The New Demand Chain is Governed by Real-time Data
Change is coming to the way companies forecast, plan, and execute the manufacturing and delivery of goods. Today’s supply chain is becoming tomorrow’s demand chain, enabled by small, inexpensive digital tags that let brands, manufacturers, distributors, retailers, consumers, and others track products through their useful life cycles.
But we can’t realize the enormous benefits of an integrated demand chain without addressing issues of data privacy and protection. Specifically, who owns the data generated along the demand chain and what can they do with it? When a brand contracts with a manufacturer to make a product, how do they coordinate to share data? When a consumer purchases the product, what are their rights to the data created by digital tag?
These and others represent complex issues, but by following a few key principles of data ownership and privacy, the goals of demand chain economics are eminently achievable.
The Shift to Demand Chain
Before detailing demand-chain data principles, it’s important to understand this new paradigm and its enablers. The demand chain marks a shift in production from being driven by forecasts—which are essentially educated guesses—to being informed by real-time demand signals (the data). Already, companies have visibility into the purchase of their products, but it typically arrives after some delay and lacks context that would be useful if they could observe in real time how things like positioning, pricing, and promotion affect purchases.
What’s more, a fully realized demand chain, built around trackable, digital tags can offer insight after a product has left a store, or after it’s been delivered to a home or business. If the product is an article of clothing, for example, does the buyer wear it frequently or leave it hanging in the closet? How long do they keep it? And in the event it’s given, donated, or re-sold to another party, what happens to it next?
This type of demand-side input can have significant benefits, from traceability to proof of authenticity, from auto-replenishing consumables to better understanding consumer usage and behavior. All that’s needed is a way to communicate with products as they move through the demand chain.
How Technology Enables Real-Time Insight
Like other paradigm shifts in the way the world operates, demand chain is made possible by technological innovation. In this case, the innovation is small, battery-free, Bluetooth-enabled, encrypted identification (ID) tags affixed to products, components, and packaging as they move through the chain—stamp-sized computers that power themselves and are perpetually connected to the Internet. The cost of this connectivity is mere pennies per digital ID tag, rather than the dollars required for previous tracking solutions.
As tagged products move from manufacturer to consumer, they’re read by “gateway” devices—readers on the shop floor, smartphones, tablets, smart speakers, Wi-Fi access points, Bluetooth-to-mobile cellular gateways, or even lighting fixtures that can read Bluetooth signals. Each time a gateway reads the encrypted tag ID, it relays the information to a secure location in the Internet cloud for decryption and association with other relevant data, such as location and information about the identifying gateway. The chain starts, for example, with understanding where in production a product may be, then eventually begins logging where in a store it’s positioned (plus, when and how often it’s tried on, perhaps), and finally—potentially—who buys the product and how they consume it. All of this is discoverable throughout the new tech-enabled demand chain.
The result is a trove of important, relevant data, which could raise concerns if the demand chain weren’t guided by principles of data ownership and protection. Product identifiers aren’t new. Cars have had vehicle identification numbers for decades, making it possible to track them through their lifecycles. And consumer data protection is increasingly well regulated, as evidenced by Europe’s General Data Protection Regulation (GDPR) and the Californian Consumer Privacy Act (CCPA).
Taking everything into account, there are five core principles that should guide issues of data ownership as the world embraces demand chain management.
Principles of Data Ownership in the Demand Chain
The modern demand chain is born out of cloud-based technology, which means it’s catching on fast. Therefore, it’s important to tackle issues quickly to establish confidence in the system. When it comes to issues of data ownership in the demand chain, companies should consider the following when implementing new digital ID tag technology for tracking goods:
1. Whoever owns the tag owns the data and is accountable for how it’s used. For example, if a manufacturer purchases cloud-connected tags from a tag provider and affixes them to garments during assembly, the manufacturer owns the data until sale of the finished goods. When a consumer purchases a product, they own the data and have total say over its use. Clearly, for manufacturers and brands, the sharing of technology costs and access to data may become a point of negotiation between parties, in which case, jump to the next principle.
2. Manufacturers, brands, and retailers (and anyone else along the chain) should understand they gain more from sharing data from tags attached to products than by keeping it proprietary. That’s how the demand chain will yield its greatest benefits. While a manufacturer owns the data when it’s incorporating tags into products, others in the demand chain, including the retailer, could benefit from data generated during manufacturing. Still, the tag owner must agree and see fit to grant data access to other parties in the demand chain.
3. Ownership of a tag doesn’t grant ownership of data gathered previously, nor does it prevent ownership of the tag from being transferred back to a previous owner or ahead to a new one. When ownership of a tag passes from manufacturer to retailer, for example, then control of the keys used to decrypt the digital ID must be transferred to the new owner. Now, the ability to read a tag doesn’t give the current owner a complete picture, therefore, as mentioned earlier, parties should agree to a layer of data sharing to reap the most benefit. And of course, consumers of connected products, as owners, have the right to turn off the flow of data.
4. Consumers must opt in to the use of a tag on a product they own. They need to know it’s there and they need to agree to its ongoing operation while the product is in their possession. The option to opt out is not sufficient. And any data created during the time they own a tagged product—including the fact that they own it—must be protected under applicable privacy regulations, such as GDPR and CCPA. This critical step will require solutions from the demand chain. Given that getting customers to opt-in is required, how does one obtain this consent? We may find the solution in the increasingly ubiquitous smartphones and smart speakers that can read the tags, or in new technology integrated into PoS systems. Or it could be that wireless carriers become the identity provider of choice and products become associated with a consumer’s mobile number. Whatever the solution, the guiding principle is the same: consumers must opt in.
5. Companies must be transparent about the use of tags and offer real value in exchange for data. However we enable consumer opt-in, people will only get in the habit of connecting products to the cloud-based demand chain if they understand it’s happening and there’s something in it for them. Use cases could include authenticating that a product is real, food safety tracking, auto-replenishment with preferred pricing, usage guidance and lost-and-found services. Tags that continually track products could be a big benefit to consumers, but companies will need to communicate those benefits for the demand chain to reach its potential.
Attention to Data Yields Benefits
Applying these five principles of data ownership to the emerging demand chain will also help address other issues, such as waste management and recycling, thereby contributing to a greener planet. To enable recycling, for instance, issues of data ownership will be critical. Waste management facilities will need access to the data associated with digital tags on discarded products so they can unlock information about a product’s components, as well as any recycling instructions. Given the principles of data ownership along the demand chain, this type of information transfer may be challenging, but it’s feasible—and important.
The concept of a demand chain is revolutionary because it allows what happens at all stages to drive production. The digital tag technology used to implement a demand chain also allows for those further down the chain to enjoy fresh transparency into the history of a product they own, to better understand what they’re buying, and to use it in new ways. For all these benefits to accrue, data sharing and privacy are critical.
IHS Markit/CIPS: UK Manufacturing PMI near-record high
UK manufacturing trends
For the UK manufacturing sector, growth of output and new orders were both reported by IHS Markit and CIPS as among the best seen over the past seven years, which in turn has led to a strong increase in employment. Despite this, the sector continues to face supply chain delays and input shortages, which resulted in increased purchasing costs and record selling price inflation.
UK Manufacturing IHS Markit/CIPS Purchasing Managers’ Index® (PMI®)
Seasonally adjusted, IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 60.9 in April, which was an increase compared to March (58.9) and above the estimated 60.7 for April.
Increasing for the eleventh consecutive month, the latest readings are the highest since July 1994 (61.0). The output growth for April has been attributed to the loosening of lockdown restrictions, improving demands and a rise in backlogged work.
“The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business. It was primarily the home market that fuelled this upsurge in activity though more work from the US, Europe and China demonstrated there were also improvements in the global economy. This boom largely benefited corporates as output growth at small-scale producers continued to lag behind,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
In addition to expanding production, total new orders rose for its third consecutive month, which was attributed to a revival of domestic market conditions, stronger client confidence, parts of the economy reopening and improving global market conditions.
While new exports rose in April, the rate was reported as weaker in comparison to new orders. “Companies reported improved new work intakes from several trading partners, including mainland Europe, the US, China and South-East Asia. Large-sized manufacturers saw a substantial expansion in new export order intakes, compared to only a marginal rise at small-sized firms,” said IHS Markit/CIPS.
UK Manufacturing’s outlook
Remaining positive at the start of the second quarter, 66% of companies forecast that output will be higher in a year's time, which is attributed to expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and new product launches.
“Further loosening of COVID-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export,” said Rob Dobson, Director at IHS Markit.
Adding to comments from IHS Markit and CIPS, , Managing Director of Freight and Logistics at Accenture Global said: “While today’s figures are positive overall, the worsening supply situation is still a concern, with rates of both input costs and selling price inflation running far above anything previously seen. Shipping delays and material shortages are driving huge backlogs of uncompleted work and the surge in manufacturing orders is leading to many firms struggling to boost operating capacity to keep up with demand. With business expectations becoming even more optimistic as the economy rebounds, the big question will be whether firms will be able to cope with the surging inflows of new orders.
“As ongoing supply chain issues are still at large, companies with wide international footprints should look to reassess their logistics strategies by running supply chain stress tests and simulations in order to respond quickly to upswings and variability in demand. A flexible and resilient supply chain will be a key way for businesses to remain both competitive and stable as we emerge from the pandemic”