Reaching customers directly — an investment worth making in times of supply chain disruption

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Amazon's staff preparing orders at their Prime Now facility, their largest global Prime Now facility located at the Mapletree Logistics Hub on Toh Guan Road East on 27 July 2017. E-commerce has accelerated the adoption of direct to consumer models. How can manufacturers leverage these lessons?
JUNE 18, 2020 - 1:17 PM

In recent years, retailers have stepped into new roles designed to increase consumer engagement and personalization. Particularly in Southeast Asia, where the e-commerce market is expected to surpass US$300 billion by 2025, brands are always looking out for new ways to ease the convenience for consumers looking to shop anytime and from anywhere. Today’s retailers are constantly seeking fresh avenues of engagement, from subscription services for packaged goods delivered right on doorsteps to collaborations that invite consumers to personalise their own fashion statements.

Now in a crisis-stricken landscape, retailers are faced with an even greater challenge at hand. Despite lockdowns across Asean slowly easing, many countries continue to see retail stores shut, services halted, and supply chains disrupted. A full return to business-as-usual is unlikely to happen any time soon. As a result, more manufacturers are bypassing distributors and retailers to sell directly to customers (DTC) — pivoting their services in efforts to expand their footprint, ensure business continuity and strengthen customer loyalty, which has proven more critical in uncertain times.

Yet how do manufacturers keep these new go-to-market models sustainable and profitable in the long run?

Software technology is key. Without proper IT infrastructure and functionality, manufacturers may essentially be taking on a challenge that is too high-cost and high-risk. And in uncertain times like these, players simply cannot afford to miss or mishandle the opportunity — manual systems, outdated technology and a “good enough” mindset no longer suffice, and missteps may fuel greater damage to the brand in the long run. Here are some key issues manufacturers need to remain cognizant of in transitioning to a new commerce model, and how software can help.

How did we get here?

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Operational innovation over the years has enabled manufacturers to mechanize and simplify what was previously a highly complex made-to-order business model. Advancements in software solutions have since made the “batch of one” production process more accessible, with agile, customizable and easy-to-program modules that leave traditional mass production cycles in the dust. 

E-commerce has also accelerated the popularity of DTC models. Global giants such as Alibaba, Amazon (or regional equivalents Lazada, Shopee and Qoo10) have revolutionized the retail experience with the convenience and speed at which consumers can now consume — through the Internet, smart phones and now even via smart home appliances. These platforms have also integrated e-marketplaces such as LazMall, ShopeeMall and JD Mall (on JD Central) in recent years to better accommodate growing DTC sales. By 2019, over 1,700 brand
manufacturers had set up official shops on these platforms, selling their products directly to customers through the channel.

So how can manufacturers optimize these trends?

For many manufacturers, these are challenging new areas, far from traditional mass production methods which some have known since their beginning. This is a new world order; one that necessitates a comprehensive understanding of the risks and obstacles involved.

Manufacturers need to be agile and adapt to changing consumer trends in uncertain times. To do so, they need to deploy technology that allows them to pivot their operations and continually innovate. The pandemic has taught us that technology will continue to be a key differentiator separating the leaders from laggards that are slow to adopt innovative functionality — and here are some ways
it can help:

- Relationships. Heightened customer expectations can pave the way for new opportunities if companies are willing to commit with the necessary resources in talent, time and technology. Manufacturers that excel at building relationships and connected networks will thus be able to set themselves apart. For instance, adopting smart technology systems like AI can help manufacturers analyze customer data and translate this into actionable insight and a deeper understanding of consumer behaviour that ultimately helps manufacturers make better targeted sales strategies.

- Configuration. Product configuration is one of the most critical ways software technology can help manufacturers build a customer-centric approach. Configure Price Quote (CPQ) solutions can help users make design choices, while ensuring that the options are within pre-set engineering constraints. Then, a quote and Customer Aided Design (CAD) drawing are automatically generated so the customer can visualise the end-product. This is a huge time-saver for sales and engineering teams, freeing them from manually redoing specs and quotes for each custom order.

- Product Lifecycle Management (PLM). Manufacturers can also leverage PLM solutions to optimize the development of new products — tracking objectives, milestones and communication at each stage of the product’s lifecycle, from cradle to grave. 

- 3D printing. Advanced manufacturers can also turn to 3D printing for highly customisable products. The fashion industry is even incorporating 3D printing for personalised and decorative components or accessories, monogrammed features and signature elements.

The DTC movement brings with it some responsibility as well. Manufacturers have traditionally turned to distributors and retailers to deal with customer-facing roles — handling customer service, maintaining inventory, providing advisories, and offering personal buying experiences. 

Bypassing the middlemen means manufacturers need to step up and assume this role. However, they are often not equipped for this and may lack capabilities such as a call-center, shipping department designed to handle large volumes of small quantities and or processes to
manage returns from disappointed customers. Making the shift to DTC often requires a full enterprise shift; it is certainly not a “deploy and done” transformation. 

An investment worth making

For manufacturers already stretched thin, taking on DTC capabilities may strain resources further. Even worse is attempting to make the transition on a half-ready model, which can only backfire, hurting the brand and alienating distributors even more. However, what DTC presents is a business model which bypasses the middleman and offers greater customer intimacy and brand loyalty — especially critical for businesses in uncertain times. Ultimately, the manufacturer who is willing to invest in technology during the downturn will stand in greater stead, rebounding even stronger when the economy recovers. And who doesn’t want that?

 

The writer is vice president of Asean at Infor.