Leveraging the Brand vaLue of SuppLy Chain in the age of M-CoMMerCe

By Ken Cottrill Supply Chain Briefings

Design and Layout by John Devaney Ascenders Design

Copyright Supply Chain Briefings 2011

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Introduction ........................................................ 3

Chapter 1 ............................................................ 6

Chapter 2 ............................................................ 9

Table of Contents

Chapter 3 ............................................................ 13

Chapter 4 ............................................................ 18

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Apple is the worlds most valuable brand according to the 2011 Most Valuable Global Brands study published by media research company Millward Brown Optimor. The iconic consumer electronics company increased the value of its brand by 84% this year to $153.3 billion. Thats a lot of iPods. What capabilities have enabled Apple to turn

Introduction

its logo into a gold-plated asset? A sixth sense for products that inspire consumers and a flair for creating superb technology must be on the list. Another strong candidate is supply chain management. In order to deliver its products to a worldwide customer base, Apple has to orchestrate a complex international web of suppliers often in situations where demand outstrips supply. The phrase may not feature in its marketing campaigns, but supply chain management it as the core of Apples business model (no pun intended). The function makes a significant contribution to the $153.3 billion worth of brand equity that the

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

company has amassed. The C-Suite is well aware of this; COO Tim Cook is in charge of supply chain. A number of enlightened enterprises have reached similar conclusions. Amazon and Walmart are two well known enterprises where cutting edge supply chain practices have helped to turn brands into household names. Supply chains brand-building role is about get even more important. The fact that Amazon passed Walmart in this years Most Valuable Global Brands rankings offers a hint of these changes. Illustrating how dramatically shopping has changed, Amazon, the online company with no stores, surpassed Walmart as the most valuable retail brand, says Millward Brown Optimor. One of the changes Mobile commerce (m-commerce) is transforming the way consumers shop. The retail industrys center

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

of gravity is shifting towards the use of mobile devices to make purchases. In this world companies have to fulfill orders without a hitch and change strategic course swiftly to keep pace with kaleidoscopic demand patterns. Laggards risk serious damage to their market reputations; a potentially fatal blow in the fast-evolving universe of digital commerce.

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

We Really Do Matter
It seems that most corporate functions believe that they have become more important over recent years. A common argument is that the function has become a highly valued strategic resource that straddles other disciplines. The claims are understandable; it is human to want to

Chapter One

be a significant cog in the machine. Supply chain is no exception, but in this case, the rationale really does have merit. First, there is increasing awareness that the functions long established mission to deliver the right product, to the right place, in the right quantity, at the right time, and at the right price, is at the heart of corporate strategy. Second, supply chain is a natural bridging function, since it covers the sourcing of materials and components, turning these inputs into products, delivering the products to end customers, and end of life disposal.

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Moreover, the profession has changed dramatically over the last decade or so, in line with changes in the business environment. And for the most part these changes have added strategic responsibilities to supply chains more traditional tactical roles. Here are some reasons why. globalization. As companies have expanded globally so the supply chains that support this growth have extended their reach in both geographic and operational terms. Market volatility. Flip-flopping materials and energy prices and fickle consumer tastes are making it more difficult for companies to plan ahead. They must be extremely agile to ride this roller-coaster successfully, and much of that agility resides in the supply chain. Just in time manufacturing. Synching supply lines with customer demand is a great way to cut costs, but it can also be a nerve-wracking business model. One slip up and the company

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

No Small Beer
Supply chain might sit below the surface in many companies but it is no lightweight when it comes to its impact on economic performance. According to the 2011 State of Logistics study published by the Council of Supply Chain Management Professionals business logistics costs in the U.S. were $1.2 trillion in 2010, an increase of $114 billion over the previous year. The 2010 total represents 8.3% of the countrys Gross Domestic Product. Logistics is part of the broader supply chain management field.

can be awash with product or scraping the barrel for supplies. Guess which function plays a key role in keeping the demand/supply gears meshed? Sustainability. Customer demand has taken on a green hue and companies must respond with viable, genuine measures to make their business models more environmentally sustainable. In many enterprises supply chain accounts for a large chunk of the carbon footprint. The relative importance of supply chain differs from company to company depending on the type of business and corporate culture. But its overall ranking in the league of functions has undoubtedly risen over recent years. The arrival of m-commerce gives the discipline another shove up the corporate ladder.

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Hidden Value
If supply chain is so influential, how come it has a relatively low profile? In the corporate arena supply chain management has its roots in warehousing and transportation, disciplines that do not exactly have their names in lights. It is only fairly recently that the significance of a well-run supply chain has started to turn executive heads. In the world at large there is little reason why supply chain should be a familiar concept. Consumers want to make purchases when they are good and ready; the frantic behind-the-scenes activity that goes on to make sure that items are on the shelf is largely irrelevant to them. Interestingly, a corner of this veil has been lifted. The UPS advertisement campaign led by the jingle We Love Logistics brings this relatively obscure term to mass audiences. Also, in the aftermath of Japans tsunami disaster in March 2011 the term

Chapter Two

Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

supply chain was coined by media outlets as they attempted to explain how the disruptions to businesses caused product shortages across the globe. Still, supply chain is relatively anonymous compared to higher profile departments such as sales. But it can make or break brands, and help to build the resilience needed to survive the direst of emergencies. Supplier issues buried deep in multi-tiered supply chains can surface in the form of product quality or safety problems that harm market reputations. These dangers are more apparent when companies outsource manufacturing to contractors and subcontractors located overseas that are difficult to track. Twenty-Twenty supply chain visibility has become crucially important to companies that rely on networks of suppliers that are scattered across the globe.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

More mundane disruptions such as late or failed product deliveries can be extremely corrosive over time. Buyers soon become disenchanted with a brand when the product is consistently unavailable. Flawed demand planning can undermine a brands standing. When there is excess product retailers use discounting to sell surplus items. Relegating a premium brand to the bargain basket does not do much for its credibility. Studies have shown that supply chain glitches depress shareholder value. Consulting firm PricewaterhouseCoopers LLC sponsored a study of 600 US public companies that suffered disruptions between 1998 and 2007. The analysis found that share prices dropped by an average of 9% below a benchmark group during the two-day announcement period (the day before and the day that the disruption was announced). Moreover, two-thirds of affected companies still lagged their peers on stock price performance a year after the incident, according to PwC.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

On the positive side is that brands built on a solid

When you see the depths to which Toyota had sunk, the concern that was being exhibited in the US about safety problems. And when you compare that with the way the brand performed in terms of sales at the end of the year, Toyota is a textbook example of brand resilience. In the sense that, if you invest in the brand over a number of years, actually it does ensure that youre able to withstand most things that happen to you in the marketplace.
Chris Hunton, CEO Team Land Rover/WPP Account Leader, Young & Rubicam, quoted in Millward Brown Optimors 2011 Most Valuable Global Brands study.

foundation of operational excellence are able to weather the storm of adversity better than flimsily constructed market identities. Toyota offers a shining example of this staying power. The brand is synonymous with lean manufacturing and cutting edge supply chain practices yet suffered the indignity of mass recalls in 2010. The famous supply chain sputtered as quality issues put Toyota on the defensive. Yet in the 2011 Most Valuable Global Brands study the car company rebounded and took top ranking in the car industry.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Riding the Electronic Storm

The anchor of a strong brand will help companies to maintain competitiveness as they navigate the explosive growth of m-commerce. This digital revolution is transforming the retail industry as consumers migrate to devices such as smart phones to shop. A study released by

Chapter Three

research firm Forrester Research in 2011 found that 48% of retailers have a mobile-optimized website; 35% and 15% respectively have deployed iPhone, Android and iPad applications. As electronic shoppers grow in number companies are trying to figure out what mix of services they should offer for maximum profitability. For example, according to Forrester 21% of all mobile traffic is coming from tablets, amazing considering the iPad was launched barely a year ago, says the research firm. Challenges for retailers include differentiating the consumer experience on a tablet versus a smart phone and figuring out features and functionality in dueling app/mobile Web ecosystems, Forrester observes.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Predicting the future shape of the m-commerce market is extremely difficult in this new frontier phase of its evolution. But one thing is clear: these dynamic retailing channels will have a profound effect on product branding. Word of mouth has been shaping consumer perceptions for as long as commerce has existed, but mobile connectivity, amplified by social media, provides a megaphone for these interpersonal communications. A dissatisfied customer can air complaints to her social circle in an instance and when used for the positive, word of mouth is a powerful generator of goodwill and brand advocacy, says brand builder Interbrand in its Best Retail Brands 2011 study. As well as fast-track communications, m-commerce provides rapid availability of information on

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

products and buying opportunities. In this quick fire buying environment, consumers have scant patience for patchy service or defective items. And they are looking for customized products that are an extension of the personal brand they espouse on social media sites. In other words, these individuals have no time for supply chains that fail to fulfill orders seamlessly and deliver personalized product quickly. Retail supply chains are challenged by this shift to improve supply chain execution to take, manage, and fulfill omnichannel orders, without increasing the cost of doing business. This is a tall order, when customers have come to expect free shipping and an array of shopping, pick-up and delivery options, says retail market research firm IDC Retail Insights in its 2011 Global Retail Supply Chain Predictions. Moreover, service levels that are acceptable today may not apply tomorrow. It is time to rethink and redesign retail supply networks, with an understanding that the dial is moving agility,

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

flexibility and responsiveness are crucial, IDC continues. Quick-response market reactions and the ability to reconfigure distribution networks on the fly are an integral part of supply chain management. By extension, error-prone supply chains are more likely to cause brand-busting failures in unforgiving digital markets. Supply chain also has a key role to play in helping companies to project the right market identity to mobile consumers. Individuality is a prized attribute in the digital space, a quality supported by supply chains designed to deliver tailored products. Sustainability is another identifier afforded a high priority in m-commerce circles, and supply chain plays a central role in improving environmental performance. The function is also critical in providing the visibility into product flows that companies need to avoid mistakes in quality control and safety that can seriously damage reputational health. This is becoming more

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

When the parts for the line come precisely on time thats logistics, A continuous link that is always in synch thats logistics, Carbon footprint reduced bottom line gets a boost thats logistics, With new ways to compete therell be cheers on Wall Street thats logistics
Lyrics from the jingle that features in the UPS We Love Logistics advertising campaign.

important in markets such as food products where tighter safety regulations are being introduced. Some companies have used supply chain to support specific brand attributes. An example is the campaign launched by CSX that burnishes the rail carriers environmental credentials by touting its low fuel consumption. Another is a campaign run by food and agricultural company Cargill that focused on its efforts to build supply chains in emerging markets. As more consumers switch to virtual shopping channels companies will need to pay more attention to the role of supply chain in supporting and maintaining their market identities.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

New Models
What exactly is this new supply chain role? To some extent it is a high-octane version of the traditional one, in that the function has to deliver the right product at the time at warp speed to meet the demands of digital buyers and maintain brand value.

Chapter Four

But m-commerce also takes supply chain into new territory as a critical component of market identity. The items purchased by electronic shoppers are not simply inanimate objects that have to be transported from A to B; they are a reflection of each buyers preferences and spending habits. M-commerce is plugged into a vast store of electronic information on the consumers that use their mobile devices to connect with retailers. Marketers are already knee-deep in this tide of information, and are beginning to understand how it can be sifted for vital market intelligence.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

It is possible to segment people into groups with similar buying habits and demographic profiles by analyzing social media chatter, for example. By tracking the movements of these tribes within a specific area such as an inner city, researchers can forecast where they will shop and what products they are likely to buy at any given time. Tracking purchases transacted via smartphones a facility that a growing number of retailers are offering can help companies to map buying behavior in near realtime. The full ramifications for managing supply chains have yet to unfold, but they will be transformative. By analyzing information from in-store mobile devices and electronic sales transactions, companies can build more accurate and timely product demand forecasts, for instance. This information, coupled with a deeper understanding of buying populations, will enable companies to

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

align product design more closely with consumer preferences and manage supply with greater precision. Enterprises that master these emerging capabilities will establish market-leading brands. But to reach these heights they need to develop fresh approaches to the way products are marketed and delivered to end customers. A new type of relationship between marketing and supply chain is sorely needed. The partnership could be described as a collaboration, but this overused term understates the degree of change required. The digital retailing business is less tolerant of traditional turf wars such as who has ownership of sales data or the number of product variants an operation can support. Companies that stumble over inadequate service levels or fail to move quickly enough to capture new demand, can do serious damage to their brands in markets where there is little room for error.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Also, m-commerce solutions must span national boundaries. A study by German market research firm yStats.com analyzed m-commerce developments in 42 nations. The Global Mobile and M-Commerce Trends 2011 study shows that 90 million individuals in Great Britain, Germany, France, Spain and Italy are expected to use mobile internet by 2015. In Germany more than 20% of all smart phone owners use their device on a regular basis to search for product information. M-commerce growth is trending upwards in Asia. Supply chain has to be an active participant in this expanding universe. The function needs to become intimately familiar with the digital landscape, and not be afraid to develop non-traditional methods and alliances. Better ways to manage inventory and building more flexibility into distribution networks are just two of the items on the functions to-do list. A wider view of risk management is needed. Supply chains are exposed to numerous risks from

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

The true potential for m-commerce is to provide consumers with a valuable tool for research, comparison shopping and retailer interaction. This will, I believe, not only meet the needs of customers but also maximize growth across all channels,
Jean-Chrisrophe Hermann, Vice President, Carrefour, commenting on the Next Generation Retail Europe Summit 2011.

supplier failures to natural disasters, and finding ways to mitigate and/or eliminate these disruptions is a major supply chain activity. Brand-related threats should be a part of this risk management universe. How does a change in sourcing strategy alter the organizations risk profile in terms of the standing of its brand, for example. Companies would also benefit from new insights into the role of supply chain in an m-commerce environment. Research is needed to shed more light on the link between supply chain management and brand equity. Which attributes and business models are the most sensitive to supply chain actions, and how can companies incorporate brand value into their supply chain strategies? There is increasing awareness that the efficiency of an organizations supply chain is an integral part of its identity. The social commerce revolution adds more weight to the importance of supply chain as brand builder. Companies that realize this and change accordingly will be better placed to compete in highly challenging m-commerce markets.

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Leveraging the Brand Value of Supply Chain in the Age of M-Commerce

Published by Supply Chain Briefings, http://www.supplychainbriefings.com

Design and layout by Ascenders Design, http://www.ascenders.net

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