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Author's profile photo Mark Osborn

The Consumer-Driven Supply Chain Understands and Acts on Intent

I’ve described in previous blogs how the digital economy is about delivering experiences and outcomes like comfort, joy, security and control directly to consumers. But experiences and outcomes are challenging traditional models because they can’t be manufactured, stocked or distributed. Rather, they are orchestrated and delivered right in the individual consumer’s moment of need – whenever and wherever that might be.

Delivering just-for-me personalized consumer experiences directly in moments of opportunity requires companies to make the shift from making big bets on estimates of future aggregate demand to acting on indications of individual intention in the moment.

Digitizing the Supply Chain: Then vs. Now

For decades, long lead-times between forecast and purchase combined with limited (if any) visibility to consumers themselves favored a model of economies of scale. This included forecasting how many units would be sold, producing physical products, investing in marketing efforts, delivering the products to retailers and tracking how many of those products were sold from store shelves.

Everything was driven by sequential, and largely inflexible, steps in a chain, all based on assumptions about future demand. Breaking the chain at any point in the process would create risk, incur cost, delay delivery and, potentially, alienate consumers. And, what’s more, the chain almost always ended at the store. Beyond the register, CP companies had no direct visibility to how or how frequently their products were being used and consumed.

Now, through direct and indirect interactions directly with consumers, the digital economy is basically flipping old models for forecasting, inventory, distribution and fulfillment on their heads. CP companies’ interactions with consumers give them indications of intention, which companies can use to act on in moments of opportunity.

The Amazon Dash button is a good example. I’ve previously talked about how this technology provides a new opportunity for CP companies to meet consumers in their moments of need. But it’s also more than that. Buying a Dash button is an indication of a consumers’ intention to buy a specific branded product. But, it’s also an indication of that consumer’s intention to buy that product again and again and again.

And, as they do, the CP company can now monitor purchase frequency at the individual consumer level to determine consumption patterns. They no longer have to forecast when that consumer might buy again. They begin to know. And along the way, they can provide personalized recommendations and delivery options that, from the consumer’s perspective, feel personally tailored just for them.

Another great example is Stitch Fix, a popular subscription service known for delivering personalized clothing and accessory selections. The consumer tells Stitch Fix key information about their intentions, such as planned usage occasion (e.g. formal event), color preferences and style preferences (e.g. classic). Stitch Fix then uses that information to deliver options directly to the consumer’s home. The consumer picks the item(s) they want and returns the ones they don’t, providing quick feedback about what they did and didn’t like about their choices.

For the consumer, the experience is inherently “just for me.” For Stitch Fix, everything the company does is based on the consumer’s direct expression of intention. The more interactions they have, the more they learn about how best to respond to consumers to the point where they’ve essentially achieved a 1:1 correlation between what they predict a consumer will buy and what the consumer actually buys.

The New Normal

Amazon Dash and Stitch Fix illustrate it’s no longer about guessing how much demand for a physical product you might see at some future date. Instead, it’s about knowing how to respond with exactly what’s needed, in the moment it’s needed, based on the capacity to sense and spot consumers’ intentions.

This is changing the definition of inventory from the storage of physical goods to now include services and content, too. It’s also changing distribution and fulfillment to include delivering content via digital means, engaging directly with consumers to deliver complementary services, extending physical fulfillment directly to consumers in their homes, and more.

Are these changes occurring in your organization? If so, what are you doing differently to better understand consumers, spot their intentions and make just-for-me experiences possible? And has this had a transformative effect on how you operate, such as a blurring of the lines between marketing and the supply chain?  Let us know.  We’d love to hear from you!

To learn more, visit: Consumer products: Reimagined for the new economy

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