Over the past few weeks I have been meeting with a number of supply chain services companies who are talking about and focusing on developing solutions that will allow users to be laser focused with demand sensing and shaping. This was particular evident during my meetings at NRF in New York. We also have the likes of eCommerce giant Amazon who have patented technology that claims to be able to put on the truck the product you have yet to order because they know that you will order it! All very interesting and exciting for supply chains – these supply chains strive to eliminate or at least control the lumpiness associated with their demand patterns.
However this begets a question – is this necessarily good? For example. The situation I hear often is what takes place at Starbucks. A regular client walks into their local Starbucks, the barista notices them standing in line and knows their preferred order. The customer reaches the cash register and their usual venti, skinny, vanilla latte is already waiting for them. All they have to do is pay and pick up their piping hot coffee. Sounds lovely.
They know what you want before you order it!
And for the most part maybe that customer appreciates the convenience, and feeling of being so well known that you are the “mayor” of that Starbucks. But what if that customer does not want that skinny vanilla latte? What if the customer wants a hot chocolate one day? Do they dare deviate from their usual order or do they accept the usual order for the convenience?
The same holds true for grocers such as Stop and Shop or Walmart, who let you order online and pick up in store – and will predict what your basket will look like. So all you need to do is drive to the grocery store and pick up your order. There is no need to think too much. Of course the positive is that there are tremendous time savings for the customer if they do not want to contemplate a new mix of groceries. But what if the consumer wants to try a new cheese or kitchen cleaner? If their order is already compiled for them will they get the opportunity to see what else is available? Or do we not want to give them the opportunity? How do we make sure they have the opportunity to browse?
My point is not that supply chain users and vendors should not stop striving to get too smart and more effective when it comes to demand shaping and sensing. However there must be some balance when it comes to how precise and “effective” the supply chains need and want to be with regards to the customer. Yes, we want to eliminate lumpiness and extract those savings from the supply chain. But retailers and other players in the supply chains need to still keep a balance with being very precise with how they manipulate and predict demand with the opportunity for their customers to deviate from their usual demand. Retailers and other customer focused industries need to determine how precise they want to be with their demand shaping and how much freedom they want to give their customers to roam and wander through options.
Okay I realize that I am a tad strange to associate the United States biggest day with supply chains but a conversation today sparked some thoughts….
The premise: I was chatting with friend today about the logistics that go around the July 4th barbeques – how much food is needed, what is the perfect mix of food and what about the beverage selection???? All this made me think about…you got it….supply chains. The barbeque dilemma is a microcosm of our supply chains.
- Demand sensing – this hinges upon who we invite, their ages and their preferences…or our belief in what they “want” to eat. Do we have a large carnivorous group? Do they prefer hamburgers or hot dogs…what about chicken and ribs…..what about fish? Ar they vegetarian? What about kids? What kinds of cheese do they want on their burgers? Do they prefer mustard or…gag…ketchup on their hot dogs? We naturally calculate and try to determine what demand we might get from our customers…aka guests. Add to the equation potential desire for organic, low nitrate or hormone free options. When we go to the super market, we are doing some forecasting based on what demand we believe, our customers want.
- Inventory Optimization – When all the food and goodies have been purchased, we also begin with inventory strategies…how much do we leave in the refrigerator/freezer (aka raw materials), how much do we throw on the grill (aka WIP) and how much is sitting on the tables ready for consumption (aka finished goods). Some of this inventory has a shelf life – try not to leave out potato salad in the blazing sun for 2 hours….As we work the grill we try to constantly gauge the demand, the pull if you will of what we are manufacturing. Should the grill be going at full capacity? How many finished goods do we really want to let sit on the table?
- Demand Shaping – As the grill is working…and no one is eating the chicken…do we start “promoting” how great a grill master you are, especially with chicken. Grilled just right without over drying the chicken. Oh and I just picked up the greatest barbeque sauce from South Carolina that I let this chicken marinate in for 48 hours….
- Reverse logistics – well I will not get into this…but think about the accessibility of facilities….
I realize that most people tomorrow will not think about supply chain and the barbeque, but maybe for a split second tomorrow think about supply chain best practices and how they apply to your barbeque.
Just think, if you could get historic eating habits of all your invitees, coupled with some analytics of trends and consumption habits and you could purchase the right amount of food and the right mix. Having some manufacturing processes in mind you could ensure that once the burgers, hot dogs, chicken, etc that come off the grill end up right on someone’s plate for perfect fresh consumption. You would then ensure a fantastic experience with no left overs…oh wait maybe the leftovers are what make the barbeque fun for the hosts!
Happy 4th of July to all!