Constellations can make supply chains more secure, flexible and resilient

Transitioning to a direct-to-customer (DTC) business model requires new thinking. Companies need to focus on […]

Transitioning to a direct-to-customer (DTC) business model requires new thinking. Companies need to focus on the creation of happy and loyal customers. But to become a customer-centric business, there are bound to be conflicts with pre-existing sales channels. Instead of thinking in traditional terms of rigid supply and sales channels, companies need to think about supply and sales constellations. At the Digital Supply Chain Institute (DSCI), we call them Constellations of Value because they are oriented around customers and focused on growing your base of happy and loyal customers regardless of whether you are a traditional B2B or B2C company.

The guiding star for every company’s direct-to-customer transformation is generating more happy and loyal customers. This is not about getting a higher score on customer satisfaction surveys. We define a happy customer as one willing to pay the same or more for your product and then is happy to talk about their experience. We define a loyal customer as a customer that always comes to you first for what they intend to buy and looks to you first for their purchase and any related product or service.

Why constellations? If we look at the stars, constellations are formed by the viewer connecting the dots based on their perspective and navigational needs. A star can be part of several different constellations. The same is true for today’s companies in a Constellation of Value. A company could be your competitor in one constellation but your partner in another constellation. The shift from thinking about a supply chain to a Constellation of Value requires a new mindset.

Constellations of Value have benefits that go beyond revenue growth. Constellations will help to make your supply chain more flexible, resilient, and customer-centric. The supply chain is at the core of business continuity and is commonly recognized by everyone from main street shoppers to the highest levels of national economic policy. Recently, Treasury Secretary Janet Yellen noted that, “Favoring the friend-shoring of supply chains to a large number of trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners.”

As companies shift to a direct-to-customer model they must design a new approach to business continuity and supply chain resiliency from that start. We’ve seen in the last two years a number of “unexpected” events—the COVID pandemic, the ship blocking the Suez Canal, and the war in Ukraine—cause enormous disruptions in supply chains and thus the ability to generate happy and loyal customers. In addition, the rapidly increasing number of cyber-attacks on software and physical goods supply chains adds to the unpredictability and increases the need for companies to develop trusted constellations that provide a level security in addition to flexibility and resiliency. Business continuity must be approached in a holistic manner that looks at risks ranging from data privacy to labor to environmental to geopolitical issues.

There are specific steps companies can take to establish resilient Constellations that incorporate business continuity by design. Never lose sight of your guiding star – growing more happy and loyal customers. If you adopt a new mindset it is likely you will form constellations to achieve a myriad of different goals.

Strategic data sharing becomes a critical new skill. What data would you share with another company as part of your constellation that would provide mutual benefit? What if this company is a competitor in another constellation? Companies need to understand that the value of data is relative – from company to company and from constellation to constellation. These situations will become more common and require companies to become laser-focused on exactly what data they are willing to share and what they want in return. At DSCI, we believe this will lead to strategic data trading between companies.

Direct-to-customer often requires companies to collect, store, process and transmit new types of data, including personally identifiable information (PII). Growing regulations around the world govern PII so data protection and privacy need to be considered at every step of the product development and market planning. It can’t be an afterthought.

Another issue that must be considered in shifting to DTC is the growing importance of Environmental, Social & Governance (ESG) to regulators, investors, society, and consumers. The companies that we work with on ESG topics say that for them to meet their ESG goals they must have the cooperation of companies in their supply chain. No company can meet their goals in carbon reduction or water usage or energy conservation on their own. As Constellations of Value are formed it is important to look at it from the ESG perspective. A company that may be a competitor in one sales channel or market segment could be an incredibly valuable ESG contributor to your constellation.

Direct-to-customer is also going to require new types of internal collaboration to support the Constellations of Value that will be formed. Companies will need to breakdown the silos in the company and create cross-functional workflows specifically aimed at creating more happy and loyal customers. Supply chain, marketing, sales, product development, HR, ESG, compliance, and finance should all be aligned around the idea of creating more happy and loyal customers. One of the critical levers here will be a combination of individual and team performance metrics. Ideally, they are tied to compensation.

Traditional ideas of channel conflict in direct-to-customer models need to be reevaluated. Increasing the number of happy and loyal customers demands a focus on business continuity and a holistic view of managing related risks.

A new supply chain operational mindset is needed that embraces the customer at the center of execution. New skills are needed to understand the relative value of data in constellations and how to share and trade data. New internal workflows are needed that smash existing functional silos and focus teams on collaborating – always tied to your guiding star of increasing the number of happy and loyal customers.

Craig Moss is director of data and change management for The Center for Global Enterprise’s Digital Supply Chain Institute (DSCI).

 


The original article can be found at: Supply Chain Management Review