Use of advanced technologies compresses the value chain, enabling value-added, customized solutions and reducing value chain inefficiencies
Frost & Sullivan’s recent analysis, Transformative Megatrends Driving Value Chain Compression, finds that transformative business solutions and customer-centric business models are compressing the value chain. With new entrants offering end-to-end solutions across the upstream and downstream stages, vertical integration is changing value chain dynamics. Additionally, as new technologies—augmented reality/virtual reality (AR/VR), artificial intelligence (AI), and blockchain—enable value-added, customized solutions and reduce value chain inefficiencies, the value chain will move from the current product-centric model to consumer-centric data, systems, and services in the new compact ecosystem.
“Disparate generational preferences toward purchases impact the overall customer journey. Millennials prefer automated customer service, and Gen Z places a high value on personalization, which is pushing retailers to redesign the value chain with a focus on direct customer communication,” said Malabika Mandal, TechVision Industry Analyst at Frost & Sullivan. “The growing trend of digitalization in the retail space is also encouraging businesses to explore new delivery and fulfillment models that will reduce the gestation gap between product order and delivery.”
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Mandal added: “The digitalization of customer services and the adoption of cloud computing, predictive analytics, and blockchain are opening up several opportunities for companies to shorten the value chain, mainly in the media and entertainment, insurance, automotive, and payment industries. Further, value chain compression offers numerous economic benefits, such as decreased capital and infrastructure costs. For example, blockchain reduces several steps around validation, tracking, clearing, and risk mitigation. It allows the companies (financial institutions) to use this technology to reduce infrastructure costs by 30%.”
The shortening of the value chain with cloud computing, predictive analytics, and blockchain creates immense opportunities for market participants. The following should be reviewed for growth:
- Retail analytics for end-to-end value chain optimization: Retailers that plan to merge online and offline stores without losing their offline customers need to tailor services based on offline retail analytics.
- Flexible fulfillment models to address the growing challenges of last-mile deliveries: Stores need to focus on operating as distribution centers and develop customized solutions that will create value for customers.
- Digital ecosystem to offer interconnected services through a single platform: Companies should develop effective integration strategies and efficient infrastructure to support integrating cloud services, mobile apps and platforms, the Internet of Things and AI-based systems.
- Innovative direct-to-customer (D2C) services to reduce excessive customer service costs: Companies that want to improve D2C relationships must invest in automated and innovative customer relationship services that will reduce sales cycles and offer constant support to customers between cycles.
Transformative Megatrends Driving Value Chain Compression is the latest addition to Frost & Sullivan’s TechVision research and analyses available through the Frost & Sullivan Leadership Council, which helps organizations identify a continuous flow of growth opportunities to succeed in an unpredictable future.
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