How the new consumer trends are impacting industrial production
A push for faster delivery, rising quality and sustainability concerns, product customization and digitalization: these are some of the long standing trends in consumer expectations and behaviors that have been reshaping the manufacturing and retail landscape.
The pandemic lockdowns that drove most of our day-to-day activity online have only accelerated the consumer mindset shifts. In Q1 2020, US e-commerce penetration growth matched that of the previous 10 years. And this is not just about e-commerce. The ways we work, learn, and even eat have suddenly gone full-online, exacerbating the need for businesses to pivot their models in order to adapt.
Let’s explore the specific challenges and opportunities that the current shifts in consumption patterns are raising for manufacturers.
Meet the new consumer
Need for speed
The sudden shift to all-digital consumption gave a final spurt to a trend that’s been picking up steam over the last two decades: consumer impatience. As the boundaries between virtual and real-life experience are blurring (case in point: 2/3 of people now order restaurant meals to eat at home), today’s consumers expect to enjoy the perks of both in-store and online shopping: instant discovery and access, transactions at the push of a button, instant delivery and gratification.
When ordering a product or service, they want it now. For 97% of consumers, fast shipping means same-day shipping. And, with warp-speed 5G expected to reach 1 billion users in the next three years, that’s just a start.
Your customers don’t care about the struggles of handling complex supply chains. The fact that your shipment is stuck in customs because of Brexit isn’t their concern. For 80% of them, it is the responsibility of the retailer to ensure that products are delivered on time and as expected. And, as brands embrace Direct to Consumer models, they are required to understand, control and optimize the entire customer journey.
A drive for quality & sustainability
The new emphasis on speed doesn’t mean that consumers are willing to compromise on quality, far from it. In fact, product quality is the second criterion for retailer selection according to Deloitte’s 2020 holiday retail survey. Additionally, 86% of consumers are willing to pay a premium for a good customer experience.
In the eyes of a majority of today’s consumers, quality encompasses responsible product attributes. With requirements ranging from carbon footprint to animal welfare, from geographic proximity to employee working conditions, consumers want to shop from brands that align with their values. 57% of them are willing to pay extra for sustainability.
Here again, the COVID-related crisis has acted as a trend accelerator. The months of extreme lockdown gave people pause to reconsider their life choices, inspiring many to shift to more responsible ways of working, living and consuming. As a consequence, almost 70% of professionals consider that the crisis has heightened sustainability concerns.
Customization & constant updates
Consumers do not only expect brands to embrace their values, they also want the goods and services they consume to match and reflect their unique tastes and habits. Technology is empowering consumers to move beyond one-size-fits-all mass-market models to millions of niche markets, as explained in Chris Anderson’s The Long Tail. Today, 20% of consumers are prepared to pay a 20% premium for a personalized product or exclusive service. And they are not willing to wait: 83% of consumers expect products to be personalized within moments or hours.
Besides, the acceleration of technology obsolescence and the market influence of firms like Apple have led consumers to expect new product releases every year or so, further shortening product life cycle. “It took us 300 years to invent the wheel as we know it, Apple now releases a new iPhone almost annually.”, to quote innovation expert Jay Jayamohan, who also points out the fact that the average company lifespan on the S&P 500 list used to be 33 years in 1965, was 20 years by 1990, and is expected to reach 14 years by 2026.
The rise of Smart products
Increased consumer appetite for customization is one of the drivers of the demand for Smart products (which are defined as physical goods with embedded software blocks). By transforming uniform products — from cars to household appliances — into customizable-by-design items, Smart products and Internet of Things (IoT) are opening up new opportunities for personalization. And they definitely found their market. Worldwide spending on smart home systems is slated to rise to $157 billion by 2023, and about 75% of manufacturing executives report exploring some form of IoT solution.
But manufacturing IoT and bringing smart products to market require shifting to new bimodal product development processes. In fact, all of the consumer trends outlined above are disrupting the established production models, compelling manufacturers to rethink their process.
Aligning the industrial process and model
While the challenges for manufacturers are manifold, digital transformation has the power to address them all. “Manufacturing at volume is mostly a software problem”, in the words of Elon Musk — and Tesla’s leader sure knows what he's talking about. A view shared by top industrial firms, which are investing nearly twice as much as peers in digital tools and training.
Turning supply chain data into information
What makes the delivery of industrial products so complex is primarily volatility. Manufacturers need to juggle fluctuating demand & supply to ensure the plant’s ability to deliver quality products on time while optimizing cash flows. A delicate balancing act, as the information about production requirements, stock levels and supplier deliveries is scattered and siloed in the ERP or across disconnected systems (time-tracking tool, Quality management tool, CRM, etc.)
And what makes all the difference is an AI-powered data management system designed to bridge the gaps across platforms to deliver an instant overview. Operational Intelligence solutions convert masses of data into consolidated information that can be leveraged to optimize supply chain management, align stock levels and production needs, and respond to constant shifts in demand.
In the past, as product life cycles could span decades, market conditions rewarded large manufacturers for their ability to invest important sums of money in the long run and maintain time-tested recipes. Now that customers prize product range diversity and frequent new releases, accelerating time-to-market and producing in smaller batches require more responsiveness. In an increasingly dynamic and volatile business landscape, success hinges on the ability to be fast, adaptive, flexible — in other words, agile.
But, for lack of adequate data management systems, many manufacturers do not have ready access to the quality insights they need to make fast (and smart) decisions on complex issues. While operational teams are wasting time looking for information in order to understand a problem, they’re not tackling the problem. While they are performing manual calculations to assess the impact and cost of the various options available, they’re not making the decisions that’ll bring the product to market.
True agility demands data visibility to anticipate bottlenecks and delays. It also requires data intelligence to prioritize the most critical issues to be tackled (for example the most urgently needed missing parts) and help to focus on the most impactful actions that should be taken in order to accelerate the delivery of quality products.
The importance of collaboration
Those manufacturers that focus on a digital-first future also need collaborative-by-design systems to run with greater flexibility and to align with the new market conditions — such as supply chain globalization and an increasingly geographically-dispersed workforce, as remote working is becoming the new normal for many firms.
Collaboration-oriented platforms drive significant productivity gains by enabling effective coordination between diverse teams and functions across the plant as well as with external stakeholders such as suppliers. Such features as automated notifications, support for instant interactions, and escalation mechanisms are enabling information sharing, constant updates, and quality communication to get everyone on the same page.
Evolving collaborative practices also supports employee cross-skilling and up-skilling. Last but not least, this helps meet the expectations of the newer, digital-native generations of workers who value horizontality, empowerment, and enabling management styles.
Customers have never had so many options. They’ve never had greater power to punish or reward businesses. As a result, meeting their expectations by embracing the digital transformation is now a matter of survival for manufacturers. 92% of senior executives report that the lockdown made it a priority.
How about you, where do you stand against the new consumer trends?