Commoditisation changes supply chain approach

The trend towards commoditisation has led to a shift in power and as such companies are taking a more customer-driven approach when it comes to supply chain design. In fact, it has become as much about the services used as it has about the product itself.

Consequently, an extra level of complexity has been added to supply chains as customers may not necessarily operate in the same way, meaning a number of different processes are needed.

This was one of the key findings of research carried out by Professor Martin Christopher at Cranfield School of Management on behalf of GXS.

The global survey of 800 companies predominantly targeted manufacturers (63 per cent), with one third of respondents coming from Europe, one third from the Americas, 15 per cent from Asia and a further 15 per cent from the rest of the world.

The research looks at how companies can enhance customer-centric supply chains and use this complexity as an advantage; particularly as 84 per cent of those surveyed said they believe the level of complexity in the processes used in the supply chain is likely to increase in future.

Manufacturers had two views on this. The first said it was “overwhelming” as they will have to find a way of reducing costs associated with increased complexity, however the second more optimistic view is that all competitors will have the same challenge, so it can be used as a differentiator.

According to Steve Keifer of GXS, manufacturers can use this as an opportunity to stand out from their peer group and to grow business with key accounts.

It is becoming increasingly difficult for companies to differentiate themselves using the 4Ps of marketing – product, price, promotion and place – so the best way for a company to distinguish themselves is through service.

Keifer uses the high tech sector as an example. “High tech goods are easy to replicate and counterfeit products are on the market almost as quickly as the original. Companies are struggling to achieve sustainable differentiation, but one way they can differentiate is on service.”

Of those surveyed, 65 per cent see a trend towards commoditisation in their industry and 95 per cent said they are now not only competing on quality of products but also on the process and services offered through their supply chain.

The research also looked to find out what technology can be used to help manage this complexity. Keifer reckons a customised service is very important if a company is going to set itself apart from its competitors.

The more flexible a B2B e-commerce platform is the easier a company is to do business with, according to 93 per cent of respondents, and 89 per cent said flexibility also helps to differentiate a company from its competitors when it comes to service.

The strength of the programs used is also important, according to 92 per cent of respondents, as a company that is easy to do business with can build better relationships with key accounts.

Looking forward, Keifer says he sees this trend of customer-centric supply chains continuing. Additionally, he believes outsourcing to third party logistics companies and contract manufacturers will increase and there will be more use of cloud computing and SaaS models as companies choose to focus on their core business.

“Manufacturers need to use creative techniques to manage these complexities which will help to differentiate them,” concludes Keifer.

The full report is being launched on Thursday 30th September via a live webinar.