Sunday 18th Nov 2018 - Logistics & Supply Chain

Supply chains must survive the butterfly effect

The retail and consumer goods industry must re-evaluate its approach to its supply chains and logistics to survive the “butterfly effect” of disruptive consumers, according to a DHL-backed study.
 
The report “Consumer as Disrupter” identifies today’s digitally empowered consumer as a key source of disorder in supply chains and sets forth the case for building consumer-adaptivity and cost-effective flexibility into the industry’s logistics to manage such disruptions.
 
It describes the “butterfly effect” as a small change at a localised point in the supply chain which can result in much wider consequences for the business, such as loss of customers or brand reputation, and billions of dollars off their bottom line.
 
Lisa Harrington, president of the lharrington group who prepared the report in collaboration with DHL, said: “We can see that rapidly changing and often unpredictable consumer-buying behaviour – enabled by the internet, mobile connectivity and growing spending power – is now making volatility and complexity the norm rather than the exception in the retail and consumer goods industry.”
 
The report identifies three major trends:
 
* The big bang disruption and the cascade effect. Quantum innovation and revolution in product cycles, fuelled by instant access to information and consumer power, which have the capacity to instantly disrupt or destroy existing product lines and markets.
 
* The digitally empowered consumer. By 2016, smartphones used as part of the online shopping experience could influence up to 21 per cent of retail sales in the US alone. Online shopping channels continue to morph, adding more uncertainty and complexity to the retail and consumer goods business model.
 
* Rise of the global middle class. Income levels in emerging markets increased by 96 per cent from 2000 to 2010, and are expected to grow 45 per cent from 2010 to 2016, driving a wave of consumerism for all types of goods, from basics to luxury items.
 
These forces are driving tremendous change in the retail and consumer goods industry, particularly in supply chain networks and operations.
 
Tom Kimball, SVP, global consumer sector, DHL Supply Chain said: “It is clear that retail and consumer goods manufacturers should be re-thinking their supply chains with an eye toward one thing: building out a portfolio of options, risk tolerances and capabilities to support cost-effective flexibility. This enables their supply chain to be resilient enough to withstand shocks, agile enough to respond quickly to sudden or unexpected change, flexible enough to customise products and efficient enough to protect margins.”

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