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How supply chains can support the shopper experience
The Journal of Business Logistics (JBL), published by the Council of Supply Chain Management Professionals (CSCMP), is recognized as one of the leading academic supply chain journals in the world. But sometimes it may be hard for practitioners to see how the research published in its pages applies to what they do on a day-to-day basis. To help bridge that gap, CSCMP's Supply Chain Quarterly will challenge the authors of selected JBL articles to explain the real-world implications of their academic research. Here, then, is the first installment of our new series, "Research for the Real World."
"What is the Right Supply Chain for Your Shopper? Exploring the Shopper Service Ecosystem," by Hannah J. Stolze, Wheaton College; Diane A. Mollenkopf, University of Tennessee; and Daniel J. Flint, University of Tennessee, published in the June 2016 issue of the Journal of Business Logistics.
Supply chain managers are accustomed to thinking about and designing their companies' supply chains to match either the products they are delivering or the needs of the end consumer of the final product. But those models may not reflect how goods and services are actually bought in an omnichannel retailing environment. Many times the person who buys a product is not the end consumer; accordingly, supply chain managers miss opportunities if they focus only on the end consumer and not on the shopping experience where the purchase decision is actually made. In the marketing realm, this is leading to a new concept called "shopper marketing."
The authors argue that because the shopper's experience is the point at which marketing and the supply chain meet, retail supply chains should be capable of supporting marketing efforts that are aimed at shoppers. Toward that end, the article identifies three types of shoppers (goal shopper, bargain shopper, and social shopper) and matches them with three types of supply chain (efficient, coordinated, and responsive).
Stolze, the lead author, spoke with Supply Chain Quarterly about what this concept could mean for practitioners.
What issues were you seeking to explore through this research?
In 1997 there was a pivotal article in the Harvard Business Review that asked, "What is the right supply chain for your products?" It was very product-focused and followed a very inventory-intensive mindset [in regard to] supply chain management. The article focused on making sure that you had the right product at the right place in the right amount at the right time—what's known as "the four Rs." So, if your product was a can of soup, it was a very functional product, and that automatically placed you in the "efficient supply chain" category. And if your product was a high-end fashion item that was purchased less frequently, then you were automatically placed in the "responsive supply chain" category.
The challenge is that as marketing shifts, the understanding of the shopper shifts, and that shift also needs to occur in the supply chain. To execute [retail] supply chain strategy, it's not so much about having the right supply chain for the product. It's about what occurs at the point of purchase—the mindset of what will the product look like in the retail environment—because the job of the supply chain is really delivering the product to the shopper, not the end consumer.
Consumers are still part of the supply chain, of course; you can't leave them out, but the most important part of the supply chain is when the person makes the purchase. There are different reasons people buy soup, and you need to be able to meet the needs of these different types of shoppers.
Briefly, what are the implications of this research for supply chain practitioners?
It requires a shift in their thinking from the traditional focus on product, inventory, and consumers to the person who will be shopping in the retail store or online in the retail environment. There needs to be a shift to thinking instead about the dynamics of place.
In marketing, the focus is on product, price, promotion, and place. Logistics is all about the "place" piece. Is the product in the right place so it is available when the shopper wants to buy it? Do you have enough product in the right quantity and assortment? Now it's not just about having the right quantity of product, it's also about how the shopper wants to experience the product. So if it's around the time of the Super Bowl that might mean specialized packaging—maybe a shift to larger bags with pictures of football. Or it might mean putting the product in a different place in the store so that it is easier for shoppers to find.
How will (or should) your findings change the way retail supply chain executives think about their supply chains?
Historically, companies have had one supply chain strategy. Either it's been "we are focused on breakbulk closer to the customer" or "we are very fast and responsive." Now they need multiple supply chains, not just for different products but also for the same product.
Let's go back to the soup example. Some people just want to buy a can or package of soup off the store shelf, some customers want to buy soup from a soup bar, some want to buy it bundled with a coupon for bread and American cheese so they can make a grilled-cheese sandwich to go with the soup. How you package and deliver soup to market is different depending on whether it is being delivered to the shelf, being ladled into a container at a bar, or bundled with a grilled-cheese promotion.
Could this also reshape how supply chain organizations interact with marketing organizations?
It is definitely going to increase the need for cross-functional interaction. For example, currently the insights into "who the shopper is" reside in marketing, and the responsibility for executing on those insights resides with logistics and operations. So now, even more than in the past, the two are going to have to talk to one another.
Marketing needs to understand what is possible in the market. And operations and logistics need to understand why they are [designing different supply chains for different shoppers], because it does increase costs, and if they don't know why they are doing it, they are not going to execute it properly.
What is the most important takeaway from your article for practitioners?
I think the big idea is really this concept of an ecosystem focused on the shopper. Traditionally, companies have focused their attention on their own products and their own goals. Now there is more of a need for marketing and supply chain to have a common goal-setting environment for the planning of promotions and the execution of them.
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