How manufacturers can pivot from response to re-conceptualisation

SYSPRO chief innovation officer, Kevin Dherman.

Over the past few months, the impact of the pandemic has forced many businesses to scale back operations or shut down completely. Other organisations have been fortunate to reinvent their business models to remain relevant. The key to survival however lies in the ability to change in order to create long-term, positive outcomes for the business. SYSPRO chief innovation officer, Kevin Dherman, explains.

According to a recent McKinsey report entitled Elevating customer experience excellence in the next normal, in order to survive, nearly all organisations should reorient their business model to become more digitally focused. A good example can be seen in the retail industry, where bricks and mortar has been supplemented by e-commerce platforms.  This has largely been driven by changes in consumer spending behaviour, where customers have been shopping from the safety of their home.

While many consumers have opted to make purchases online, some stores have chosen to shut their doors and open ‘dark stores’ or fulfilment warehouses. A dark store is a retail outlet or distribution centre that caters exclusively for online shopping. This pivot allows them to increase revenue streams by improving customer service and shortening the supply chain.

Prior to the pandemic, Coles and Woolworths had already been operating dark stores as part of their online grocery shopping service but for many retailers, the dark store shift has been reactionary. In April the Accent Group, parent company of retailers including Platypus and The Athlete’s Foot, turned some of its retail locations into dark stores to help meet the jump in demand for its online shopping. Accent Group was able to continue to operate online during the pandemic, despite closing stores.

While retail has remained agile, research by McKinsey has shown that B2B companies may be too focused on the present, but the big question now is how manufacturers can tap into the potential of e-commerce to not only respond to the pandemic, but also reimagine the industry for the long haul. The answer may lie in technology and more specifically in application integration.

Connecting directly with the consumer

Within the supply chain, wholesale manufacturers typically sell products to retailers, which then sell directly to consumers. In order to meet the new consumer demand, some manufacturers have opted to turn that model on its head by incorporating a retail model and selling directly to the public. In order to save on costs and respond immediately to end customer needs, manufacturers are not opting to build entire e-commerce sites from scratch, but rather to leverage existing platforms such as Amazon or Alibaba.com.

To achieve this, they have turned to a software intermediary, known as an API, that allows application programs to interact with each other and share data technology. These API services help to move organisations from a linear supply chain to a circular supply chain by giving manufacturers the ability to connect to the whole world, not just their immediate environment. This is more relevant for food and beverage manufacturers who may have had to change their supply chain during the pandemic. For example, the Australian wine industry demand from China dropped due to the pandemic and the tariffs imposed on Australian wine imports. By plugging an API into their existing ERP, it could enable these businesses to reroute produce initially aimed for export markets or local restaurants and focus on selling these through domestic channels where consumers can buy the products direct online.

The ERP Advantage

Enterprise resource planning software (ERP) is an integral component in ensuring a successful pivot.  Not only will it provide real-time visibility of stock, but also offers a back-end-system that will support the collection and control of payments in direct consumer sales.

Another advantage is that returns can be tracked and digitally accounted for, including the authorisation of returns, issuing of credit notes and tracking of returned inventory.

Progressing beyond the Pivot

While the pandemic continues, an opportunity is presenting itself for manufacturers to think out of the box. A pivot is much more than an ‘experiment’, it’s an opportunity for businesses to re-evaluate their customer and workforce journeys, re-mapping them to comply with regulatory requirements for now and into the future.

There are also multiple connected platforms from Amazon, GraysOnline and ebay, to plug into and create new revenue streams. These platforms already have a captive audience that manufacturers can use to tap into their desired demographic.  It is now up to manufacturers to reimagine what is possible.