The busiest shopping season of the year is underway, and the race to meet customer needs -- and do it better than the competition -- is officially on. For supply chain managers this means running a tight ship is more important than ever. But keeping up with consumer demand is often easier said than done, as detailed in a new survey by Paris-based consulting firm Capgemini.
This is the first year Capgemini has conducted the survey, and the consulting firm was interested in learning more about how supply chains adjust to rapid upticks in demand, according to Kavitha Krishnarao, the firm's director of supply chain services.
"We spoke to about 150 supply chain managers on one end, and on the other end we also spoke to 1,000 consumers," she explained. "We asked the supply chain managers what it would mean for them if they could not get all their orders out on time, and we asked consumers what it would mean for them if they couldn't find the product they wanted on the shelves."
Supply chain managers struggle with inadequate technology
While the experiences of the companies surveyed are those of large organizations -- with at least $1 billion in worldwide revenue -- small- and medium-sized businesses should be able to relate. The main takeaway, according to Capgemini, is that supply chains can make or break a company's holiday profits, and supply chain managers are feeling the pressure.
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The survey found that 54% of companies pointed to supply chain issues for negatively impacting revenue or profitability. Additionally, 83% of supply chain managers surveyed said adequately preparing their supply chains to meet holiday fluxes is a major challenge. Whether that challenge is being met isn't a sure thing, however: Only 21% of the supply chain managers feel their software systems are doing a good job of providing reliable up-to-the-minute data on supply chain performance.
And managers aren't always much more helpful, Krishnarao noted. "Despite the fact that supply chain issues can really be a make or break thing from a profitability standpoint during the holiday season, there's always a good number of senior executives in client organizations that are not paying adequate attention to these issues," she said.
Consumers have no patience for weak supply chains
On the consumer side of the supply chain, customers have no patience for "out of stock" notices. The study found that nine out of 10 U.S. consumers would take their business to another retailer in the future if that oh-so-important holiday gift on their list was delivered late. And 73% would buy their item at a different store if it was not in stock at the first store they visited, while 29% would opt out of buying the item altogether.
Failure to meet consumer demand means missed revenue and customer retention opportunities for manufacturers and retailers alike, the survey suggested. "The findings show that, if a desired product isn't available on the shelves during the holiday season, consumers were likely to turn to an online retailer or look at a different product," Krishnarao said. "Consumers were very willing to go with another brand [if the product they wanted wasn't available in stores], which is an indicator that brand loyalty is not an important factor for them."
The supply chain managers surveyed by Capgemini seem to know what's at stake during the busiest shopping season of the year and what it will take to rise to the challenge. Eighty-six of those surveyed identified having processes in place that can respond to volatile consumer demand in real time as an important part of their supply chain strategy. Talent management also factored into supply chain planning in a significant way, with 89% of managers looking for talent with strong analytical skills and 85% searching for candidates with the functional knowledge needed to run a smooth supply chain.
"The most important element [of business for supply chain managers] is how they move towards the demands of an enterprise," Krishnarao said. "There was a time in supply chains when it was all about production and keeping products stocked in warehouses. Today, we are moving more toward a demand-driven supply chain, which means understanding what the consumer wants and needs, and being able to react to that."
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