It’s interesting, this idea that the consumer has begun to dictate how supply chains should work – a far cry from the days of Henry Ford and his famous quote “You can get a Ford car in any color, as long as it’s black.” What we’re seeing now is demand driven supply chains.
We now live in a world of demand driven supply chains
The digital world we live in has put the customer in the middle of the supply chain; it’s their needs and expectations that are dictating what’s happening. That’s the undercurrent of what’s happening in the world of logistics and supply chain management.
So where is this coming from? I think it’s definitely a byproduct of the digital world we live in, social media for example. If you look at Apple and its launch of the iPhone 7, and the hype it created, we’ll see in the next month or so if they can deliver on that hype. But the buzz created by marketing, digital marketing, has put significant pressure of the supply chain side to deliver.
Another example of how demand from the customer is creating demand driven supply chains is eCommerce, Amazon in particular – there were few Christmases there where some of their third party logistics partners were unable to deliver people’s Christmas present on time, which caused quite a bit of backlash. The issues arose from the huge peak in orders compared to the rest of the year, as well as a difficulty in fully planning and understanding the demand side.
Back to Apple, think about the incredible expectations that are now being placed on the new iPhone. Not just the quality of the product, but if the supply will meet demand, if the features and functionality will meet the expectations created by the buzz around it. Apple has a unique issue – if, for example, the phones aren’t delivered to stores on time, the stock price will be affected.
None of this would have happened in the past. Previously, when a product would be released, the messaging would be fully controlled by the company. There was no social media or internet for consumers to research and give opinions. The expectations were set by the business itself, and the supply chain folks were better able to handle it. But now we have demand driven supply chains.
It almost doesn’t seem fair – humans are very very rational it’s not be you, but let’s not kid ourselves, is it rational for us to demand that we get our iPhone 7 14 hours after it launches?
Absolutely not, right?
But we’re getting to the point where consumers are beginning to expect that kind of thing. And the supply chain side has incredible pressures put on it to deliver. This is just an example of how the consumer demands are impacting supply chains in ways no one could have previously imagined.