Are We Heading Toward a New Era of Personalization at Scale?
Even though the trend of personalization at scale is well-established in marketing circles, the concept is also becoming more pervasive in the world of supply chain management. The traditional model of mass-produced, low-priced items, manufactured in the lowest cost-arbitraged centers and delivered through stove pipe channels is under stress.
Even a casual glance at today’s headlines indicates that growing trade regulation and the impact of COVID-19 are causing globally distributed manufacturing and distribution strategies to come under duress. Instead, there is increasing momentum towards goods produced with local content, influenced by real-time consumer demand, and distributed via a closer-to-the-consumer network. This accelerating preference towards mass product personalization challenges some of the very fundamentals that used to be taught in business schools around the country — that standardization is king and economies of scale will come to dominate.
The continued acceleration of the shift toward mass personalization is not a given. The most effective mass personalization strategies are based on detailed customer data, and while some customers will share personal data to receive more insightful, tailored offers, more and more consumers are becoming more concerned with data protection. Also, the shift to personalization at scale requires companies to take a step back from their traditional operating models and pivot towards a hyper-local approach. In the world of retail, for example, brands can no longer operate as one entity, with some modest, periodic segmentation. They must operate at store-level granularity, with a keen understanding of their regional market. This new paradigm impacts everything from inventory to production to distribution. To make personalization affordable, companies have to think differently about how their operations are structured.
Indexing on mass production and standardization, most manufacturing sites produce large volumes with few variations, trading flexibility for quantity, and low per-unit cost. Traditional supply chain organizations struggle to handle this new personalization trend because their production planning process is based on mass production with few variations. But the main way to support this personalization/localization trend is to feed the data about hyper-local and personal preferences (historically only captured for improving execution within lead-time) directly into the demand planning and production planning process. Companies can’t accomplish personalization at scale by making execution more responsive or adaptive, because this approach is predicated on standardized products that can be moved around between distribution centers. The most effective way companies will be able to scale their operations to sustain the personalization trend at scale is by adapting their entire production operation to ingest data sooner and make relevant adjustments before production takes place. These trends are part of the drivers, making the integration of planning systems and execution/logistics solutions even more important.
Take, for example, the Lenzing Group, a supplier of high-quality specialty fibers to the global fashion industry. The Lenzing Group recently undertook a goal to connect demand forecasting, sales planning, and operations planning via digitalization — creating an accurate, efficient end-to-end supply chain. This new level of transparency and visibility helped Lenzing stakeholders understand the needs of both customers and end consumers, creating a more accurate forecast — and, ultimately, a much more agile and responsive supply chain. Still early in its broader digital transformation, the company has already reduced its planning and decision- making time by 50%.
We’ll talk more about this topic of “Personalization at Scale” during Blue Yonder’s ICON event, May 5-6, 2020.