Scott Bouvier and Katie Lewis attended the latest Australian Food and Grocery Council (AFGC) Supply Chain conference. The conference provided an opportunity for thought leaders to discuss issues facing the industry, anticipate future trends and share experiences and new ideas.
This alert sets out some key takeaways from the conference, including tips for lawyers who are regularly engaged in matters involving the supply chain.
The supply chain as a whole is currently undergoing unprecedented levels of change. As Klaus Schwab, founder of the World Economic Forum, told attendees of that conference in 2016: “We stand on the brink of a technological revolution that will fundamentally alter the way we live, work and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.” This revolution is being driven by increasing consumer power and the overwhelming uptake of technology, including wearable devices and the Internet of Things. Forces for change include: convenience for consumers, changing consumer behaviour and demographics, heightened expectations of delivery, healthier and fresher products and fair and responsible logistics. Businesses will need to fundamentally reset to respond to these changes in order to ensure that they remain relevant to consumers.
What follows are some key themes from the conference, and related legal implications.
1. Consumer power
In a world where everyone is connected, and communications can be shared across thousands of people instantaneously, consumers have more and more power over the supply chain. Key factors which are driving consumer satisfaction include:
Convenience: Consumers are increasingly expecting businesses to respond to demands in real time, which is leading to a large scale compression of delivery lead times. However, legacy technology platforms are often cumbersome and slow, and do not allow businesses to match the pace expected by consumers. Existing infrastructure is also causing issues for businesses, as it is generally set up to deal with large deliveries and long lead times, rather than short lead times and smaller orders. Businesses will need to be more agile in order to maintain consumer satisfaction. Lawyers will need to ensure that this agility is reflected in the contracting model with IT and logistics services providers, and look for new ways to balance price certainty with service flexibility.
Transparency: Consumers are increasingly demanding transparency over the supply chain – they want to know where their order is at all times. Shane Azzi, VP of Global Logistics at Kimberly-Clark, noted that the number one transaction through any ecommerce site in the United States is the question: “Where is my order?”Supply chain systems will need to provide this transparency, while providing secure, failsafe and flexible platforms. Technology has a major role to play in providing both businesses and consumers with visibility over the supply chain more generally. Both Paul Graham, Chief Supply Chain Officer at Woolworths and Matt Swindells, Supply Chain Director at Coles, spoke about the importance of having the ability to communicate with and track their supply trucks in real time, and to be able to understand how the journey from producer to warehouse to retailer affected the relevant goods (particularly for food products). Lawyers will need to ensure privacy and data law compliance while meeting the need for consumers to access their data directly through secure means, in addition to supporting their teams on the additional IT and communications contracts.
Sustainability: Consumers also want to know where their products are coming from, and that goods and services are being provided in a fair and sustainable way. This is particularly true in the food industry. Further, consumers want to feel connected with a brand, and the “brand story” that businesses convey to consumers is becoming more influential. Han Yuguang, from JD.com, spoke about the importance that blockchain technology will play in this area. JD.com currently has technology in place which traces unique products from their origin, through the supply chain to the consumer. JD.com is then able to share this information with the customer. Lawyers will need to negotiate agreements with suppliers which support sustainability policies with oversight and consequences. Lawyers will also play a huge role in ensuring that consumer representations are real and authentic to avoid legal challenge and loss of consumer trust.
2. Machine power
Developments in technology are having a major impact on how the supply chain operates. Sally Pyke, Associate Director at KPMG, noted that cognitive/predictive analytics in particular will disrupt all parts of the supply chain. Connected and wearable devices are tracking consumer habits in more and more detail, and this data will have a significant effect on how businesses relate to their customers.
It will also have an impact on how brands are viewed by consumers. An example raised by Andrew Clark from irexchange was that voice ordering could eliminate the consumer’s relationship with the brand altogether – for example, a consumer could ask a virtual digital assistant to “order cheddar cheese” rather than specifying a particular brand of cheese. Businesses will need to consider how to stay relevant in a world of automated ordering. In particular, trade mark lawyers will increasingly need to focus on the aural aspects of brands and there will be interesting legal challenges involved in differentiating between requested products and promotions.
Technology will also play a huge role in allowing businesses to respond to the increasing consumer demands set out above. Dan Knox, from GRA Supply Chain Consultants, noted that results from GRA’s recent supply chain survey showed that warehouse automation is receiving a high level of investment. Businesses should also consider how to capture and analyse data in the most beneficial way. For example, Mr Yuguang noted that JD.com collects data from a wide variety of sources – including weather information, public opinion and news outlets – and uses this to forecast, simulate and optimise the supply chain.
Data will play a significant role in allowing businesses to respond to changing consumer needs. Data gathered throughout the supply chain can be used to predict consumer needs, target promotions accordingly, allocate stock between warehouses and ensure that stock levels are sufficient to match demand.
Lawyers will need to be mindful of the increasing reliance on data, business’ growing vulnerability to data and IT breaches, and the effects this will have on brand reputation. Processes for consumers to opt in and manage their own data will become increasingly important, and lawyers will need to consider the impact this has on legal and technological processes. This will need to involve robust IT contracts with strict service levels and risk sharing.
3. A dynamic network
A key theme from each of the speakers at the seminar was that businesses need to stop looking at the supply chain as a linear concept. Rather, the supply chain should become an integrated, dynamic network, where each “link” communicates with the others. Martin Conneally, Partner in Retail, Consumer and Industrial Products at EY, stated that the approach to long haul freight and last mile delivery in particular needed to be reconsidered. Current infrastructure is at breaking point, and traffic congestion in major cities means that logistics providers are unable to meet demanding timelines. We need to find a way to move traffic off the roads, while still ensuring that logistics providers are able to fulfil delivery requirements. Propositions like Uber Freight, high speed rail and autonomous vehicles could have a major impact on this area. Likewise, lawyers need to move beyond linear thinking. Lawyers who work with the supply chain need to understand consumer demands, the effects on brand and the impact of data, and think holistically about the businesses they advise.
The goal is “anytime, anywhere” shopping.
Agility is fundamental.
Data and technology will play a major role in a business’ success.
Lawyers need to understand the consumer and be extra creative, while managing the increasing risks of data security, supply chain failure and misleading consumers with inauthentic claims.