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Feb 2016 - Perspective - Doc # US41042216

Perspective: Commerce Implications of D2C

Author: Simon Ellis Program Vice President

This IDC Manufacturing Insights perspective looks briefly at the implications direct-to-consumer (D2C) commerce will have for manufacturers. Although some manufacturers have grown up in a D2C business model, most have not, and it presents some very different challenges. Certainly there are sales and marketing implications, but we'll leave those to another discussion. There are supply chain implications in moving from a mass-centric business to a customer/consumer-centric business model — essentially moving from an operation that is designed to handle full pallets and full truck loads to one that will have to handle individual units shipped by parcel post. In our research, we have written quite a bit about the challenges this presents for most supply chains and the alternatives available to them. One option, of course, is to outsource D2C operations to a third party. Perhaps a logistics service provider or a retailer like Amazon. We have seen manufacturers testing both approaches. A somewhat more provocative approach would be to fundamentally rethink the fulfillment (and partly factory) network from today's large, centrally located warehouses to a network of micrologistics facilities. We touched on this notion in our 2016 supply chain predictions and fleshed it out in the IDC PlanScape: Implementing a Micrologistics Network The Evolution of Supply Chain Fulfillment (IDC #256929, June 2015). It's fair to note that reimagining the fulfillment network is not for the fainthearted, and a network more conducive to D2C trade may be more likely to be owned by a third party.

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