CSD: Preparing for the Demand Revolution
Through a special arrangement, presented here for discussion is a summary of an article from Convenience Store Decisions magazine.
At the 2011 Sweets & Snacks Expo, Rick Kash of The Cambridge Group and author of How Companies Win, spoke on the changing landscape that operators and manufacturers must navigate as we enter what he called a "demand revolution."
Mr. Kash noted we’ve seen three great business revolutions–two industrial revolutions followed by a technology revolution. Today, he noted, we’re in a demand revolution. To compete, companies need to focus on demand first, supply second.
The demand revolution started with the introduction of Google, which put all information at our fingertips instantly, and grew with the release of GPS, which can in seconds tell us how to get us from one side of the country to the next, and soared with social media, which connects us instantly. Customers want, what they want, and they want it now without the confines of time and place. And answering that need are Tivo, Skype, Smart Phones and YouTube, making the confines and limitations of time and place less relevant and less necessary.
"In the demand revolution, consumer demand will be formed, shaped, influenced, and satisfied in entirely new ways…Facebook…Twitter…Groupon…Social media is a technology, not a channel of communication…it changes countries, it changes companies, and if you understand it, it will propel careers and brands," Mr. Kash noted.
He pointed to how 12 people in Egypt used social networking to start a revolution to overthrow a 30-year dictatorship in a powerful country of 80 million people in just 23 days, that then snowballed across the Middle East inspiring revolutions in neighboring countries. All signs, the way the world works is changing fast.
"Demand revolution is more than a business and a human revolution, it is a geographic revolution, a gender revolution and a technology revolution," Mr. Kash noted. Developing nations are growing and delving into new technologies. The role of women is changing with more women joining the workforce in various countries. U.S. college enrollment is now made up of 60 percent women.
In the demand revolution, business models, competition and strategies are all going to change and will impact all brands big and small. A demand chain, Mr. Kash noted, will take its place alongside the supply chain to be the new business model for the 21st Century. And collaborative networks between manufacturers, retailers, consumers and media will evolve and become vital to business.
Discussion Questions
Discussion Questions: How has the relationship between supply and demand and changed with the advent of the internet and other digital technologies? What are the particular challenges of “demand chain” planning?
Ok, first I have very little idea what most of this gibberish means. It is all style and swoosh, not much meat. What does GPS have to do with any of this?
Second, we have been talking “demand chain” for more than a decade, though the term has largely failed to catch on since supply chain got there first, but it simply means you need to build your supply chain from the customer back.
Customers have always wanted what they want and want it now. It’s why auto dealers continue to employ the financially ruinous practice of having hundreds of cars sitting on their lots so buyers can drive away that day, instead of the far more sensible practice of a general inventory pool across dealers or make to order processes.
There are some things changing. Most everyone now understands the challenges of “multi-channel” order capture and inventory management. That does in turn lead to the need to support different “paths” for customer order fulfillment–order over your phone, pick it up at the store. There are logistics and costs complexities with this.
The customer’s ability to rapidly compare prices across retailers and others is also an unwelcome development for many that must be dealt with (price matching, etc.).
Social media is great for organizing Egyptian dissidents and flash mobs at Minneapolis Malls, but its connection to supply and demand is modest, with the exception of short-term “deal” promotion. Where that is going is unclear–another post today calls such deal focus an “infectious disease.”
It’s evolution, not revolution. Order-to-delivery-cycle times have been compressing for a long while, but in the end are governed by the laws of physics–or how many inventory buffers you want to carry.
New routes to market are nothing new for supply chain.
Mr. Kash noted, “Social media is a technology, not a channel of communication…” Social media is both. As evidenced by his further statement on the Egyptian example. The way to look at social media is to think of it as nothing less than the next internet. Whether in the form of Facebook, twitter or whatever else will come in the future, “virtual” communication is here to stay.
Therefore, if virtual communication will be with us in the future, then it only follows that consumers, through this communication, will create both virtual and real demand. Technologies exist today (and I promise not to do a sales pitch here) that can help anticipate, measure and respond to this new demand phenomenon. Demand signal repositories are only part of the solution. Deep digital/social analytics are being utilized to ensure supply meets demand.
I think there’s something here.
For millennia, the retail model was to display merchandise and hope that people bought it. Location was everything. That’s no longer the case!…and it doesn’t bode well for retailers who can’t adapt to the newly demanding customer.
Decisions based on demand is no longer rocket science and has been made possible in the retail arena by a number of factors, among the most important of these has been the modernization of retail computer infrastructure, reduction in computing power costs, and improvement of advanced demand management applications. Today retailers can utilize computer applications to crunch a variety of input to determine how much of a product a consumer base will likely purchase, the sizes needed, the optimum price, amounts to allocate to each store, replenish amounts, etc.
Effective retailers, manufacturers, distributors, have been utilizing computer applications that leverage their understanding of demand for some time to more effectively make inventory decisions and to better serve their customers.
As Dan Gilmore suggests, chains of demand have been around forever. Until a few years ago we didn’t label it as such, but it’s always been there. Let’s take the now-defunct Sears Catalog, for which I contributed advertising input when working for Campbell-Mithun Advertising in Chicago in the early 80s. On its face, a catalog may seem to be the very embodiment of supply-oriented marketing. “Here’s what we have, order what you want.” But most folks never saw the extensive customer/product tracking department at the Catalog’s HQ. It was this department’s job to interpret customer demand as communicated by their orders and questions, and to adjust the offerings in the next catalog accordingly. That’s a chain of demand, and its principle has existed since retail began.
So, are we now seeing a “demand revolution?” Nope. Again as Dan indicated, it’s an evolution. Bigger, stronger, faster–isn’t that the way of progress? Was it a revolution when servants no longer had to carry vittles upstairs to the “master” but began to use the dumbwaiter instead? And the master sent his wishes by return dumbwaiter instead of ringing a bell? Those were evolutionary, not revolutionary, and the various electronic references made in today’s discussion topic fall into the same category.
You are really confusing a lot of dynamics here. Social dynamics (Egypt) are the channeling of emotion. Purchasing dynamics allow consumers a “better” handle on features and product cost. And it seems you’re talk about demand planning without talking about marketing.
As this is a c-store article, let’s talk about demand planning. First of all much of the inventory in the c-store is supplies by fairly agile DSD suppliers. The remainder of the inventory (non oil) is delivered by a contracted wholesaler with very structured route systems. Now we should consider traffic as the number one factor in demand. Realize that many factors control traffic in the c-store. Gas price is usually a major factor. Lower gas prices by 5 cents and traffic soars (especially in a competitive location.
I really don’t think the c-store industry can demand plan much beyond what they are doing now. The fast food industry is light years ahead with regard to demand planning. They can plan production in their kitchens based on in store computer models that factor past consumer traffic, marketing, road traffic flow, etc. Seldom do they run out of inventory and can satisfy their customers in minutes.
In my opinion, this is just another phrase developed by someone trying to sell something that is older than dirt by simply changing it’s name.