DSCI Insights Into Action: Conversation with Under Armour’s Craig Jones on Data Trading

DSCInsights Into Action is a new interview series with business leaders on advancing digital supply chain transformations. In this first episode, DSCI Managing Director Marko Kovacevik talks with Under Armour’s SVP, Operations & Supply Chain Craig Jones, on how his company uses data trading to connect with customers.

 

 

Direct-to-Customer: The need for dynamic supply chains

In a world that has been disrupted by a global pandemic and now a European conflict, we have seen firms execute years of digital transformation practically overnight. Putting the customer-first, companies have reevaluated their supply chains with focus on nearshoring, spreading supplier risk and relocating distribution centers. One of the surprising and unpredicted outcomes, driven by the customer-first priority, has been a move toward direct-to-customer (DTC) business models driving the need for dynamic supply chains.

Businesses are competing with their traditional channels in a drive to better understand their customer, act upon and meet customer expectations. Companies want to know more about their customers’ motivations and purchasing habits, what they think about the company’s product, and, most importantly, what makes them happy so that they can produce a better, more desirable product. No longer satisfied with the filtered, incomplete, and often misleading information provided through distributors and retail outlets, companies are establishing direct channels, that in many cases, upend successful business models and require a re-engineering of operating processes.

It is not just retail companies that are going DTC. Traditional manufacturers that were dependent on distributors, such as beverage maker Diageo have introduced direct sales online. So have apparel manufacturers such as Under Armour and Nike, which consolidated retailers as they expand direct channels. Digitalization and personal experiences are blurring the differences between B2C and B2B customer expectations. As we have written extensively at the Digital Supply Chain Institute (DSCI), today’s customer—what we call the New Customer—has vastly different expectations and understanding the New Customer requires a more comprehensive data-driven approach.

DTC is all about putting the customer first and driving supply chains to become customer present. Digital supply chains are a necessity as DTC becomes pervasive.

Just a couple years ago, DTC would have been an impossible challenge for many organizations. Digital transformation by all businesses, large and small, requires connectivity and automation throughout the supply chain. However, the most important characteristic of the digital transformation of supply chains may be that they are adaptable and dynamically reconfigurable to adjust to changes in the market whether those be customer whims or seismic events like war or a pandemic.

In fact, today’s supplier networks have evolved so dramatically that we at DSCI believe it is more appropriate to think of today’s digitally connected supply chain networks as three-dimensional constellations that can be dynamically reconfigured to meet rapidly changing market conditions.

Dynamic supply chains are, quite possibly, the most significant supply chain transformation since the advent of offshoring.

What are the practical implications of DTC enabled supply chains? Here are a few observations:

Emergence of dynamic supply chains: The New Customer will be the center of DTC business models. While this may seem obvious, few businesses have truly put the customer first, let alone being customer present. The ability to recognize demand signals and dynamically adjust supply chains to those changes puts the customer first. Data management tools in conjunction with artificial intelligence (AI) and machine learning (ML) will enable dynamic adjustments to meet customer needs which may include changes in distribution, suppliers and shifting product between channels to optimize sales. Characteristics of dynamic supply chains include:

• Tightly integrating demand with supply: Access to real demand data will allow synchronization across the business. This in turn will enable automated workflows across the business and throughout the distribution and supply chain. With tighter workflows, partners, and internal operations can adapt quickly to market changes and adjust manufacturing, supply and distribution including suppliers and routes to market.

• Changing channel prioritization: Cross channel management and workflow consistency is required, but certain channels may take priority over others. Furthermore, workflow could be significantly different as one channel deals in truckloads and another delivers smaller quantities. In one channel, an SKU may represent a truckload or pallet, and, in another, a case or bottle. These changes will permeate the supply chain and force wide-ranging changes.

• Shorter supply chains: Global sourcing reduced cost but created long and inflexible supply chains. Market adjustments took months. Now that timely feedback is possible, businesses are rapidly building shorter more flexible supply chains that closely link supply with demand to optimize sales. With the move to nearshoring, firms will no longer be faced with the inflexibility that offshore manufacturing with months in transit create.

New business models: Managing demand signals dynamically requires an adaptable and digitally linked business model that drives near-shoring, multiple supply sources and optimized distribution to meet the New Customer demands. New business models will likely include:

• New systems to support business model changes: Businesses that once sold by the truckload or pallet will reengineer systems and processes to handle the new channels. Financial systems will need to change to support when goods are sold (e.g., when they are shipped to the customer instead of when they leave the warehouse for the distributor). Warehouses will need to be physically changed to handle smaller quantities, logistics and inventory management will be updated to deliver to new points of sales and marketing will need to address the New Customer.

• Inherent channel conflict: With DTC there is intentional disruption of traditional routes to market with downstream impact to supply chains and distribution. Supply chain networks, that represent structured supplier relationships are giving way to constellations of value that are more dynamic and can be quickly adjusted to market shifts that may range from a supplier not being able to deliver to a customer who requires a different product. DTC performance demands data sensing with rapid adjustments to product sourcing, distribution, and mix.

• New business relationships: As DTC channels are established, different and new business relationships will be created. Dynamic tuning of supply chains will become pervasive. Existing partners will be evaluated for fit in new business models and new partners will emerge. This will force the re-engineering of operational processes and workflows.

New leadership and talent: Working directly with the customer will require new skills whether those be call center, business development or account management. New leadership skills are required to adapt to DTC business models with greater emphasis on collaboration and dynamic business model changes. There will be focus more on workflow management and linking demand and supply dynamically. The talent that holds your supply chain together today will be less important in the future as automation and the use of AI and ML become ubiquitous. In the future, critical talent will more likely be those that understand the consumer and customer deeply and build the models and write the AI and ML rules.

Governance: To ensure compliance with internal policies and external regulation, governance will be essential. Digitally extending the enterprise to manage end-to-end workflows with intelligent sensors along with AI and ML tools will require risk management, data privacy and data security policies to be updated and for many, developed. For example, how do you recognize if your AI algorithms are behaving as designed or keep an auditable inventory of those algorithms so that they can be evaluated for compliance? Digitalization opens new opportunity for activity that must be monitored and proactively addressed.

DTC transformation is driving the need for dynamic supply chains. Those businesses that adapt their business to exploit digital capabilities and technologies will be those that grow market share and outperform competition.

To Transform to a Digital Supply Chain, Don’t Overlook People Skills

Data literacy and people skills are critical in a data-driven supply chain. Third in a five-part series exploring the critical role of data in a digital supply chain transformation.

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Data Stewardship and Governance in a Connected World

Supply chains are becoming powerful sources of data. Governance and stewardship are critical issues for business leaders. Fourth in a five-part series exploring the critical role of data in a digital supply chain.

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Protecting Data in a Digital Supply Chain

In today’s interconnected world, data protection and cybersecurity are essential to manage supply chain risk. Fifth in a five-part series exploring the critical role of data in a digital supply chain transformation.

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The Digital Supply Chain Runs on Data

An effective Digital Supply Chain requires the creation of new data models that organize new sources of data and establish new data relationships. Second in a five-part series exploring the critical role of data in a digital supply chain transformation.

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In a Digitally Integrated Value Chain, Data is Power and Competitive Advantage

To achieve sustained competitive advantage, extending beyond enterprise boundaries is essential.

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Six Keys to Serving the Post-Pandemic End Customer

Companies that have the skills and knowledge to have a tighter relationship with the end customer will emerge stronger, more resilient, and more digital

Much has been written about the impact of the COVID-19 pandemic on supply chains and the predicted long-term effect on the global economy. What no one expected to emerge from this disruptive period, however, is clarity into the key attributes that will define success in a post-pandemic global economy.

We have seen many enterprises accomplish more in the last year than they planned, in many cases, to accomplish in the next decade. The digital transformation of businesses, by any measure, has accelerated at speeds previously not thought possible, and while capital investment was tightly controlled, and employees were working remotely. Yes, much was done by government to help keep the economy afloat, and some sectors were more devastated than others, still overall private enterprise accelerated their digital transformation of core functions like supply chain and rethought their operating models. The digital transformation of the supply chain, whether embedding sensors in products and networks, using Artificial Intelligence/Machine Learning (AI/ML) tools, deploying a new generation of robotics, or applying data analytics, is opening new opportunities.

It is our view, backed by our research, that enterprises will emerge post-pandemic stronger, more resilient, and more digital, with a clear focus on what the Digital Supply Chain Institute (DSCI) identifies as, the New Customer. The “New Customer,” whether B2B or B2C, has a fundamentally different way to make purchasing decisions based on criteria that include near-instant delivery, bespoke products and services, dynamic pricing, and among other factors, a delightful user experience.

You can read the complete article here.

Before Starting Your Next Digital Supply Chain Project, Ask These Three Critical Questions

To improve your odds of success, here are some performance outcomes you should be targeting before you plan your next digital transformation project.

In talks with our Digital Supply Chain Institute member companies, we’ve found that nearly all of them are engaged in digital transformation projects. Some are large-scale, enterprise-level endeavors, and others are more modest efforts focused on fixing immediate problems. One thing that is frequently missing in the planning and prioritization of these projects is a clear set of targeted performance improvement outcomes. It’s easy to be drawn into simply creating a short-term workaround or become lost in building large-scale infrastructure while overlooking the critical improvements and outcomes that a digital supply chain offers.

One of the most mission-critical performance metrics for supply chain leaders has always been lowering costs, especially inventory holding costs. Much of supply chain research has focused on minimizing inventory cost while at the same time being able to quickly satisfy customer demand. Digital supply chain projects promise to reduce the inevitable trade-offs between controlling costs and delighting customers.

To make sure that your next supply chain transformation project makes the most of what digital initiatives offer, make a shortlist of expected performance outcomes. Here are a few of the questions you should ask before green-lighting a project proposal:

Does the project promise a performance shift to reduce trade-offs between cost and customer satisfaction?

Finding a digital solution to reduce costs should not be a one-dimensional exercise. Projects should at a minimum deliver the same level of customer satisfaction they did before any changes are implemented. If your actions cut costs but might lower customer satisfaction, rethink your approach. Digital transformation promises to unlock the ability to reduce inevitable tradeoffs by delivering new enhanced processes and business models. Make this a consistent goal of your initiatives and you will have a good chance of realizing better performance outcomes. A more accurate demand forecast, enabled using unstructured social media data, for example, may allow for ripple effects of cost savings, while at the same time minimizing out-of-stock situations, even improving customer satisfaction.

Will your project enable new business models that create growth through new revenues that were not accessible under the traditional model?

A digital supply chain project that aims to simply digitize an existing process or business model will likely miss the mark in performance improvements. Instead, take some time to review the business model itself before you implement technology solutions. By investing in digital data that uncovers more insights into customer preferences and needs, you might be able to adapt your business model to new segments. This way, the supply chain function may be able to access and drive growth into customer segments that might not have been available under the more traditional business models.

Will your digital transformation sustain competitive advantage through ‘hard to replicate’ integrated capabilities?

Before taking on a digital supply chain transformation project ask yourself if it takes advantage of opportunities to integrate processes and information across your enterprise. To sustain an advantage over competitors, your transformation initiatives should be hard to replicate by others. Integration across functions in organizations is often difficult, but this is precisely why you should aim to do it. It means you can build a capability your competitor lacks, giving you a chance to outperform them. Convincing your sales and marketing departments to share consumer insights with managers in the supply chain might give you a unique ability to design a strategy that can meet customer needs in entirely new ways.

By addressing these questions before you hit the go button on your next digital supply chain project, you might be able to get beyond simple incremental performance. Instead, you may realize the true performance promise of what digital supply chain transformation offers.

Supply Chains: The Growing Target of Cyber Attacks

The Colonial Pipeline, SolarWinds, and Microsoft Exchange cyber breaches are the latest vivid reminders that cybersecurity is a core supply chain issue and a threat that is growing in frequency and impact. Colonial Pipeline epitomizes supply chains in the truest sense, providing 45 percent of the fuel to the East Coast of the U.S. SolarWinds had its software development supply chain compromised, affecting an update to 18,000 users of its network management software, including several key U.S. government agencies. Meanwhile, the Microsoft Exchange attack affected at least 30,000 users.

These are perfect examples of why supply chain cybersecurity is so critical. Hackers are systematically disrupting organizations directly and using indirect supply chain companies as a gateway to access high-value targets.

All this is taking place at a time of workplace disruption driven by the COVID-19 pandemic. Companies are accelerating their digital transformation to build greater visibility, agility, and resilience into how they go to market and meet the needs of their customers. More critical data is being shared every day in far-reaching global supply chains. All companies today are connected. No company is, nor can be, an information castle surrounded by an impenetrable moat.

SolarWinds is an ugly reminder that if the companies in your ecosystem are vulnerable, you are vulnerable too. From this moment on, you should never again think about cybersecurity without considering third-party risk. And conversely, the companies in your supply chain, even small ones, should never think they’re safe because you “don’t have anything hackers would want.”

In today’s inter-connected increasingly digital supply chain world, every organization of any size is a potential target. Hackers will try to go through you to get to another company and they will try to go through your customers or suppliers to get to you. The whole situation is made much more complicated because of new hybrid business models. Your employees may be rotating from home to office, using different devices and connections. Although you may feel you have the situation under control, what about your suppliers, partners, and other third parties in your supply chain?

For large companies, here are some basic steps you should immediately take with your supply chain stakeholders to help them protect themselves and ultimately protect you.

First and foremost, you should ensure that you and every company in your supply chain has an incident response plan that includes regularly scheduled backups of critical data. As the Colonial incident highlights, knowing what to do during and after an event—and having essential data backed up in the case of a ransomware attack—could mean the difference between a major blow to your business and a mild annoyance.

To help implement this and other actions, the companies in your supply chain should have a designated, trained Cyber Leader. A person that is responsible for building a culture of cybersecurity by focusing on human behavior. They don’t need to be technology experts. They need to be able to communicate how important it is for everyone to develop good cyber habits. They need to make sure that the company puts some simple policies in place around four core issues:

  • Passphrases: encourage them to change passwords to 15-character passphrases. It has been reported that some employees at SolarWinds were using “solarwinds123” as their password. Don’t make it easy for hackers to crack your passwords. Any 8-character password can be hacked in 3 minutes, but a 13-character password takes 5.2 million years.
  • Multi-factor authentication: Use it any time it is offered. If it is not offered, consider switching to a software or service that does offer it.
  • Phishing: Have them conduct refresher training for employees on how to spot a phishing email or text. The email may even look like it is coming from another person in their company or your company. Reinforce the message to never open an attachment or link if at all suspicious. Tell them to contact the sender through alternative channels to verify it is real.
  • Devices: Encourage third parties to review what devices their employees are using to connect to their network or your network. If they are using personal devices, make sure they follow the rules about passphrases and multi-factor authentication. Avoid the use of USBs and removable media.

These basic things and other recommendations developed jointly by the Digital Supply Chain Institute (DSCI) and the Cyber Readiness Institute (CRI) can help you begin fortifying your security and that of your supply chain by building an operating culture of cybersecurity. Start today by raising awareness among your third parties. Push them to develop good cyber habits. It is critical to your company and every company you touch. By working together, we can improve cybersecurity for all.