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Direct-to-Consumer – A Supply Chain Dream?

There’s a whole new generation of manufacturers shaking up supply chains and traditional retail. We’re talking about direct-to-consumer businesses that manufacture, promote, sell, and ship their products themselves, eliminating middlemen. In the US alone, sales from D2C are expected to reach $175 billion by 2023.

ELT to Eliminate Supply Chain Data Silos

What does this mean for supply chains?

E-commerce and omnichannel fulfilment have radically transformed not only supply chains, but also customer expectations and behavior. Customers can now easily compare products from different manufacturers and retailers to find the best product at the right price, and have it delivered within days right to their doorstep. This shift has compelled manufacturers to redesign their supply chains to match demand and build a competitive advantage. All developments point to the rise of direct-to-consumer (D2C) supply chains. With the number of consumers worldwide buying directly from a brand going up to 64% in 2022, from 49% in 2019, an increasing number of manufacturers looking to capitalize on new channels. But achieving D2C success is neither easy nor straightforward. Brands need to keep pace with the unrelenting demand for convenience, faster deliveries, and competition from new entrants. They also need to deal with challenges and uncertainties impacting their logistics and supply chains, while trying to ensure that they can sustain this heightened level of activity. So how is D2C impacting supply chains and pushing supply chain managers to make changes? Here are some key points to consider.
Product availability has become a priority Even the most modern supply chains were not designed for D2C demands like lightning-fast deliveries and always available stock. Manufacturers need to remodel their supply chains to ensure that product availability online matches stock levels in the warehouse; and if available, can be delivered within the promised timeframe.
Accurate and real-time communication Thanks to the Amazon effect, customers have come to expect same-day or next-day delivery. Pasting on words like ‘free’ or ‘fast’ next to displayed products will no longer suffice. D2C brands must now offer flexible delivery options and ramp up their shipping processes and supply chains to ensure delivery expectations on time. Buyers must also be able to easily track the status of their shipment in real-time and through push notifications. Brands like Beavertown Brewery have increased their sales by 1000%, up from an 85% drop in business, just by launching into D2C rapidly.
Continuous evolution While it remains a question if D2C will go mainstream, there’s no doubt that agility and innovation are two key qualities that manufacturers, as well as retailers, must build. For instance, D2C brands will have to look beyond traditional warehouses and set up fulfilment centers scattered over multiple locations, especially near the more populated localities. These centers must be equipped to serve customers directly without involving a retailer, which eventually will help reduce delivery times and increase product availability. They will also need to fine tune their order management processes to ensure on-time delivery of not just large shipments but also smaller packages to individual buyers.
Agile supply chains Agile supply chains combined with exceptional planning and execution alone can support a multi-channel delivery model. It also requires extensive collaboration between all players of the supply chain ecosystem to ensure they have the proper processes, technology, and logistics partners to deliver with velocity and predictability.
Master last-mile deliveries Most shoppers won’t purchase from a brand again if their shipping experience was bad. However, manufacturers can find it challenging to maintain last-mile deliveries. The reason could be inefficient or erroneous route planning, poor supply chain visibility, or unexpected delays due to external factors. Ensuring last-mile deliveries is critical because repeated late or wrong deliveries have a ripple effect on the business and brand reputation.
Enable easy returns E-commerce players have gradually mastered the art of frictionless returns and reverse logistics. However, D2C brands may not yet have the resources or processes to handle returns. Easy returns are an important part of the e-commerce experience and setting up robust reverse logistics is critical to D2C success.

Intelligent Supply Chains help mitigate D2C challenges

The D2C model requires a reimagining of traditional CPG supply chains. Intelligent Supply Chains use data and insights to streamline operations and detect new signals that help prevent D2C problems. Leveraging data and analytics will help anticipate customer demand, optimize inventory management, and ensure timely fulfillment. AI and advanced analytical solutions can help brands simplify D2C supply chain complexities through predictive insights. The extracted data can provide network-wide inventory visibility, thus reducing, or eliminating, sub-optimal levels of inventory across the distribution network. With a more granular segmentation, D2C brands can identify best-performing retails and track prices in real-time to avoid pricing conflicts.

D2C Supply Chains – Simplicity, efficiency, and choice

The biggest advantage that D2C offers is that it allows manufacturers to get closer to customers, gather invaluable customer data, and build a direct communication channel for feedback. While we’re not suggesting that retailers and distributors have no role left, D2C does open unprecedented opportunities for manufacturers. With ongoing advances in supply chain technology and delivery logistics, D2C players are more confident in building efficient supply chains that will help them fulfill customer needs, gain a better understanding of their customers, and consequently create better brand experiences. In addition to the right technology, this will require the building of supply chains that are agile, responsive, resilient, intelligent – powered by data, analytics, and AI – and provide greater economies of scale. Selecting the right supply chain partner with a deep understanding of multiple local geographies and customer requirements is also important for D2C success.