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5 Supply Chain And Digital Economy Myths Debunked

Richard Howells

The digital economy is presenting businesses with myriad opportunities. But to capitalize on these prospects, companies must be willing to adapt, particularly in regard to how they manage their existing supply chain operations.

While people are finally beginning to recognize the potential benefits that come with the digital economy, too few companies are digitizing their operations in an effort to thrive in this dynamic environment. In fact, according to SAP research, 71% of organizations consider their digital maturity levels to be in the “early” or “developing” stages.

Given that fact, it’s entirely possible that people still don’t fully grasp the importance of transforming their existing business models and processes to succeed in today’s digital economy.

Below are five statements related to the digital economy and supply chain that many people believe to be true – and an explanation on why they are, indeed, false.

Myth #1: Your existing supply chain is sufficient to help you thrive in the digital economy

“To win in the digital economy,” says Hans Thalbauer, senior vice president of extended supply chain at SAP, “we have to reimagine how we design, plan, make, deliver, and operate our products and assets.”

Companies must put themselves in a position to develop environments in which they can access and manage data and processes in real time. This requires transforming your traditional supply chain into a digitized, extended supply chain, one that enables your business to be more connected, intelligent, responsive, and predictive.

By reimagining your existing supply chain, you can deliver superior customer experiences and increase revenue. In fact, companies that adapt to the digital world are 26% more profitable than their industry peers, according to MIT Sloan research.

Myth #2: Customers aren’t willing to pay for better experiences

Today’s customers crave a new type of experience. Omnichannel solutions can provide this, enabling buyers to discover a product online, research it on a mobile device, and purchase it in a retail store.

Given that these capabilities exist, your company needs to ensure it can deliver on the omnichannel fulfillment promise. To achieve this, the different channels must be able to support the development and/or delivery of goods, based on each individual customer’s preferences.

Customers are so eager for a better purchasing experience, 86% of them are willing to pay more money to get it, according to a 2014 American Express and Ebiquity survey.

By reimagining your existing supply chain and transforming it into a digitized, extended supply chain, you can gain the real-time insight you need to enable customer-centric processes and truly satisfy your buyers.

Myth #3: Customers love mass-produced products

Each and every one of your customers is wholly unique. So it’s no surprise that buyers are increasingly seeking out products that are customized to their individual preferences and needs.

Forty-two percent of consumers are interested in technology to customize and personalize products, and 19% are willing to pay a 10% price premium to individualize products, according to a Deloitte research study.

This growing demand for product customization is challenging companies considerably. Traditionally, supply chain organizations merely had to manufacture and/or ship full pallets of identical goods. Now, they’re tasked with delivering a lot size of one.

To support your customers’ growing desire for individualized products, your business must transform how it designs, produces, and delivers goods and services. It must embrace the latest technologies, harnessing the power of the Internet of Things (IoT), 3D printing, and other cutting-edge innovations.

By adopting a digital supply chain and smart manufacturing techniques, you can enable greater connectivity, responsiveness, agility, and reliability, empowering you to better meet your customers’ demands for individualized products.

Myth #4: Businesses can’t benefit from the sharing economy

The sharing economy revolves around the sharing of human and physical resources. Generally, consumers love it. Businesses, on the other hand, view it with great skepticism, wondering how it can actually benefit their companies.

At the heart of the sharing economy lies connectivity. When everything is connected, you can collaborate like never before.

Through the sharing economy, you can better link your organization with manufacturers, logistics service providers, and other partners. This larger business network enables companies to capitalize on their partners’ resources, expand their reach, innovate, and improve customer service.

Taking full advantage of a connected enterprise of companies requires putting an extended supply chain at the core of your operations. This allows you to have greater visibility into various customer, supplier, manufacturer, and other insights, ensuring you can improve decision making and respond to in-the-moment changes and demands.

Networked businesses, according to McKinsey & Company, are 50% more likely than their peers to be market leaders.

Myth #5: You simply cannot overcome resource scarcity

Resources are declining globally. Raw materials such as water, minerals, oil, and gas are becoming increasingly difficult to obtain. Human talent is also growing scarcer, as employees lack the requisite skills to manage the data that comes with running digitized, extended supply chains.

Today’s organizations need to begin building sustainability into their business processes. From a talent perspective, companies can achieve this a number of ways, from deploying a contingent labor force to replacing certain roles with robotics. To combat resource scarcity, manufacturers must start doing more with less, leveraging alternate sources of energy and reused or recycled materials.

Finally, another key to ensuring your organization is run in a sustainable manner is to emphasize safety and risk management. Protecting your staff from harm and your resources from damage go hand in hand with your company’s long-term success.

The truth about prospering in today’s complex digital economy

Now that you’ve read a few myths about the digital economy and supply chain, here’s an undeniable truth: Digital transformation is the only tried-and-true way to survive and thrive in today’s dynamic new environment.

Whether providing a superior customer experience, delivering the individualized products your buyers yearn for, or overcoming resource scarcity, only digitization can ensure you possess the capabilities necessary to realize your greatest business goals.

Download this free white paper, Digitizing the Extended Supply Chain, to further explore how your enterprise can combat complexity and accelerate growth in today’s complex digital economy.

This blog was originally published on SCW Magazine

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About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

Consumer-Driven Digital Enterprise: The Digital Future Of Consumer Products

Jim Cook

Across industries, there’s a lot of talk about how digital is rewriting the rules of engagement.

We are shown examples of how digital disruption is impacting almost every aspect of businesses – from reinventing business models to transforming business processes. Re-imagining a business platform is almost a requirement in today’s consumer-led and data-driven economy. (You know the businesses that are quoted in every article on digital.)

A key question here, though, is: whether the consumer products industry is indeed facing digital disruption, or does it really need deeper digital innovation? Disruption turns an industry on its head by offering consumers something that previously did not exist, while innovation enhances an existing value proposition – making it better, faster, or cheaper.

It is important to distinguish between the two, because hype often causes businesses to overlook the true value of digital transformation. Companies may presume such radical changes have nothing to do with them, especially if they are already in a dominant market position. So while digital is dramatically changing industries such as retail and healthcare, the disruption in the consumer product industry may not be as severe – not yet anyway. Instead, what consumer products businesses should focus on is how they can transform digitally to gain the capacity to build and grow “live brands.” This is preparation and not protectionism.

Create direct customer experiences: Secure the dominant market position

The digital age has fundamentally shifted customer and consumer expectations. Consumers increasingly value outcomes over products. To build ongoing engagement and loyalty, consumer products companies need to sense and engage consumers and customers in the moment, i.e. build “live brands” by seamlessly delivering highly personalized experiences – anytime, anywhere.

This ability to create direct customer experiences helps consumer products companies create a sharper competitive edge to secure dominant market positions. Leading consumer products companies know this well.

Red Bull sets a fine example in creating direct customer experiences to protect and strengthen its brand. Today, it has moved beyond a beverage company into a content media company spanning web, social, film, print, music, and TV – creating brand experiences of exhilaration and adventure. Red Bull collects data from every touch point that it has with the consumer, building an enhanced profile of every individual so that it can respond with products that consumers desire – whenever and how they want them.

Procter & Gamble recently launched an online, direct-to-consumer subscription business for its Tide Pods (its highest-priced laundry detergent). The service (currently only available in Atlanta), branded Tide On Demand, offers free shipping of Tide Pods at regular intervals. P&G has also been testing its delivery laundry service – Tide Spin – in Chicago. While the direct-to-consumer services may not form a bulk of its revenue, they allow P&G to quickly build a live understanding of its customers, their preferences and habits, and then hone in on these insights to create new offerings that customers want.

Build a real-time supply chain: Support lasting customer loyalty

As consumer products companies move towards sensing and engaging customers in the moment, they also need to ensure a fast and profitable response to dynamic demand.

This necessitates connecting customer insights that brand owners have collated and analyzed with supply chain insights to accelerate time to market. Ultimately, it is about transforming previously linear supply chains into customer-centric demand networks – where demand information is captured through new signals from various sources (such as retailers, wholesalers, sites like Amazon, directly from customers, or the Internet of Things) and fulfilled through the orchestration of a network of internal and external partners.

With that, consumer product companies can start getting answers to questions such as:

  • What are my short-, mid-, and long-term views of expected demand across channels?
  • How can I combine supply chain planning with strategic, financial, sales, and operational goals?
  • How can I extend planning by collaborating with customers, partners, and suppliers?
  • How can the company translate the plan into actionable targets for fulfillment systems?

All these should go full circle to help make manufacturing more responsive, optimizing capacity to help ensure availability of finished goods produced just-in-time to meet demand, thereby also lowering inventory costs.

Consumer products companies need to consider how they can create the digital future today. We invite you to learn more about digital transformation for the consumer products industry, where you will get access to valuable resources including whitepapers and customer case studies.

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Jim Cook

About Jim Cook

Jim Cook is the Industry Advisor for consumer industries in South East Asia, with over 20 years’ experience of IT and business consulting. He has held various roles from solution architect, project and program management, business development as well as managing an SAP partner organisation. Jim is passionate about transformation within consumer driven organisations. Jim is particular interested in customer engagement solutions and the value that can be achieved from end to end SAP deployments.

Predictive Procurement Gets Real

Marcell Vollmer

The physical and digital worlds have officially collided. In the old days, we’d have the morning paper delivered to our doorsteps and read it on the way to work while sipping coffee we made at home. Today, the news stories we care about are automatically delivered to our mobile devices, and we scan them while enjoying the beverage that was ready and waiting for us at the local coffee shop after we ordered it via mobile app. In years past, we attended events after work to expand our professional networks. Now we link to our peers — and their peers — around the world, online in real time.

Connecting the dots

As a society, we are more connected than ever. Thanks to the Internet of Things (IoT), we can see and be seen like never before. We can learn about the future and use this information to shape it to our advantage.

There are plenty of examples of this in the consumer world—for example, refrigerators that predict when you’re about to run out of milk and automatically order and have it delivered before you even notice, and devices that know you’re on your way home and turn on the lights before you get there.

It’s happening in procurement as well, and transforming the function as we know it. Procurement is complex and involves lots of moving parts, from sourcing and manufacturing to transportation and logistics. It’s an intricate web of systems, processes, and relationships that must be coordinated and managed, both internally and externally, to ensure that goods and services get delivered on budget and on time.

Predicting the future

Over the years, procurement has made great strides, leveraging disruptive forces such as business networks and cloud technologies to evolve from a tactical manual process to a strategic digital one. Paper orders and invoices are all but dead. Electronic payments are taking hold. Buyers and sellers are meeting and collaborating online.

Yet the transformation has only begun. Aided by Big Data and the IoT, procurement is becoming smarter and more predictive than ever.

Data is the lifeblood of any organization. From structured information on production, marketing, sales, HR, finance, facilities, and operations to transaction-level data on suppliers, customers, and partners, it tells the story of a business. For years, companies have been mining data simply to figure out what it all means—essentially, to learn from the past and perform better in the present.

Now they are leveraging advances in technology such as in-memory computing, real-time analytics, and the IoT to create assumptions about what will happen in the future and take actions that drive optimal outcomes.

Eliminating risk

Supply chains are more global than ever, and as a result, fraught with more risk. Many companies are turning to the IoT to anticipate and mitigate this risk before it disrupts their business. Consider the mining industry. Trucks are the critical link to transport raw materials to either further process or sell them on the market. If one of these trucks stands still due to maintenance issues, losses to the company could run into the millions, as they only can sell what they get out of a mine and deliver.

With the help of sensors, companies can continually monitor their fleets and receive notifications on upcoming maintenance needs to prevent breakdowns before they occur. Critical components such as engines and braking systems, for example, can be connected by small IoT sensors that monitor their temperature, hydraulic pressure, container angle, position, and vibrations. The sensors transmit all data to a live dashboard, and if a key parameter such as temperature changes, it will trigger an alert for the radiator. This information is then automatically routed to the procurement system, where a replacement order for radiator hose and radiator cleaner is automatically processed in line with the company’s procedures and policies. Related maintenance service is scheduled with a qualified technician who will arrive as soon as the material arrives and perform the work before a fatal defect of the radiator causes the truck to literally stop in its tracks. Risk avoided.

Delivering value

Supply chains are no doubt complex — and the data within them even more so. But data is the new global currency. And the IoT holds the key to unlocking its value. With the IoT, companies can not only spot patterns and trends in their business but anticipate risk and changes and adapt their businesses to gain advantage.

For more on how data analysis is transforming business, see Living The Live Supply Chain: Why You Need Data Scientists.

The article originally appeared in Spend Matters. It is republished by permission.

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Marcell Vollmer

About Marcell Vollmer

Marcell Vollmer is the Chief Digital Officer for SAP Ariba (SAP). He is responsible for helping customers digitalize their supply chain. Prior to this role, Marcell was the Chief Operating Officer for SAP Ariba, enabling the company to setup a startup within the larger SAP business. He was also the Chief Procurement Officer at SAP SE, where he transformed the global procurement organization towards a strategic, end-to-end driven organization, which runs SAP Ariba and SAP Fieldglass solutions, as well as Concur technologies in the cloud. Marcell has more than 20 years of experience in working in international companies, starting with DHL where he delivered multiple supply chain optimization projects.

How Emotionally Aware Computing Can Bring Happiness to Your Organization

Christopher Koch


Do you feel me?

Just as once-novel voice recognition technology is now a ubiquitous part of human–machine relationships, so too could mood recognition technology (aka “affective computing”) soon pervade digital interactions.

Through the application of machine learning, Big Data inputs, image recognition, sensors, and in some cases robotics, artificially intelligent systems hunt for affective clues: widened eyes, quickened speech, and crossed arms, as well as heart rate or skin changes.




Emotions are big business

The global affective computing market is estimated to grow from just over US$9.3 billion a year in 2015 to more than $42.5 billion by 2020.

Source: “Affective Computing Market 2015 – Technology, Software, Hardware, Vertical, & Regional Forecasts to 2020 for the $42 Billion Industry” (Research and Markets, 2015)

Customer experience is the sweet spot

Forrester found that emotion was the number-one factor in determining customer loyalty in 17 out of the 18 industries it surveyed – far more important than the ease or effectiveness of customers’ interactions with a company.


Source: “You Can’t Afford to Overlook Your Customers’ Emotional Experience” (Forrester, 2015)


Humana gets an emotional clue

Source: “Artificial Intelligence Helps Humana Avoid Call Center Meltdowns” (The Wall Street Journal, October 27, 2016)

Insurer Humana uses artificial intelligence software that can detect conversational cues to guide call-center workers through difficult customer calls. The system recognizes that a steady rise in the pitch of a customer’s voice or instances of agent and customer talking over one another are causes for concern.

The system has led to hard results: Humana says it has seen an 28% improvement in customer satisfaction, a 63% improvement in agent engagement, and a 6% improvement in first-contact resolution.


Spread happiness across the organization

Source: “Happiness and Productivity” (University of Warwick, February 10, 2014)

Employers could monitor employee moods to make organizational adjustments that increase productivity, effectiveness, and satisfaction. Happy employees are around 12% more productive.




Walking on emotional eggshells

Whether customers and employees will be comfortable having their emotions logged and broadcast by companies is an open question. Customers may find some uses of affective computing creepy or, worse, predatory. Be sure to get their permission.


Other limiting factors

The availability of the data required to infer a person’s emotional state is still limited. Further, it can be difficult to capture all the physical cues that may be relevant to an interaction, such as facial expression, tone of voice, or posture.



Get a head start


Discover the data

Companies should determine what inferences about mental states they want the system to make and how accurately those inferences can be made using the inputs available.


Work with IT

Involve IT and engineering groups to figure out the challenges of integrating with existing systems for collecting, assimilating, and analyzing large volumes of emotional data.


Consider the complexity

Some emotions may be more difficult to discern or respond to. Context is also key. An emotionally aware machine would need to respond differently to frustration in a user in an educational setting than to frustration in a user in a vehicle.

 


 

download arrowTo learn more about how affective computing can help your organization, read the feature story Empathy: The Killer App for Artificial Intelligence.


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About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.

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In An Agile Environment, Revenue Models Are Flexible Too

Todd Wasserman

In 2012, Dollar Shave Club burst on the scene with a cheeky viral video that won praise for its creativity and marketing acumen. Less heralded at the time was the startup’s pricing model, which swapped traditional retail for subscriptions.

For as low as $1 a month (for five two-bladed cartridges), consumers got a package in the mail that saved them a trip to the pharmacy or grocery store. Dollar Shave Club received the ultimate vindication for the idea in 2016 when Unilever purchased the company for $1 billion.

As that example shows, new technology creates the possibility for new pricing models that can disrupt existing industries. The same phenomenon has occurred in software, in which the cloud and Web-based interfaces have ushered in Software as a Service (SaaS), which charges users on a monthly basis, like a utility, instead of the typical purchase-and-later-upgrade model.

Pricing, in other words, is a variable that can be used to disrupt industries. Other options include usage-based pricing and freemium.

Products as services, services as products

There are basically two ways that businesses can use pricing to disrupt the status quo: Turn products into services and turn services into products. Dollar Shave Club and SaaS are two examples of turning products into services.

Others include Amazon’s Dash, a bare-bones Internet of Things device that lets consumers reorder items ranging from Campbell’s Soup to Play-Doh. Another example is Rent the Runway, which rents high-end fashion items for a weekend rather than selling the items. Trunk Club offers a twist on this by sending items picked out by a stylist to users every month. Users pay for what they want and send back the rest.

The other option is productizing a service. Restaurant franchising is based on this model. While the restaurant offers food service to consumers, for entrepreneurs the franchise offers guidance and brand equity that can be condensed into a product format. For instance, a global HR firm called Littler has productized its offerings with Littler CaseSmart-Charges, which is designed for in-house attorneys and features software, project management tools, and access to flextime attorneys.

As that example shows, technology offers opportunities to try new revenue models. Another example is APIs, which have become a large source of revenue for companies. The monetization of APIs is often viewed as a side business that encompasses a wholly different pricing model that’s often engineered to create huge user bases with volume discounts.

Not a new idea

Though technology has opened up new vistas for businesses seeking alternate pricing models, Rajkumar Venkatesan, a marketing professor at University of Virginia’s Darden School of Business, points out that this isn’t necessarily a new idea. For instance, King Gillette made his fortune in the early part of the 20th Century by realizing that a cheap shaving device would pave the way for a recurring revenue stream via replacement razor blades.

“The new variation was the Keurig,” said Venkatesan, referring to the coffee machine that relies on replaceable cartridges. “It has started becoming more prevalent in the last 10 years, but the fundamental model has been there.” For businesses, this can be an attractive model not only for the recurring revenue but also for the ability to cross-sell new goods to existing customers, Venkatesan said.

Another benefit to a subscription model is that it can also supply first-party data that companies can use to better understand and market to their customers. Some believe that Dollar Shave Club’s close relationship with its young male user base was one reason for Unilever’s purchase, for instance. In such a cut-throat market, such relationships can fetch a high price.

To learn more about how you can monetize disruption, watch this video overview of the new SAP Hybris Revenue Cloud.

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