Supply-chain-as-a-service innovation: could it work for your business?


Taking inspiration from an initiative by Nike, could more businesses be employing supply-chain-as-a-service (SCaaS) methods of innovation to put the sparkle back into their performance and their brand?

Global footwear brand, Nike, has launched an initiative, which moves it closer to an operating model based on customisation. The initiative, NYC By You, is inviting 28 designers in New York City to design new trainers and then produce them at low volumes, in a bid to offers customers a more individual product.

In an era of rapid market globalisation, many manufacturers have built their business models on the principles of mass production, with a focus on lean management, low-cost sourcing and operating a reduced inventory. By stripping out waste and keeping costs to a minimum, they have become adept at making products that meet customers’ expectations in terms of both value and quality.

As customer tastes become increasingly sophisticated however, businesses have been looking for new ways to differentiate their brand by offering more bespoke products and bringing them to market more quickly.

In the fashion retail sector for example, retailers such as Zara have found that by shortening supply chains it is possible to respond to trends first seen on the catwalk and introduce new lines within weeks, rather than months.

In a market where speed of delivery has become a key factor in purchasing decisions, supply chain efficiency and agility has moved to the top of the business agenda.

Manufacturers in many other sectors of industry have been looking for ways to increase customisation, without impacting on a product’s commercial viability. This is evident in the automotive sector, where consumers purchasing new cars can choose from a limited range of exterior colours, wheel trims, textiles and onboard features.

Automotive manufacturers are able to meet demand because they have invested in the creation of successful, long-term supply chain partnerships capable of delivering the various options, in the quantities required, on a just-in-time (JIT) basis.

Manufacturers seeking to follow in Nike’s footsteps by introducing a supply chain-as-a-service innovation initiative, will need to ensure they have the capability to deliver on customer promises.

By effectively outsourcing innovation in this way, the business can reduce spending on R&D and deliver value to the bottom line. Introducing a model based on low volume production could prove challenging however, and a change of mindset may be required.

Instead of focusing on keeping parts per million as low as possible in order to optimise efficiency, while minimising inventory and reducing the volume of supply movements, they may need to start focusing more on understanding customers’ needs and delivering a solution that fits the bill in terms of value, quality and individuality.

For some businesses, a major shift of operating model could deliver strong returns and have a transformational effect on their brand and its market appeal. However, this could seem a high-risk strategy and it is more likely that businesses will want to trial new ways of working before adopting them more widely.

Before introducing a customised product range, manufacturers should aim to establish a local ecosystem of suppliers that is sufficiently agile and capable of producing the required components or raw materials at short notice, based on predicted volumes. In some instances, it may be necessary to operate two supply chains in parallel – one focused on mass production and the other on low-volume, customised production. Depending on the success of the latter, more volume could be moved across over time, as demand increases.

The rapid uptake in 3D-printing technology, which has become more accessible to a wider range of manufacturers, has made product customisation strategies working with a variety of materials more viable. By locating a printer close to production lines, it is possible to produce components in the precise quantities and specifications required, within minutes rather than days or weeks. For footwear manufacturers such as Nike, it could even be possible to produce a pair of trainers that are designed to fit the shape of each customers’ feet, at the same time as allowing them to choose their preferred colour and trim.

Research suggests that innovators and early adopters of technology are more likely to view supply chain innovation as a means of delivering an enhanced customer experience, than businesses that are behind the technology curve, which are more focused on reducing cost.

In today’s fast-paced, consumer-driven markets, supply chain innovation is critical, and businesses should be looking for ways to leverage supply partnerships and harness technology to streamline their route to market. The ability to customise product offerings has long been regarded as the icing on the cake from a brand perspective, but it is increasingly regarded as integral element of modern manufacturing processes from start to finish.

Michael Minall is a partner and head of the global industrial team at management consultancy, Vendigital.