4 Ways to Compete Against Nontraditional Supply Chains

Supply chain leaders can get ahead of supply chain disruption by adopting the innovative and agile practices of digital giants and startups.

Supply chain organizations are used to dealing with competition. But increasingly, the competitors are not well-known contenders — rather, they are startups, digital giants and other nontraditional entrants. With their agile networks and relentless focus on customer needs, nontraditional competitors are reshaping supply chains through disruptive innovation. Chief supply chain officers (CSCOs) must think on their toes and react fast to avoid losing customers, market share and profits.

Traditional supply chains must adopt four essential capabilities that characterize their nontraditional competitors

According to the latest Gartner Future of Supply Chain survey, more than half of supply chain organizations across a range of industries believe they are at risk of disruption by competitors in the coming years. The highest perceived risk comes from a range of nontraditional competitors. This includes digital giants such as Alibaba, Amazon, Apple, Tesla and Uber, companies from other industries trying to diversify, emerging startups and innovative suppliers.

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“The COVID-19 pandemic has multiplied supply chain disruptions and competitive threats” says Pierfranceso Manenti, VP Analyst, Gartner. “The response to these uncertainties prompts CSCOs to accelerate digitalization, explore new business models, adopt the circular economy, and develop more agile and resilient supply chains.”

Although necessary and inevitable, those changes are much harder to implement in a conventional, mature supply chain network than in a startup or a digital giant. To support their business competitiveness, traditional supply chains must adopt four essential capabilities that characterize their nontraditional competitors.

Reestablish close contact with customers

Customer proximity and intimacy — the ability to know which products and services customers really want — are critical for an organization’s success. However, this characteristic is one that many established companies risk losing over time, opening a window for competitors. As companies become lulled into complacency by long-established strategies in supply chain, sales, marketing and product development, gaps arise in product and service offerings.

Read more: Gartner Keynote: Adapting Supply Chain Strategies, Investments and Leadership Style

The starting point to get closer to the customer again is to gather voice of the customer (VoC) data and create customer journey maps to design for critical touchpoints. According to the 2020 Gartner Opportunity After Crisis Survey, however, only 25% of survey respondents report active collection of VoC data and customer journey mapping to sense unexpected changes in demand. 

Gartner describes four capabilities needed to compete with nontraditional supply chains — from staying close to customers to leveraging traditional and new business models.

Develop a supply chain innovation mindset

Being closer to customers and understanding their wants and needs must be matched with an equally important ability to launch new products faster. Customers want better, cooler and smarter products, as well as solutions and services with extended capabilities. They also want a continuous flow of innovative products developed and launched without delays.

Gartner research shows that 44% of respondents plan to become faster at launching new products. “Even established organizations are planning to operate like a startup when it comes to innovation,” Manenti says. “To create the necessary innovation culture, CSCOs need to engage their employees with a strong sense of purpose and inspire them with shared beliefs to guide decision making.”

Accelerate supply chain agility

Large organizations often have long lines of command and internal silos. This can create complexity and low-paced decision making that harms innovation and change. An agile supply chain organization makes use of self-forming teams and data-driven decision making to become more responsive. By embracing less hierarchical organization and leadership models, companies can engage more of their talent to develop new ideas across operations, products and customer service.

Leverage traditional and new business models

An advantage that nontraditional competitors frequently have over established companies is that they don’t follow the established supply chain conventions. These new competitors — especially emerging startups — often are purpose-driven and focus solely on achieving innovation or customer experience as their business goal, instead of being only focused on delivering financial performance that investors expect from established companies.

Read more: Make a Compelling Case for Your Digital Supply Chain Transformation

CSCOs can use supply chain segmentation to combine the advantages of a well-run supply chain with the agility to support new business growth and the resulting efficiency trade-offs. Already, many supply chain leaders operate separate supply chain segments within their global supply chains to support emerging new products.

These segments rely on third-party contract manufacturers or incubators and use different distribution channels than the traditional supply chain. This combination of conventional and innovative supply chain segments is a recipe for success for traditional organizations.

Recommended Gartner client* reading: Supply Chain Executive Report: Competing Against Nontraditional Supply Chains by Pierfranceso Manenti, et al. 

 

*Note: Some documents may not be available to all Gartner clients.

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