…Continued from Part 1 in the previous edition of Thoughtfeast’s ‘The Omnichannel Supply Chain’…
We now understand that there is no magic bullet in the shape of overseas production – where labour costs are no longer crushingly competitive, lead times are far too long and unpredictable; consumer inquisitiveness (“Where did this come from? Who made it? What’s the impact of this being made?”) is becoming more confident, vocal and insistent. Consumers want to be involved in the conversation around the products that they spend their money on: when their purchasing decisions are no longer carefree and spontaneous but more thoughtful and drawn-out, consumers want a greater stake in the bargain.
But one of the biggest influencers in this new ‘control and converse’ movement is self-centred. If you have control of the raw materials then you close down some of the vulnerability around rising prices, scarcity and interruption in your supply chain. I first noticed this happening in the luxury market when big players such as LVMH (the biggest) started buying alligator farms and gold mines to ensure that the fire burning the passion for luxury could be constantly stoked.
Then major food retailers such as Waitrose and M&S began taking on their own farms to ensure that the ‘virtuous circle’ of food production was complete, secure and consistently delivering.
Now DFS – not a name we in the UK would have naturally associated with provenance and quality – are bringing their light out from under their bushel (bushels actually – they have factories in Yorkshire and Nottingham). No longer the everlasting sale – DFS now wants to highlight their craftsmanship, quality materials and UK-standard manufacturing processes. UK production has risen from 20% to 30% since 2010 – a softly shining beacon in this recession-fogged murk.
The consumer’s concern over provenance, which is driving new definitions of value, is also closing the loop between consumer, producer and retailer/distributor. Consumer-driven vertical integration? It’s not quite as simple as that, but it’s a very smart thing to do for all involved. Sourcing, designing and making the product gives the retailer control over much of the supply chain – as long as they are smart enough to understand what processes, infrastructure and people they need to make this scalable, sustainable and profitable. The suppliers get greater peace of mind as they have visibility over the ‘what, where, who, when’ of their materials/services. If they can be plugged in to the product (not just the production) process, then suppliers can build better relationships with both retailers and customers, and a greater understanding of what is selling, what could sell, and plug this back into the development process. And hopefully the customer gets a better deal out of this – not just making better purchasing decisions and making their pound really worth something, but being a valued participant in the ‘ Circular Economy ’ which we are now seeing as a transformative product.