There has been a pretty constant e-commerce drumbeat in the business-to-consumer (B2C) arena over the last few years. Brick and mortar stalwarts with their roots in the 19th century are facing declining sales–sometimes even outright extinction–while e-commerce sites like Amazon.com grow by leaps and bounds every year.
"Timely data is the foundation of mastering the e-commerce challenge. It’s a truism that you can’t manage what you don’t measure"
What does this have to do with manufacturing? Think of it as a preview–or a warning. Many of the forces transforming B2C interactions are affecting business-to-business (B2B) relationships as well. In fact, B2B e-commerce is already twice the volume of B2C e-commerce in the United States (source: Forrester Research, via Practical Ecommerce), and is growing fast.
There are three main ways in which manufacturing companies can expect e-commerce to affect the way they do business: first, by taking friction out of the ordering process; second, by increasing the importance of the direct-to-customer sales channel; and third, by changes in customer expectations about the speed, simplicity, and reliability of doing business.
These three points are all linked. Whatever else our role in the economy, we are all consumers and we take our B2C experiences into the office with us. Amazon has set a high bar for expectations: streamlined access to products, clearly-presented information about delivery options (i.e., timing and cost) at the time of order, reliable fulfillment, a straightforward return process, and the ability to see–and contribute–feedback on both product and process.
So, why shouldn’t every purchasing interaction be this easy? We all know there are lots of reasons why not, especially for complex products, but that is the baseline experience driving our customers’ expectations and the farther you are from meeting them, the more tenuous your grip on your customers’ business.
Using the technologies and techniques of e-commerce, you can make it easier for your customers to do business with you. In many cases, taking out friction from the ordering process can increase the volume of business going through your direct-to-customer distribution channel. But now, in order to meet those Amazon-driven expectations, you need to substantially transform your distribution/fulfillment game. Easier said than done–Amazon has spent billions creating the technology infrastructure underpinning their cutting-edge capabilities. What can you do? And how can you do it in a way that preserves or enhances your margins?
What Are the Building Blocks of Success?
Good, timely data is the foundation of mastering the e-commerce challenge. It’s a truism that you can’t manage what you don’t measure. In practice, this means that you must gather data from across your distribution/fulfillment chain–from your own internal order management and inventory control systems, as well as from external partners such as carriers and 3PLs.
Just getting the data isn’t enough; in order for it to be actually useful for enhancing the customer experience, the data from all of these disparate systems must be normalized, that is, translated into a common standard. With that, you can form a single, comprehensive, end-to-end picture of the customer transaction and do the analysis needed to make recommendations across different potential fulfillment or distribution options possible (and to make those options visible to the customer at the time of the order, to duplicate that Amazon-like known cost known delivery date experience).
To ensure that you are providing your customers with the best possible combination of cost and customer service, that data should be fed into advanced predictive and prescriptive analytics designed to optimize the cost/service tradeoff–backward-looking descriptive analytics may show you where you have been (and help to diagnose past problems), but won’t give you the timely guidance you–and your customers–need. Finally, the ability to normalize data enables a dialog between analytics and the execution systems they inform, allowing you to feed intelligence back and create a closed loop, end-to-end distribution or fulfillment process.
What Does All That Buy You?
The ability to gather, normalize, and analyze data from across your distribution or fulfillment process provides you with four critical benefits: First, you get a clear picture of where you actually are. What is the actual cost of the product, as delivered, based on real information and not just on historical cost averages? Second, with timely, accurate, normalized data, you have the ability to optimize for customer service and cost–getting your distribution or fulfillment process lean. Third, by providing timely, accurate, normalized data to advanced analytics, you can identify the best tradeoffs of cost and service or the best way of actually getting your products to your customers. Fourth and finally, you can use the intelligence that you have created to continuously improve your distribution and fulfillment functions and to keep abreast of changes in your customer base, your market, or your competitive environment–staying lean.
Where Does That Leave Us?
At Grandcanals, we understand that e-commerce is fundamentally changing the B2B world, just as it is on the consumer side. Even though e-commerce transactions still represent a minority of the volume of B2B business, they represent both a disproportionate share of growth and are influencing customer expectations across all channels.
How can you turn this disruption to your advantage? By getting in front of the wave of change and taking lessons from leading-edge B2C e-commerce companies. The combination of comprehensive data and advanced analytics will enable you to clearly understand what is going on right now, how to improve your customers’ experience, and to create the means for continuous improvement so you can keep pace with a constantly-changing world.
See Also: Muckrach | CIOReview