We are in a new reality. No longer are a company’s products the sole driver of value. The end-to-end customer experience now rules. To deliver that experience, a business must be able to understand its customers, anticipate their needs, and adapt the supply chain to exceed their expectations.
COVID-19 has quickly and very visibly highlighted the critical importance of supply chains in enabling the customer experience. In the face of large shifts in consumer behavior, the role of the supply chain has been elevated to become a fundamental enabler of a company’s customer responsiveness. The key lesson from 2020 is that customer-centric supply chains are an imperative, not a luxury. Consider the way the pandemic has forced companies to rethink the rapid segmentation of products (essential vs. nonessential), use ad-hoc partnerships for the distribution of goods, enable contactless deliveries, and develop new capabilities to protect customers and employees.
We believe that there are four key characteristics that make up a customer-centric supply chain: tailored fulfillment, agile operations, trustworthy relations, and a focus on innovation. As the pandemic subsides, the goal will be to build a customer-centric supply chain that is resilient and flexible enough to meet future day-to-day business requirements as well as “black-swan” shifts in supply and demand. In many cases, this may require transforming the fulfillment function to be more “intelligent” by redesigning the physical network, warehouse operations, and last-mile transportation. To accomplish this goal, companies will need to conduct a full review of their operating model to determine the capabilities, digital enablement, and collaborative partnerships needed to support these elements.
How have customer expectations changed? Across all industries, customers want ever-faster delivery, and they want it cheap—or even free. They want more control over delivery windows, real-time visibility, and tracking of their orders, and even direct communication with providers and drivers. According to a recent report by Accenture on last-mile delivery,1 the evidence is clear:
This increase in customer expectations is also driving the development of the business-to-business (B2B) e-commerce market. Today, e-commerce makes up just 12% of B2B sales.2
Tomorrow, however, entire swathes of B2B fulfillment may be supported by e-commerce. Forrester has projected the B2B e-commerce market will grow to $1.8 trillion by 2023, accounting for 17% of all B2B sales. COVID-19 may now accelerate that growth.
What makes a customer-centric supply chain?
Companies need to redesign their supply chains as engines of growth. That means creating new customer-centric fulfillment capabilities that can deliver the experience customers crave. A customer-centric supply chain should therefore focus on four characteristics:
1. Tailored: Delivering products and services in a customized way that meets each customer’s specific needs.
2. Agile: Possessing the ability to flex and change to keep up with continually evolving customer demands.
3. Trustworthy: Supporting transparency, traceability, and responsible behavior across the end-to-end value chain.
4. Innovative: Being able to continually attract and delight customers and bring new and relevant products and services to market.
Let’s look at each of these characteristics in more detail.
Companies must differentiate themselves by offering customers a personalized experience. From a fulfillment standpoint this could include providing personalized last-mile delivery and direct-to-consumer offerings. A 2020 Accenture survey, however, showed most companies lack the flexibility to deliver differentiated customer offerings on demand. To gain this flexibility, traditional models aligned to categories, markets, or businesses must be replaced. It’s also vital to consider restructuring to create multiple supply chains tailored to specific segments based on unique value propositions. This will enable companies to focus on the customer experience across the value chain for each segment.
Digital technology is also key to being able to provide a tailored supply chain. Machine learning and artificial intelligence play a key role in providing personalized last-mile delivery and direct-to-consumer offerings that give customers what they want, where, and when they want it. Analytics enable a company to look at all dimensions of its products, customers, and channels to understand how to segment customers by common characteristics and needs—and then configure the right supply chain activities to meet those needs. Companies also need to build capabilities to support ongoing network optimization and be able to flex and adjust in near real time as those customer needs evolve.
One company that excels in tailored experiences is Inxeption. This B2B e-commerce company provides a platform for small to medium-sized industrial companies to list, sell, and distribute their products. Thanks to a recent partnership with UPS, Inxeption customers can track transactions from listing to delivery. Inxeption creates a tailored experience for their customers by allowing them to select how, when, and where they want to receive their order.
The Japanese convenience store Lawson is another example. Japanese convenience stores in general are viewed as one-stop-shops and often handle package delivery services, allowing customers to pick up their packages along with their grocery staples. Now the company has partnered with Uber Eats for the delivery of its grocery and household goods. This partnership allows customers to receive one, tailored delivery instead of having to coordinate several separate ones.
Agility is a key feature of the customer-centric supply chain due to the customer demand for increasingly faster deliveries. Accenture research shows that 89% of companies agree e-commerce is driving these expectations.3 Today’s same-day delivery market has grown 40% year-over-year and is expected to reach $13 billion in 2020 (and $92 billion by 2025).4
Yet, as recent events have demonstrated, most established fulfillment operating models cannot react flexibly to changes in volume, variability, and mix, among others. Nor can they necessarily fulfill customer orders at the pace demanded while simultaneously optimizing cost to serve.
To increase agility, companies should consider an asset-light supply chain model and re-evaluate the physical length of their supply chains (and how close they can bring fulfillment and other agile components to their customers). In some cases, the company may rely entirely on ecosystem partners to fulfill incremental demand from segments that it cannot handle effectively or profitably on its own.
Consider Fabric, an Israeli startup that provides fulfillment as a service. It offers warehousing and distribution capabilities through micro-fulfillment centers in urban areas that feature robot product pickers and human packers and shippers. Fabric partners with companies to store and distribute their products or allows them to use its platform to run their existing facilities more flexibly.
Another example is a freight and logistics company that is creating an agile, adaptive supply chain network by leveraging its ecosystem partners and using digital tools to increase responsiveness. It has implemented robotics-enabled carts and integrated its systems with Google Glass to support pick and pack. Its automated carts follow pickers as they work, and Google Glass helps them quickly visualize what products to pick and where to place them in the warehouse (product barcodes are also scanned by Google Glass).
Trust is paramount in creating a sustainable customer-centered supply chain. In fulfillment, the opportunities to build that trust are huge—but so are the opportunities to disappoint the customer. The supply chain is now a primary provider of customer confidence and satisfaction, and several capabilities play a role in helping companies earn and sustain trust.
Blockchain can be an important enabler here, potentially providing full traceability across the value chain from farm and factory, to transportation and distribution, to final delivery. Data security is also central. Given the large amount of data needed to provide a tailored and seamless customer experience, companies must ensure they are responsible stewards of customer data and transparent in how they use it.
Sustainability is another key aspect. Companies should be looking to embrace circular economy practices in their supply chains so their customers can be sure that goods are acquired and handled in an ethical and environmentally sustainable fashion. That means, for example, being able to address returns, resales, and redesign of items via an efficient collection and sorting process.
The American clothing retailer Everlane has been successful in winning over customers through trust. The company is transparent about its sourcing practices, including vendors, types of materials, and margins. For each product, it provides a breakdown of direct costs and margin, showing how the retail price compares to a similar product from a “traditional” retailer. Everlane also provides an overview of the factory where each item is produced with accompanying pictures and information.
In order to attract and retain customers, companies need to continue to seek out innovative ways to interact with potential and existing customers. For example, there are some new technologies that provide new opportunities to learn more about customers and provide new products and services. Digital assistants and connected household devices allow customers to place orders, track deliveries, and coordinate returns from any location. Wearable devices transmit data indicating customer usage, location, and frequency.
Interacting with customers through such devices will only become easier: The deployment of 5G will enable the seamless connection of these devices and the creation of integrated experiences on an unprecedented scale. The use of 5G is expected to further boost e-commerce revenue by $12 billion by 2021.5 In fact, Gartner predicts that this year there will be approximately 20 billion internet-connected devices.6 Many of these won’t be smartphones or PCs, but dedicated machinery such as vending machines, jet engines, and myriad other examples.
As greater numbers of connected devices are incorporated into the supply chain, companies will gain an immediate feedback loop of information. This will encompass everything from connected machines providing output data at the factory to finished goods that transmit their location at the warehouse via low-frequency sensors and provide data on final product sell-through at the retailer. All this information can be used to provide better service to the customer.
Technology-led innovations that create a more customer-centric supply chain can also be good for the top line. Accenture’s research shows that companies that invest in building a digital architecture that facilitates cross-functional collaboration, use new technologies for innovation (like augmented reality, virtual reality, and machine learning), and create new streams for data driven insights can drive up their revenues by as much as 8% on average over a three-year period.
One industrial manufacturing company Accenture interviewed for its supply chain research demonstrates the potential for digitally powered innovation. This company no longer builds physical prototypes. Instead, it creates a digital twin of a product it wants to manufacture and then tests it using an augmented reality environment. From design through to production, everything is digital. This helps the company to make products that are more personalized, longer lasting, and safer. It also gives the company new ways to connect with customers across the product life cycle.
It’s never been harder to attract, delight, and retain customers than it is today. This is why reshaping the supply chain around customer needs is vital. And developing intelligent fulfilment capabilities is a key part of that process. This requires significant changes across a company’s operating model, infrastructure, and digital ecosystem. It also means rethinking network strategy, warehousing, and transportation to fully meet customer fulfilment expectations.
To do so, leaders must ask themselves:
The world is moving quickly, and customers are moving with it. For companies to achieve a competitive advantage, there’s no time to waste in embracing the customer-centric supply chain.
1. Accenture, “How Could Last Mile Delivery Evolve to Sustainably Meet Customer Expectations?”: https://www.accenture.com/_acnmedia/pdf-96/accenture-postal-last-mile-delivery.pdf
2. Allen Bonde and John Bruno with Susan Wu, Charlie Ruhl, and Rachel Birrell, “U.S. B2B eCommerce Will Hit $1.8 Trillion By 2023,” Forrester, Jan. 28, 2019: https://www.forrester.com/report/US+B2B+eCommerce+Will+Hit+18+Trillion+By+2023/-/E-RES136173#
3. Accenture, ibid.
4. Kurt Salmon, “Omnichannel Supply Chain Agility: Supporting an Integrated Marketplace,” January 2019.
5. Adobe Digital Insights, “A Mobile First World,” 2018: https://www.slideshare.net/adobe/adobe-digital-insights-a-mobile-first-world-2018-89090904?
6. Gartner, “Leading the IoT: Gartner Insights on How to Lead in a Connected World,” edited by Mark Hung, 2017: https://www.gartner.com/imagesrv/books/iot/iotEbook_digital.pdf
Matt Pedersen (firstname.lastname@example.org) is a managing director within Accenture Strategy.