Supply Chain Management / Digitalization / Materials Handling

Perspective: Digital fulfillment is changing manufacturing

By Matthias Holweg, Benn Lawson, and Frits K. Pil, for Harvard Business Review

Mar 19, 2019

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Many manufacturers that serve retailers are still hamstrung by pre-digital production and supply chain processes, which make it difficult for them to see for themselves what customers’ needs truly are so they can offer them better choices. As one manufacturing executive lamented to us about the way it supplies one of its major retail partners: “It’s like delivering into a black hole.”

Digital technologies open up the entire spectrum of fulfillment channels from offline to online and from manufacturing to retail. They facilitate choice and empower customers to make trade-offs that were previously constrained by the order fulfillment system. In turn, visibility on the trade-offs customers actually make informs important operational adjustments and process improvements. We call this integration of fulfillment channels digital fulfillment.

Making attribute-price-time trade-offs visible to customers and giving them the ability to make an informed selection across these is central to manufacturers’ realizing digital fulfillment’s potential. In our research with global manufacturers in the automotive and consumer goods industries, we see this approach play out as some firms exploit the potential of digital technologies to redefine variability in customer preferences as an opportunity for value creation, rather than a problem to be managed.

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