5 minute read

The way people buy has changed dramatically within the past decade. Ten years ago, buying a Kit Kat bar meant you most likely chose the standard milk chocolate wafer bar. Today, there are more than 300 different Kit Kat flavors around the world, with product lines branching into travel-sized Bites bags, Chocolatory Special Edition boxes, London bus-shaped tins, Senses holiday gift boxes, and more.

This proliferation of product choice and selection is the result of disruptive market forces including the rise of upstart brands and direct-to-consumer business models. These smaller, more agile brands are pivoting to address evolving consumer tastes for artisanal, organic, and ethically sourced products. Similarly, e-commerce-focused retail platforms are offering consumers an alternative avenue for convenient, customized purchasing experiences.

These market forces have permeated through virtually every consumer product category. According to a 2018 study by IRI, brands that generate annual sales of less than $1 billion generated $176 billion all together in 2017—more than 25% of the U.S. CPG market that year. And, a 2019 Gartner study found that while the traditional storefront comprised more than 56% of company respondents’ revenue, website revenue accounted for 22%, with further growth expected in the future.

These figures demonstrate how consumer preferences are diversifying and upending the one-size-fits-all paradigm of retail consumption. These factors converge to form a dynamic, complex, and volatile consumer market.

With such dramatic market shifts, it’s no surprise that brands may find themselves struggling to evolve their processes to meet the needs of a more hypersegmented supply chain. Meeting those needs requires delivering ever more differentiated products to a variable consumer marketplace. The speed and volatility of today's consumer market demands a new type of supply chain ecosystem: one in which multi-enterprise supply chain partners (i.e., brands and their external suppliers) can go from "concept to consumer" with agility. These ecosystems will be able to rapidly launch and pilot new products to address seasonal, on-trend, or niche consumer preferences. The agility required of this ecosystem can only be achieved through supply chain digitization efforts which enable partner collaboration and streamlined communication.

In short: agility is the name of the game.

While brand owners continue to identify improving costs and operational efficiencies as important drivers in their decisions for using external manufacturers, they now consider improving agility/flexibility the primary factor driving manufacturing outsourcing decisions.
'Optimize External Manufacturing Relationships by Focusing on Talent and Competency Requirements', Gartner, April 24, 2018

The name for this new, adaptable, flexible supply chain system: the agile customization network.

An agile customization network is a frictionless, digitally-enabled ecosystem of strategic partners that manages everything from the initial conceptualization and launch of brands, to their production and adaptation for diverse market end points. Within an agile customization network, consumer brands are able to quickly release and reiterate products to meet the needs of these increasingly specialized market end points.

Diagram with the words Create, Adapt, Produce all pointing in a circular direction on the interior

The end goal of the network is the perfectly differentiated consumer experience. The solutions that each partner uses must be interoperable and capable of plugging into real-time activity on the shop floor. Digitization is the only way to enable network-wide visibility of materials, capacity, productivity, and profitability.

Consumer brands must commit to driving this level of visibility and control throughout their supply chain. Every stage of the consumer product lifecycle—from initial ideation to manufacturing, packaging, and distribution—must be driven by tight collaboration.

Within this type of ecosystem, brands will be able to deliver customized products with agility: at the right time and through the right channels. To achieve success in today’s consumer market, adoption of the agile customization network will be the differentiating factor for brands.

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May 01, 2019

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