Member Practical: A Digital Supply Chain

 

There’s a new way to view a brand’s investment in media operations.

Every brand should have a digital supply chain or a set of components that, when properly constructed, equip a retail business with an important class of end products: content, first-party data, digital products, and community. 

There’s a small minority of brands that have a venture-backed war chest or a Kardashian-Jenner sister atop the sales funnel. For those few, conversion rate optimization is the game by improving the landing page, shorting image load times, A/B testing, tuning headless commerce modules, and properly capturing social proof through on-site user generated content (UGC).

But the vast majority of retailers lack the attached celebrity, the demand, the advertising budget, or the excess capital to spend on conversion rate optimization, landing page engineering, or micro-influencer operations. For them, the digital supply chain is essential.

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Member Exclusive: Studying The Fast Cinematic Universe

 

We’ve never seen anything quite like the Fast Cinematic Universe in all of entertainment history.

Today, every media property is likely to attempt a cinematic universe. We owe this to a Vin Diesel epiphany. The Fast and Furious saga built its own cinematic universe out of thin air, with no written source material. Few, if any, other films can say the same. The timing couldn’t be better for Diesel. With the streaming film economy eating into film exhibitor profits, fans will go to physical theaters for events. Over 20 years, those events have been defined by film franchises.

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Memo: Supply and Demand

Today, it is hard to buy: lumber, stone, a sectional sofa, a dress shirt, yoga pants, basketball shoes, or luggage. Even the most sophisticated retailers are struggling, now imagine the nascent brands. The current struggle is an opportunity to reinforce our back office supply chain and logistics strategies.

We evangelize the marketers and not the logistics and supply chain leaders. In the world of CPG and DTC, many assumed demand generation was the difficult assignment. But today, so many will fail to reach their potential because they have much less to sell. Or because they can no longer mitigate shipping costs. There’s simply no supply and each day sees rising demand.

The world’s supply chains were already in a precarious state before the pandemic. Now, after a period of extreme disruption, manufacturers can’t meet demand, resulting in a chain reaction of delays and out-of-stock products. While out-of-stock inventory can signal high demand and appeal for a brand, eventually the allure runs out when there’s no back supply.

And as customers in the US embark on revenge shopping that shows no signs of slowing down (back-to-school shopping is expected to amount to $33 billion, according to Deloitte), the supply chain will continue to be strained and products will continue to be unavailable. Take a recent article on The Strategist as proof of how pronounced this situation is: The machinations of the global supply chain, when operating right, should be invisible to the average end consumer. The Strategist, a consumer shopping title, published a piece last Friday guiding customers on how to shop right now despite a shortage of availability for high-demand products and incredibly long lead times. The world is reopening, people want to buy. Right now, supply isn’t meeting demand and logistics costs are eating into margins.

S&P Global published a report analyzing what’s happening in the global supply chain, finding that retailers are trying to fix this problem by increasing imports:

Retailers have certainly attempted to keep up with demand growth. U.S. seaborne imports of consumer discretionary goods in May increased 88.2% year over year and by 32.9% compared with 2019, led by shipments of home furnishings and household appliances.

Yet, the increased level of imports has not been enough to support sales on the basis of falling inventory-to-sales ratios. Materials are still in short supply like aluminum and lumber. An increase in imports means there’s a bottleneck, slowing and delaying shipments into the US. And as the New York Times reported in June about a long-standing supply chain solution known as “Just In Time manufacturing”, where manufacturers receive components, materials and other parts only as they need them in order to minimize costs of overhead. The practice started in automotive production and rippled to other categories including fashion and food. That short-term solution has led to a period of extreme underpreparedness:

Still, the shortages raise questions about whether some companies have been too aggressive in harvesting savings by slashing inventory, leaving them unprepared for whatever trouble inevitably emerges.

To get out of this, retail supply chains will need to find both short-term solutions as well as rethink dependency on complex supply chains. Brands will invest heavily in flexible processes that can account for moments when things don’t run as planned. For now, expect delays.

By Web Smith