Published on November 16, 2023, 9:07 pm

Chief supply chain officers (CSCOs) have a critical task at hand – growing direct-to-consumer (D2C) selling and other forms of digital commerce. However, they must also navigate ongoing supply chain disruptions that can lead to out-of-stocks, missed sales, and disappointed consumers. To address these challenges, Gartner recommends that CSCOs implement four key actions.

Firstly, CSCOs should segment consumer products as “backorderable” or “substitutable.” This involves defining which products can be backordered with high confidence, allowing online sales to continue up to a defined quantity and future delivery. Similarly, products that may not be backorderable can be grouped as “substitutable,” where viable similar products are recommended to consumers as alternatives if the primary item goes out of stock.

Secondly, it’s crucial for CSCOs to weigh performance with backorder metrics. Defining and implementing metrics and tolerance levels for backorders is essential for driving alignment and end-to-end accountability. Without these metrics, challenges such as unanticipated demand volume, poor allocation prioritization, capacity misalignment, and cross-functional friction can arise. Tracking backorders and analyzing factors like volume growth, overdue backorders, and promised delivery dates becomes crucial in ensuring accurate insights.

The third action is to involve other functions within the organization. A successful backorder strategy requires input from multiple function areas including customer service, warehouse and logistics, sales and marketing, fulfillment teams as well as suppliers and consumers. Cross-functional involvement should start in the planning process when performing product segmentation and deciding which items are suitable for backordering or substitution. Ongoing discussions on backorders should then become a regular topic in sales and operations meetings.

Lastly, CSCOs need to make backorders an integral part of their supply chain playbook. Traditional playbooks often lack an approach to digital commerce backorders resulting in reactive approaches to out-of-stock situations. By focusing solely on being in stock or mitigating out-of-stock scenarios, supply chains deliver inconsistent performance both internally and in the consumer experience. Gartner suggests incorporating backorder planning into the supply chain playbook to improve overall execution and enable new insights and capabilities. This includes considering unified commerce strategies that offer consumers hybrid options such as pick up in-store or location-based availability.

In summary, CSCOs must implement a proactive backorder strategy for digital commerce to effectively navigate ongoing supply chain disruptions. By segmenting products, weighing performance with metrics, involving other functions, and making backorders part of the supply chain playbook, CSCOs can maximize their potential earnings and better serve consumers in the ever-changing digital marketplace.

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