Battling the Amazon Effect, manufacturers embrace the role of retailer

Findings from the 2018 Intelligent Manufacturing Survey, conducted by JDA Software, suggest manufacturers are embracing a new retail-like role, willing to cater to both consumer needs and the competitive direct-to-consumer space.

Responding to the “Amazon effect” and today’s consumer demands, the survey suggests manufacturers are reprioritizing and focusing technology investments on inventory optimization solutions (43%) and integrated planning and execution technologies (41%). Additionally, 31% of manufacturing respondents revealed a commitment to integrated planning, wherein their long- and mid-term planning process is integrated with tactical execution through a single, connected technology accessed by users across the supply chain.

“The Amazon and Alibaba effect have significantly compressed consumer order fulfillment delivery time expectations,” said Fred Baumann, group vice president, industry strategy, JDA. “Now, more than ever, planning and execution processes must be more tightly coupled. Incorporating real-time data inputs across both the planning and execution horizons can further bolster an integrated approach. We found that, as a result of implementing supply chain digitalization strategies or technologies, the subset of respondents who follow an integrated sales and operations planning (S&OP) and sales and operations execution (S&OE) approach reported benefits such as greater profitability (61%), increased customer service levels (49%) and reduced spend (48%).”

In an effort to address future shopping behaviors and consumer tastes, 51% of manufacturers say they are focused on enabling internal and external collaboration across the supply chain. Many manufacturers say they are also focused on demand sensing (44%) and/or data science (33%) to improve forecasting.

According to the survey, there are about as many “predigital” manufacturers (18%) as digitally mature manufacturers. However, while only 18% of respondents say they’ve reached digital supply chain maturity, nearly twice as many respondents (35%) anticipate they will get there within two to three years.

“Supply chain digitalization is no longer a ‘nice to have. It’s a strategic mandate and a dramatic differentiator that drives revenue and market share growth,” Baumann said. “The companies investing in their supply chain today, that have support from their leadership teams and those that are positioning the supply chain function as a key point of differentiation – these are the companies that will excel and achieve profitable business growth.”

Sixty-five percent of those survey respondents who are targeting a two- to three-year digital transformation benchmark are on track, reporting that supply chain digitalization is a “major priority” for their organization in 2018. Aspirational manufacturers have also reported a current investment in digital strategies and solutions, as detailed in this video.