New Normal : We don’t think so

Seismic shocks. Definitely. We are swept up in a period unprecedented in our working lifetimes. Demand and supply patterns have been disrupted simultaneously and in levels never previously witnessed, almost overnight.

Simultaneously disrupted demand and supply patterns

Do we know what the “new normal” will be? Not really. We are going to have to live in a world of grey for some time. We will need to prepare for the long term, whilst giving us the best possible flexibility and agility to deal with the many after-shocks and changes driven by Covid-19 global lockdowns.

As business leaders, we need to ensure our organisations are transformed. We need to re-invent business models for many categories and markets. We will need to re-imagine, re-shape our businesses and services. We need to plan for beyond now, and beyond this year. The future is going to rely heavily on:

Re-invent Business Models

Agility
Flexibility
Resilience

Fine words, but what do these mean?

Agility

Sales and distribution patterns have been severely disrupted, especially in non-grocery retailing and hospitality. Demand has not, however, died for all products and services. Convenience, necessity, new interests and new appreciations of desired work-life balance are bringing new customer perspectives and buying behaviours.

Ecommerce has grown significantly in a few months; customer behaviours and preferences are changing:

We are buying much more on-line.
It’s easier and more fun, not to mention safer, to buy on-line.
We are buying a wider range of products and categories on-line.
Service, product availability and speed of delivery are more important priorities than pricing.

New sales and marketing opportunities are emerging – for example:
- the older generation of silver surfers are deploying their purchasing power – buying more by necessity on-line – and finding that retailers often do not market to them specifically.
- for all ages, we no longer have to worry about getting to the gym as we can get better instruction and work-outs at home through our TVs and tablets, and can buy our favourite equipment on-line.
- we are upgrading our personal lives with time and investments at home, in the garden, and valuing our place in the community more.

Customer behaviours and preferences are changing

Traditional sales channels are also changing

We are prepared to try new sales channels – from local suppliers, direct from manufacturers/suppliers, and no longer rely on traditional large retailers. For many, the traditional retail shopping experience – based around convenience and browsing – will no longer be desirable or possible as social distancing restricts physical movement in stores and queues become more normal.

Normal retail experience –no longer desirable or possible

In short, we need as businesses to attend to our digital world to become more connected and more important to our customers. We must be more agile and truly embrace digital technologies to link to our customers and meet their changing needs, giving them better and more endurably engaging customer experiences. These digital transformations must focus on customer experience, customer engagement, content, membership, and attendant fulfilment services to build new and enduring loyalty with customers. It will no longer be about ERP, but Order Management Systems, Customer Engagement and being able to Know your Customer.

Expect innovation in digital technologies and in how customers will want to interact with you directly. AI (Artificial Intelligence) and big data analyses will be essential technologies to provide rapid insight and response to evolving customer interests and demand/buying patterns.

Expect innovation in digital technologies

Expect innovation in stores – more automation, robots, and more use of AI to serve customers in more and engaging ways.

As customer behaviours change, businesses will find that traditional demand forecasting systems no longer give the answers we need; demand sensing and working with real-time data, can and will help companies become more agile and better-informed on how to respond to new buying behaviours.

As markets change, service needs will change

Flexibility

No one has a crystal ball providing reliable insight into what the future holds in 2020, 2021 and beyond. Rather than worry, businesses need to ingrain flexibility into their DNA now.

With digital transformations and technologies, it is possible to innovate and try new initiatives with customers much more quickly, and against target segments of customers/demographics. These enable you to see what wins and what doesn’t and to build a learning organisation that has innovation, adaption, and flexibility at its core.

As markets change, service needs will change. This is the time to build ecosystems of resources that can provide the elasticity required to respond to fluctuating and changing patterns of demand. Not everything has to be owned.

This is a time for making our business operating models more responsive and able to adapt to new buying behaviours.

Build Ecosystems of Resources

Expect growth and changes in:

More vertical integration to build synergies in supply and customer service.
Vendor-to-customer (V2C) direct shipments, with retailers and ecommerce companies holding less stock.
More kerbside shipments/supply.
Retail stores going “dark” to focus on regional fulfilment of on-line orders.

Resilience

Agility and flexibility are critical, but resilience is fundamentally important and must be addressed in parallel.

Liquidity is still paramount for success. Managing revenue and profitability are essential skills. They always have been. But now these are sharply focused imperatives. Not just for today but in the future.

Liquidity paramount for success

We now find ourselves in a global economy with more risks. We have witnessed factory shutdowns for prolonged periods due to un-predicted pandemics – causing focused manufacturing strategies of the 1990s to start to collapse.

We have seen national interests prioritise supply over contracts/customers, and we have come to witness that we are shockingly vulnerable and exposed, with the awareness that we are not self-sufficient in many key sectors and categories. With tensions between nations on so many levels, and co-operation between governments lessening – risks to companies’ resilience and supply chains are at unprecedented levels.

So what should be on our agendas?

Sell/spin off non-core assets to address liquidity and valuation.
For those with the financial muscle, leverage mergers and acquisitions to build scale and reduce risks through vertical integration and developing flexible ecosystems of capable resources and suppliers.

Manage supply chains better. Emphasise speed, visibility, flexibility and resilience to build adaptability, responsiveness and reduce reliance on inventory, inflexible suppliers, and vulnerable assets.
Reduce inventories to improve working capital.
- Drive with demand sensing.
- Change sources of supply and reliance on long-term supply orders.

Better Supply chain management – speed, flexibility, visibility

Manage inventories closer to channels

More focus on on-line stock availability and speed of order fulfilment – from regional supply centres and dark stores close to markets.
Adopting more vendor-to-customer (V2C) shipments, especially for non-core range and higher value products.

Changing sources of supply – a longer-term initiative.
- But with the new focus on agility, speed of supply, reliability, quality, sustainability, and not just cost. This is likely to mean that near-shoring and local market supply will be valued more highly by customers and will present far less risk for companies.
  - In this emerging world, after our seismic shock, we need to be able to respond to demand quickly with a focus on quality. Long lead time supply contracts to the Far East will only build stock, commit capital too early, and potentially miss short-term and changing demand opportunities.
  - Customers are looking at the new world through the lens of global challenges such as climate control and sustainability. They will pay for ethical and green supply.

As a result, we see a growth of digital technologies to manage supply chains – not the hybrid ERP systems of the 21st century. These technologies will focus on:
- Visibility of supply – from design, product sampling through manufacture and transportation for delivery.
- Flexible ability to switch in-bound inventory to demand channels on a short- term basis to meet market demands in an agile manner.
- To book, track and trace inbound loads.

Summary

There is no new normal, just simple clear imperatives for business transformation. Agility, flexibility and resilience are needed to respond to a rapidly changing world, with new customer behaviours and no likelihood of a return to traditional norms. We need to re-invent our business operating models – both from demand management and in the supply chain.

There are no magic bullets, standard answers, or blueprints for where we are. But all strategic imperatives – agility, flexibility and resilience – need to be built now in the context of the current business situations and re-imagined. There is no going back, so planning and optimising your business are the only ways forward.

Imperatives :