How manufacturers can pivot from response to reconceptualisation
By Kevin Dherman, SYSPRO Chief Innovation Officer
Over the past few months, the impact of the pandemic has left many organisations with no choice but to scale back operations or shutdown completely. Other organisations have been in the fortunate position to reinvent their business model to remain relevant for the present. The key to survival, however, lies in the ability to create long-term, positive repercussions for the entire business.
According to a recent McKinsey report: "Elevating customer experience excellence in the next normal", in order to survive, nearly all organisations, whether traditional companies or start-ups, should reorient their business model to be more digital. A good example can be seen in the retail industry, where bricks and mortar has been supplemented by e-commerce platforms. This has largely been driven by changes in consumer spending behaviour, where consumers have been shopping from the safety of their own home.
While consumers have been reluctant to go into stores, opting to make purchases online, some grocery stores have chosen to shut their doors and open ‘dark stores’ or fulfilment warehouses. A dark store is a retail outlet or distribution centre that caters exclusively for online shopping. This pivot allows them to increase revenue streams by improving customer service and shortening the supply chain. Even before the pandemic, this business model had been tried and tested in the US by Walmart.
While retail has remained agile, research by McKinsey has shown that B2B companies may be too focused on the here and now. The big question now is how manufacturers can tap into the potential of e-commerce to not only respond to the pandemic, but also reimagine the industry for the long haul. The answer may lie in technology and, more specifically, application integration.
Connecting directly with the consumer
Within the supply chain, wholesale manufacturers typically sell products to retailers, which then sell directly to consumers. In order to meet the new consumer demand, some manufacturers have opted to turn that model on its head by incorporating a retail model and selling directly to the public. In order to save on costs and respond immediately to end-customer needs, manufacturers are not opting to build entire e-commerce sites from scratch, but rather to leverage existing platforms such as Amazon or Alibaba.com.
To achieve this, they have turned to technology – APIs. An API is a software intermediary that allows application programs to interact with each other and share data. These API services help to move organisations from a linear supply chain to a circular supply chain by giving manufacturers the ability to connect to the whole world, not just their immediate environment.
A good example of this recently took place in South Africa. During the national lockdown, a beverage wholesaler took the opportunity to scale up and offer customers products directly through an existing e-commerce site. They did not need to build a whole new Web site to make this a reality. In a matter of days, they moved from hundreds of orders a day to over thousands a day. By integrating an API into their ERP system, the wholesaler could essentially expand the supply chain outside of their business.
The ERP advantage
Enterprise resource planning (ERP) software is an integral component in ensuring a successful pivot. Not only will it provide real-time visibility of stock, but also offers a back-end system that will support the collection and control of payments in direct consumer sales.
Another advantage is that returns can be tracked and digitally accounted for, including the authorisation of returns, issuing of credit notes and tracking of returned inventory.
Progressing beyond the pivot
While the pandemic continues, an opportunity is presenting itself for manufacturers to think out of the box. A pivot is much more than an ‘experiment’, it’s an opportunity for businesses to re-evaluate their customer and workforce journeys, re-mapping them to comply with regulatory requirements for now and into the future.
There are also multiple connected platforms from Amazon to eBay to plug into and create new revenue streams. These platforms already have a captive audience that manufacturers can use to tap into their desired demographic. It is now up to manufacturers to reimagine what is possible.