Brian Straight ·February 13, 2024 ·
Editor’s note: Supply Chain Management Review’s Leadership Lens, appearing online at scmr.com on the second Tuesday of each month, showcases industry leaders’ thoughts on how the C-suite can better manage their businesses. This month, we are looking at the role supply chain plays in brand management. If you are interested in future topics, you can see a full list of upcoming topics on our Editorial Calendar.
The history of customer service dates to nearly the beginning of time, back to when merchants of the ancient civilizations in Rome and Greece worked to satisfy their customers. It has evolved since then, but until the COVID-19 pandemic disrupted supply chains, few companies considered the task of delivering product to be a vital part of customer satisfaction.
The pandemic changed that. Now, brands realize the role moving products, whether that is between warehouses, from warehouse to store, or to the end consumer, has on its brand recognition.
Consider Peloton.
In 2021, at the height of the global pandemic, the exercise company known for its bikes saw skyrocketing sales, with revenue climbing from $466.3 million in its 2020 second quarter to $1.06 billion just a year later. But it’s supply chain couldn’t keep up. Consumers were angry. The company was missing out on even more sales. And it had no great solutions.
Then CEO John Foley announced the company would invest $100 million in its supply chain to speed deliveries to customers, some of whom were waiting three months or more for their equipment to arrive.
“West Coast port delays and COVID-related delivery challenges have prevented us from returning to our normal order-to-delivery wait times and unfortunately forced us to reschedule many deliveries,” Foley said on the 2021 Q2 earnings call. “To address this issue, we will continue to invest heavily in systems, teams and manufacturing capabilities to ensure we don’t disappoint our customers going forward.”
He added that the company would be incurring a transportation and delivery cost 10 times its usual expenditure for its Bike and Tread products.
We are making this investment because we are as frustrated as you are that you don’t have your Peloton Bike or Tread yet. We are (and always have been) a company that is deeply committed to your happiness and we’ve fallen short of that in this regard,” Foley wrote in a blog posting at the time.
The pandemic moved the supply chain front and center, and the C-suite is now more aware than ever of the role it plays in brand management. Peloton learned that the hard, but that should no longer be the case for others.
“Over the last few years, there has been a growing topic called the customer back supply chain,’” explains Dheera Anand, a partner with Bain & Company focusing on supply chain strategy and transformation. “What is the customer value; what is the consumer value; and how does your brand fit in there.”
Anand said the supply chain can play an important role in building positive brand awareness. But, it also has to be managed. Customers may want their items in 2 days, but a snowstorm or truck breakdown could delay that delivery promise. While communication to the customer is important in these cases, equally important is communication between the supply chain and logistics teams and the C-suite.
“It’s more behavioral change, to be honest,” she said. “It’s a mindset. It’s a behavioral change, and it’s integrating the supply chain [into the process] early. You could redesign your current organization to put enough resources against the brands—that’s not the biggest challenge. It’s more the mindset.”
Anand said fractured supply chains make this process more complex. She advised designing the supply chain function as part of the overall operation, not as a separate entity.
“Amazon kind of started this revolution [by saying] I’m going to sell my products based on my supply chain,” Anand notes. “I think our regular CPGs and consumer companies thought they were immune to it, but COVID just {flipped that].”
Marketing play
Companies that can successfully implement their supply chain into their marketing program can achieve increased sales and profits. Anand pointed to chocolate manufacturers. The increased focus on ethical sourcing has pushed many companies to highlight where their cocoa is coming from, and that procurement process “is supply chain,” Anand says.
As more companies work to reduce energy consumption, that is also often a supply chain-related function, whether that is factory initiatives or electric vehicles.
“Consumer patterns are changing. What sold five years ago is not going to sell anymore,” Anand says. “If you think about patterns … for example, is this green, is it clean? You think about the health consciousness that is happening with Gen Z and even Millennials. People read labels before buying. There is a plethora of things that have hit the consumer market and companies have to deal with that, take that into account, and design it into their supply chains.
“[They] need to get supply chain people to the table,” she adds, noting that those experts, when working side-by-side with marketing and other departments, may be able to find cost efficiencies, or at least ensure the C-suite understands the costs associated with initiatives “so marketing can determine whether people will pay for it.”
Supply chain’s role has never been more important, and the recognition it is receiving is changing the perception of it.
“There is this shift happening that supply chain is a lot more than a cost function,” Anand says. “You can also consider supply chain as a topline enabler. It is not just a [cost], it can add to growth. If a consumer wants speed and you are not giving them speed, they are going to go to someone else. Supply chain is a tool to unlock market share.”
