, but a middle-aged mother. The tools and techniques of the marketer have focused on finding these prized business insights for many years. How often are such insights used by supply chain leaders to develop their segment designs?

The skill sets required to go beyond what is apparent in segment data can be daunting as we enter the realm of data architecture, data cleansing, alignment, predictive analytics, and forecasting algorithms. Artificial intelligence and machine learning are core processes used to drive e-commerce sales on company-owned websites, as well as social media platforms (Xu, 2014). What happens on retailor and distributor websites is much fuzzier for many firms. The point is that analytic muscle can be flexed in designing supply chain segments, as well as in more operational demand forecasts and fulfillment networks. Supply chain leaders can and should be involved in decisioning based on upstream business insights just as the more predominantly customer-facing functions of the firm are. If you lack access to this set of resources, the leadership move is to negotiate, trade, and influence your way into them. Leaving the data analytic value on the table is not a viable business option in the face of digital competition.

Armed with knowledge and insights about the key, most profitable and critical segments, and those we are targeting for growth, leaders are prepared to design their new digital supply chain segments.

 
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