Don’t Call It ‘The Customer-Centric Supply Chain’
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
At the recent Council of Supply Chain Management Professionals’ annual conference (CSCMP), Tesla turned out to be most emblematic of the reason why we’re all going to hear about retail and supply chain a lot more over the next few years. It’s because it’s all about the customer.
At the event, Tesla had a retail story to tell, as they described some of their customer-facing initiatives ("owner experience") and the impact some of those strategies are having on supply chain.
I don’t like the term "customer-centric supply chain" — it’s like "demand-driven."
Tesla turns that concept on its head. They focus on the services and activities that their customers are trying to achieve, and then turn to their supply chain to deliver it. "Supply chain", in their case, modifies "customer-centric", not the other way around. For example, they are in the process of building charging stations across the country. Their goal is to make it possible for a Tesla owner to drive coast-to-coast by stopping only at Tesla’s charging stations — a service that the company plans to offer to its customers for free for as long as they own a Tesla car.
Yet in order to enable this capability, Tesla is going to have to get into some retail locations pretty quickly. And to serve their desired service level of a quick charge — half the battery capacity charged in 20 minutes — they are rapidly on track to become the largest purchaser of batteries in the world, which in turn poses some significant supply chain challenges. This is customer service defining supply chain requirements. And that’s something much bigger than a customer-centric supply chain.
Macy’s, in its own way, echoed that sentiment at the conference. When asked why they were pursuing RFID, the Macy’s executive basically said the company knew it needed to do ship-from-store, and the only way they could ensure inventory accuracy was by turning to RFID.
Inventory accuracy happens to have a lot of ancillary benefits, which the company is currently exploring. In the meantime, Macy’s took a customer need — we want to be able to promise any available inventory to our customer no matter where she is, and no matter where the inventory may be — and in the end had to spend a significant effort educating their suppliers (a process still in flight) as to why it’s worth tagging every individual item. The answer, by the way, is not that it will make the manufacturer’s life easier too, but that both retailer and manufacturer will sell more stuff.
Customer need has not defined the retail supply chain in a long time. Store needs, efficiency needs, cost needs — these have defined the retail supply chain for decades.
But I think that’s about to change. Just don’t call it customer-centric supply chain.
Do you likewise see customer needs playing a bigger role in driving the retail supply chain? Will inventory replenishment and accuracy become more important in the years ahead?