WELCOME to the world of ambient commerce
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2 WELCOME to the world of ambient commerce The Harvard Business Review published an article in 2016 describing a modern-day shopping experience in which shopping as a discrete activity in a given place and time takes a distinct back seat. Instead, the transaction becomes an ambient activity that is executed everywhere (at home, on the go, at work, in leisure) and anytime, said the article s author, Werner Reinartz, a German marketing scholar. 1 Holiday shopping trends reflected this reality. In its most recent analysis of Thanksgiving and Black Friday shopping patterns, Google found shoppers were browsing for products on their mobile devices all day long, on both days. 2 The fact that consumers can shop anytime from anywhere, and expect to have a wide array of choices on how they can get their orders fulfilled, has changed retail paradigms. Professor Reinartz asserts that the traditional consumption model has shifted altogether. He points out there used to be three basic assumptions about how consumers would shop: experience a need, go to a store to buy the item, consume the item. This model put a lot of emphasis on what consumers encounter after they are in the store. However, in the world of ambient commerce, the focus shifts to what individuals do when they initially perceive they have a need. Retailers and brands need to address this stage the perception of the need more than they need to control the store experience, the article suggests. And not all of these needs may require instant gratification. In a 2016 study by Google and research firm Purchased, 1,000 smart phone users were polled several times daily about the needs they had throughout their day and how they addressed them. The results shed light on what Google calls micro-moments when people turn to their devices for help. The survey found that 68% of people used search to help with things they want to address at some point in the future
3 The bigger picture: evolution to a friction-less existence There has been a lot of discussion about the seamless retail experience. In ambient commerce, consumers want the absolute minimal amount of friction. Just as water will always flow down the path of least resistance, so too will shoppers flock to the brands and storefronts, virtual or physical, who meet their needs with the least interference and inconvenience. Business is gravitating toward more cash-less, credit card-less and, in some cases, people-less commerce a world with more Uber-type enterprises and fewer registers and checkout lines. Just think about it: Uber provided almost 15 million rides globally on New Year s Eve 2016, with an average ETA per ride of four minutes. In the not-so-distant future, Uber riders may find they can get a ride without physically interacting with another human. The company is test piloting the use of self-driving cars in Pittsburgh and San Francisco. Amazon is testing a new small-format grocery store concept, called Amazon Go. Using what it calls just walk out technology, the retailer promises no lines, no checkout and no registers. Shoppers using the Amazon Go app simply swipe their phone upon entering the store, and sophisticated sensors and software automatically detect when they take items from the shelf. A virtual cart tracks shopping activity, and automated payment occurs when the shopper leaves the store. 4 The Harvard Business Review article points to 3 TRENDS as evidence of retail s paradigm shift: 1 INSTANT PURCHASING 2 AUTOMATED PURCHASING 3 SUBSCRIPTION-BASED PURCHASING 3 (i.e., click on what you want and order it through a streaming movie, social media) (today, Amazon Dash; tomorrow, intelligent appliances that reorder automatically after X cycles) (i.e., music streaming services, Netflix, Dollar Shave Club)
4 Change is necessary now. Fundamental, organizational, operational change. A natural reflex in times of major change can be to wait for the dust to settle a bit before making any major moves. As it pertains to the apparel supply chain, the time for waiting is over. The same fashion, consumer goods and retail companies that have created brilliant websites, social media channels and shopping apps now must turn their attention downstream. Ambient commerce requires a greater degree of operational prowess, including exceptional global supply chain connectivity and visibility. These tectonic paradigm shifts have executives examining the very underpinnings of their core supply-side processes. The big questions: How can they control what they currently cannot see? How can they pull the right product through a sprawling supply matrix at just the right time and price? A 2016 study by Capgemini and GT Nexus indicates executives are taking this visibility challenge very seriously. They surveyed 337 executives from large global manufacturing and retail organizations from 20 countries, most in Europe and North America. The research revealed that digital transformation of the supply chain is important or very important to 75 percent of respondents. These executives know the fate of their corporations rests on the outcome. A winning strategy behind supply chain transformation is to determine how the extended supply network can help fulfill orders, regardless of where, when and how they arrive. From this perspective, it is really the next evolution in retail, not simply omnichannel but simply commerce. In order to move forward, retailers are finding it increasingly necessary to look backward, according to the paper, The New Era of the Agile Supply Chain, produced by GT Nexus and Kurt Salmon, now a part of Accenture Strategy. 6 The research describes how retail s traditional focus has been on stores and fulfillment (i.e., visibility from the DC to the store) whereas now the focus has shifted to encompass the entire supply chain. The entire supply chain is a warehouse, where customer needs and orders can be fulfilled. It s a tall order, to be sure. The authors point to the importance of leveraging inventory across the network, which by default, requires greater supply chain visibility. As retailers look to operationalize omnichannel, they are increasingly looking to empower their supply chain with visibility and with accurate and dynamic information across all partners, they said. How can they control what they currently cannot see? How can they pull the right product through a sprawling supply matrix at just the right time and price? 4 Failure to transform is not an option, said a report of study findings. 5
5 Challenges posed by retail s transformation: mighty but surmountable Fashion retailers and brands face great pressure to fulfill product flexibly and profitably. More so than at any time in retail history, consumers are calling the shots, and companies are forced to react to these demands. Operational fundamentals must be evaluated and re-engineered to succeed in this environment. It s one thing to capture orders; it s quite another to fulfill them efficiently. In particular, to meet today s consumer expectations, brands and retailers need much clearer, more reliable and faster insight into inventory information. The deeper into the supply chain they can see, the better they will be able to meet demand. End-to-end supply chain visibility is a foundational enabler of the strategic capabilities needed to succeed in today s retail marketplace, Kurt Salmon noted in its article Choosing a Visibility Operating Model. 7 Supply chain visibility is critical to today s retail success, in large part, because consumers want a crystal-clear view of product information. 82% Visibility into product availability is even more important among millennials. 89% DIGITAL SHOPPERS say the ability to check availability of a product prior to visiting a store is the most important retail capability (emarketer) 8 MILLENNIAL SHOPPERS say information about real-time product availability influences what stores they frequent (Accenture) 9 5
6 Social responsibility-minded millennials also seek transparency into their product s origins. Results of a November 2016 survey of almost 2,000 millennials conducted by research company YouGov and GT Nexus showed 61 percent of millennials had switched one of their favorite brands. The most common reasons? All of the major disloyalty factors identified fall into the behind-the-scenes domains of operations, logistics and supply chain management, the survey s authors conclude. 40% product quality issues 35% brand not available in store or cannot be delivered 25% brand does not pay or treat its workers fairly 21% brand is not environmentally friendly (YouGov and GT Nexus) 10 The Capgemini and GT Nexus study also highlights the importance of supply chain collaboration to not only respond to consumer demand but also to ensure operations pass muster for social responsibility. As public pressure mounts for transparency, ethical and sustainable supply chains, the importance of collaborating tightly with suppliers goes beyond assuring supply and optimizing costs, the report says. 6 Critically, this means that investments in digital transformation can t just stop at the organization, but need to extend to every partner in the supply chain network.
7 Supply chain strains trace to myopic view of visibility itself One of the greatest hurdles to supply chain visibility is that organizations rarely have consensus on what visibility really means, says Praveen Kishorepuria, managing director, Kurt Salmon, part of Accenture Strategy. Some think of it as a logistics issue, solved by better tracking. Others put the visibility challenge in sourcing s court. C-suite leadership is required to ensure visibility initiatives are holistic and successful, addressing the end-to-end supply chain. It s imperative that visibility becomes a strategic business transformation process, says Kishorepuria. The most successful fashion brands and retailers approach the issue by performing a thorough review of their entire process, identifying pain points and deciding what new or improved visibility capabilities will deliver strategic advantages. This approach can deliver huge savings and benefits to organizations, says Kishorepuria. $ 7
8 Organization/information silos, outdated communication tools slow progress 41% 75% of companies struggle to know their inventory position take more than a day or two to determine the status of orders in the supply chain (Kurt Salmon, part of Accenture Strategy) Not having visibility to that data to make decisions is a blind spot for retailers, says Kishorepuria. Reliance on inefficient communication tools is a big part of the problem. 48% of executives say traditional methods, such as phone, fax and , are still the dominant ways to interact with supply chain partners 15% say the majority of data from the extended supply chain is accessible to their organization 23% are analyzing and using extended supply chain data for decision making (Capgemini, GT Nexus) 5 It s hard to overstate the significance of this finding, said the Capgemini and GT Nexus study report. A persistent reliance on outdated, manual, analog tools of communication such as phone, fax and is fundamentally at odds with the needs of the everchanging, fast-moving, disruption-prone nature of today s global supply chains. 8
9 Transparency is tough when you don t own the entire supply chain Most major fashion brands and retailers rely on factories and other parts of the supply chain that are owned by their trading partners, and those partners source from myriad suppliers themselves. This creates multiple layers of complexity in the quest for transparency. 41% of large fashion companies were sourcing from more than 20 countries in 2016, up from 22% sourcing from this many different countries in 2015 (USFIA) 11 This sourcing web could become even more elaborate in 2017 as retailers respond to ongoing margin and speed-to-market pressures. Some are balancing low-cost supply bases with near-shore quick-turn sources, says Kishorepuria. THE SOURCE OF SUPPLY IS GETTING MUCH MORE COMPLEX AND INTEGRATED ACROSS REGIONS AND THE WORLD, HE SAYS. 9
10 The most critical data for retail success resides within the supply chain. Cloud networks can connect the dots. 80% of information required for actionable supply chain decisions can reside externally with suppliers, third-party logistics providers (3PLs), brokers and others (Kurt Salmon) 7 From a technology perspective, cloud-based networks can connect the extended supply chain. Companies are counting on them to have a transformative effect on their organizations. Global executives expect to have radically better access to extended supply chain data by 2020, according to the Capgemini and GT Nexus study. But they have a long way to go. 5 YEARS FROM NOW YET TODAY 95% of executives expect more processes with suppliers to be automated 94% expect to receive more real-time status updates from across the supply chain 33% are dissatisfied with their progress in digitally transforming their supply chains 5% are very satisfied with their progress (Capgemini and GT Nexus) 5 10 Transforming a large global organization by itself is difficult enough. Including an entire ecosystem of hundreds of external partners in the process will be even more challenging. Accomplishing all of it within just five years will be impossible without vision, leadership, investments in the right technologies and superior execution, said the study s authors.
11 How business will close supply chain visibility gaps Supply chain visibility provides real-time awareness of business processes, said the Capgemini and GT Nexus study authors. Big data analytics turn raw information into actionable insights. And the cloud is a technology paradigm that tears down barriers by creating universal accessibility to data, no matter where you are. POWER TRIO OF TOOLS While there has been a lot of buzz about the cloud, the study found relatively few organizations have robustly embraced it. Two of three respondents said less than 25 percent of software they use is cloud based. This inherently means limited access to critical data for supply chain partners. When solutions are cloud based, partners need only an Internet connection to start collaborating. Otherwise, their only options are the aforementioned traditional communication tools ( , phone, etc.) or expensive and complicated point-to-point interfaces with software programs hosted on their trading partners premises. Cloud-based technology Supply chain visibility/platform solutions Big data/ analytics HARMONIOUS QUARTET OF CAPABILITIES Data access Data sharing Collaboration Network-wide analytics 11
12 High-granularity visibility into supply chain nodes A network-wide view of inventory and workflow provides details that make a difference information that informs the answers to questions such as: Can we promise delivery to the DC, store or consumer by X date? How should we re-allocate the shipment to different fulfillment destinations given the latest market data? What is the status of purchase order XYZ at factory ABC? What is our fastest and most reliable production option? How will our costs change if we air freight half the shipment and ship the rest by ocean as planned? How will the delay at factory ABC impact costs and commitments? Mastering end-to-end supply chain visibility demands clarity into raw material origins; product, order and shipment status; and information about product flow, delays, inventories and costs, according to Kurt Salmon. Kishorepuria says when brands and retailers begin to see their supply chains more clearly, they can quantify the costs of all of the buffers, both in time and inventory, they have depended on to safeguard their supply. 12
13 Social media-style communication enables business collaboration 13 Cloud-based networks tap into critical information maintained by thirdparty logistics providers, factories, raw materials suppliers, distribution centers and other trading partners around the world. They facilitate more efficient, accurate communication than manual traditional methods. Just as with a social media platform, partners all know where to go for the latest information. For comparison, consider how easy it is to update one s status on Facebook or job title on LinkedIn. There is no need to inform your network of friends or colleagues individually. The same applies to business-to-business updates, such as purchase order changes, on cloud-based collaboration networks. Visibility requires a network capable of seamlessly collecting and distributing supply chain data, Kurt Salmon said in its New Era of Agility article. Companies are increasingly turning to cloud-based networks to realize this seamless flow, thus using an information model similar to that of social networks one that supply chain networks can rely upon. Supply networks just like social networks are defined by their members. Cooperation with and adoption by partners is essential. Machine-to-machine autonomous information exchange removes the need for people to break away from their priorities to check for updates. Following exception-based rules, the network knows when to alert key stakeholders when something is not going as planned. In the end, all trading partners waste less time giving and receiving status updates and can focus more time and effort reacting to trends and evolving business dynamics.
14 Conclusions Shopping is now an ambient activity, requiring a highly integrated, accurate and automated supply chain. Fashion companies cannot manage what they can t see. Visibility and access to data from the extended supply chain is essential. The path to success requires a holistic effort, driven by c-suite leadership. Ultimately, the biggest winners will be fashion businesses that embrace the fundamental need for end-to-end visibility and recast their supply chain operations to meet the challenge. The consumer demands satisfaction, the networked supply chain is best way of giving them this satisfaction. Sources: 1. Reinartz, W. (2016, March 20). In the Future of Retail, We re Never Not Shopping. Harvard Business Review. Retrieved from 2. Google. (2016, November). What Google Data Reveals About Black Friday Shoppers. Retrieved January 12, 2017, from 3. Gevelber, L. (2016, September). How Mobile Has Changed How People Get Things Done: New Consumer Behavior Data. Retrieved from 4. Amazon. (n.d.). Amazon Go. Retrieved January 11, 2017, from 5. GT Nexus, an Infor company, and Capgemini Consulting. (2016). The Current and Future State of Digital Supply Chain Transformation. Retrieved from 6. Jacoby, C., Kishorepuria, P., Madane, A., & Thakurta, A. (2014, November 14). The New Era of the Agile Supply Chain. Retrieved from Supply-Chain?utm_source=partner&utm_medium= &utm_campaign=e2evisibility 5. GT Nexus, an Infor company, and Capgemini Consulting. (2016). The Current and Future State of Digital Supply Chain Transformation. Retrieved from 6. Jacoby, C., Kishorepuria, P., Madane, A., & Thakurta, A. (2014, November 14). The New Era of the Agile Supply Chain. Retrieved from Supply-Chain?utm_source=partner&utm_medium= &utm_campaign=e2evisibility 7. Madane, A., Jacoby, C., & Kishorepuria, P. (2015, October 1). Choosing a Visibility Operating Model. Retrieved from 8. emarketer. (2015, May). Omnichannel Retail - Seven Trends in Retrieved from 9. Donnelly, C., & Scaff, R. (n.d.). Who are the Millennial shoppers? And what do they really want? Retrieved January 13, 2017, from GT Nexus and YouGov. (2016). Infographic: Why Millennials Turn on their Favorite Brands. Retrieved from Lu, S. (2016) Fashion Industry Benchmarking Study U.S. Fashion Industry Association. Retrieved from 14 Copyright EmsembleIQ and Apparel 2017
15 GT Nexus, an Infor company, operates the world s largest cloud-based business network and execution platform for global trade and supply chain management. Over 25,000 businesses across industry verticals, including adidas Group, Columbia Sportswear, DHL, Electrolux, Levi Strauss & Co., Nestlé, and Sears share GT Nexus as their standard, multi-enterprise collaboration platform. This enables all network participants to operate against a core, real-time and always on set of information across multiple supply chain functions, allowing them to optimize the flow of goods, funds and trade information, from the point of order through final payment. For more information please visit us at
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