What rapid adoption of virtual assistants means for CPG supply chains
I recall watching the original Battlestar Galactica series in the late 1970s, and there was an episode where Commander Adama was dictating his log. Before him was a computer screen recognizing his voice, taking his spoken words and translating them to perfect text for all to see. The capitalization and punctuation were perfect. Who knew back in 1978, when a home computer was slightly more than an expensive toy, and large computers were mainframes that ate punch cards and spewed paper and hole-punched tape, that this stunning scene would be a reality in my lifetime?
Now let’s move on to December of 1983, when a small company owned by Exxon Enterprises, named Verbex, interviewed me for a Systems Analyst position. Verbex had nothing to do with oil. They were one of the early pioneers of voice recognition technology, and produced a device about the size of a small paperback book, that had an active vocabulary from 300 to 10,000 words. It was being used at the time for everything from bridge painting to package sorting. I didn’t get the job, but I was made quite aware that the “future” shown in a 1978 TV show was five years closer to becoming a reality.
Now if we fast-forward to present day, we have the likes of Siri, Alexa, Cortana and Bixby, all on personal devices. I have spoken into my phone to Google to get directions on numerous occasions. People dictate text messages. And now, using technologies like Amazon Echo, people can order whatever they want, any time, from any place. This fundamental shift in the shopping paradigm is posing unique challenges for supply chains. Already, supply chains have had to adapt to online shopping, and crazy fulfillment demands. After reading a recent article in SCM World by Kevin O’Marah, I learned that CPG companies have felt extreme upstream pressure, as he puts it. Wider assortments, multiple versions of packaging and a completely different kind of customer relationship are required. There is a move from the traditional shopping method of going to the store, whose inventory is based on customers buying pre-packaged items on shelves. The demand was set by either advertising, seasonal cycles or spikes due to new “hot items”. Just as retailers and suppliers have made adjustments, a different kind of disruption has been taking place, and picking up momentum. This means a shift from retail store-based supply chains to a more dynamic personalized one, based on the consumers.
Being able to place voice orders, from any place, any time, means more shopping can and does take place. You don’t have to go to a store, you don’t have to be home in front of your computer. You could be out at the movies, and order anything from a tube of toothpaste to a set of furniture, 24/7. Non-traditional online items are now being bought. Orders come in any time, without a predictable cadence. I saw in O’Marah’s article that major retailer Walmart has teamed with Google to be part of Google Express. Google Express is a service that includes stores like Costco, Walgreens, Pier 1, PetSmart and a host of others. You download the app and can start shopping. Walmart brings extreme fulfillment expertise to the table, and Google has the technologies for language processing, artificial intelligence (AI) and analytics. This brings a new player to compete with Amazon and the Alexa system. It also signals a change in retail as a whole.
What does this mean for supply chains? The rapid adoption of virtual personal assistants changes shopping habits, just as Uber changed transportation. Traditional calendar-based sales and operations planning (S&OP) is blown out of the water, as there will always be the requirement to adapt to what consumers want. The reasonable forecast and predictability of consumer shopping habits is not straightforward any longer. This reality exists today, and is only accelerating. A new kind of supply chain needs to be developed to run in what used to be non-traditional patterns. An agile way of dealing with flexible fulfillment, shipping and return options is required. Advanced data analytics will need to be more heavily relied upon than before, so adjustments to planning, forecasting and deployment can be made. Real-time inventory is a necessity. The customer relationship – knowing how and what they purchase, and what their buying habits are – becomes a crucial factor in how a strategy is defined. Stores are now becoming distribution points. I recently went to my local Sprouts Farmers Market store (a national chain) and was surprised to see a sign for Amazon Flex. They had special arrows on the floor, directing shoppers to the area where they could pick up their Amazon orders. So besides being a grocer, they were also an Amazon distribution center. Retail stores now need to be considered part of the supply chain, as opposed to just being an end point.
Omni-channel, one of the most overused marketing terms in Gartner’s 2016 list, cannot be denied. In order for any retailer to adequately evolve their supply chain to meet the consumer’s needs, they must be able to see the consumer’s experience across the entire enterprise. The bottom line is supply chains in 2017 and beyond have to be strong in analytics, demand planning, order fulfillment, S&OP and a host of other applications. It’s time to evolve traditional supply chains into ones that meet the current and future requirements.