Digital capabilities are creating smarter and better-informed customers, both in the B2B and B2C spaces.

This new customer has expectations and demands that companies must meet if they are to grow sales, retain current business and reduce costs. Brands are responding by augmenting or even replacing their traditional wholesale channels with a direct-to-customer (DTC) model.

The lines between B2B and B2C are blurring. Businesses of all kinds need to know more about their customers and how purchasing decisions are made. They want to be able to spot changes in buying behavior, and adjust quickly. And that urgent need is making DTC an essential part of many corporate strategies.

To implement this new business model, sellers must redesign workflows, with the aim of acquiring the visibility, tracking capability and data needed to make key decisions. The resulting systems must link the customer to demand planning, manufacturing and the supply chain, creating end-to-end visibility.

The need for optimized and connected workflows is accelerating digital transformation of the supply chain. Following are some key characteristics of this trend.

Customer needs are being dynamically recognized. Data is being made readily available with artificial intelligence and machine learning tools, which sense when changes are needed.

Demand sensing is being tightly linked to manufacturing and the supply chain. Adjustments are taking place quickly and seamlessly. The data-driven business model adjusts quickly to customers’ changing needs.

Regionalization is becoming preeminent. Smaller quantities of product are being manufactured and delivered as lead times shrink, and companies acquire deeper insight into actual demand. As a result, more goods are being sold at full price, with fewer markdowns. Near-shore sourcing strategies are helping to overcome material shortages and demand uncertainties, while adjusting last-mile deliveries to meet customer service requirements.

Distribution is happening closer to the customer. Stock is becoming visible across the distribution network, and stock rebalancing is taking place quickly and seamlessly.

Risk management is being integrated into workflows. The regionalization of distribution reduces geopolitical risk and makes logistics more predictable. Digitization of the end-to-end supply chain provides transparency, and with the help of integrated risk-management tools, companies can better predict potential issues. Compliance can be monitored and reported with higher confidence, ensuring that goods are produced in an ethical and sustainable way, using modern labor practices.

Direct connection to the customer is a must for today’s data-driven supply chain. Companies are moving to the DTC model to retain and grow their customer base. While DTC doesn’t need to be the exclusive route to the buyer, it provides the data needed to understand changes in the market and adapt more quickly than with traditional logistics models. 

Industry leaders are busy adapting their business models to exploit the capabilities of digital supply chains and other technologies that can differentiate them in the marketplace. As a result, they’re better able to deal with material shortages and demand uncertainties. At the same time, they’re integrating risk-management into workflows, instead of treating it as an afterthought. Witness the growth of business in Mexico and other Latin American countries, as manufacturing spans borders with subassemblies moving back and forth for companies like Boeing, Samsung, LG, and Whirlpool. All across the globe, manufacturing is regionalizing to better serve the customer.

The ultimate goal is direct knowledge of the customer. Those who aggressively invest in DTC business models and supporting technology are likely to outpace their competition for some time to come.

Marko Kovacevic is managing director of the Digital Supply Chain Institute.