{"id":23760,"date":"2017-11-15T15:29:16","date_gmt":"2017-11-15T20:29:16","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/does-the-brand-with-no-name-have-the-best-supply-chain-game\/"},"modified":"2017-11-15T15:30:27","modified_gmt":"2017-11-15T20:30:27","slug":"does-the-brand-with-no-name-have-the-best-supply-chain-game","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/does-the-brand-with-no-name-have-the-best-supply-chain-game\/","title":{"rendered":"Does the brand with no name have the best supply chain game?"},"content":{"rendered":"

The consumer packaged goods (CPG) industry is concerned about digitalization, or at least it should be. Innovative start-ups and non-traditional CPGs are invading their space, and in order to remain contenders, CPGs need to adapt. One way they can adapt is by digitalizing their supply chain. For those who do so, the potential short-term impact is significant. \u201cExpectations include up to 30 percent lower operational costs, 75 percent fewer lost sales, and a decrease in inventories of up to 75 percent.[1]<\/a> So why haven\u2019t more CPGs jumped on the digitalization supply chain bandwagon? Because it isn\u2019t that easy. What\u2019s required, as Strategy& puts it, is quite complex:<\/p>\n

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\u201c[The digital supply chain] extends the vertical integration of all corporate functions to the horizontal dimension, knitting together relevant players \u2014\u00a0the suppliers of raw materials and parts, the production process itself, warehousers and distributors of finished products, and finally the customer \u2014\u00a0through a network of sensors and social technologies, overseen via a central control hub, and managed through an overarching data analytics engine.\u201d[2]<\/a><\/p>\n

 <\/p>\n

What makes this move so challenging is that most pure CPG companies are based on decades-long investment in building the value of their brand, and they are deeply rooted in traditional supply chain. This operating model stands in stark contrast to what consumers expect today. Companies need to be faster, more flexible, more granular, more accurate, and more efficient.[3]<\/a><\/p>\n

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Enter Brandless, a direct-to-consumer (DTC) e-commerce start-up that offers high-quality low-cost \u2018unbranded\u2019 products across a range of everyday staples.[4]<\/a> The brand, a form of \u2018private label,\u2019 has leapfrogged the traditional supply chain approach of CPGs and believes it has a strategy to succeed in the digital world via speed and increased efficiency. For starters, it has eliminated the need for a traditional supply chain by eliminating the \u2018brand tax,\u2019 \u201c\u2026the premium you pay for branded versus unbranded products.\u201d[5]<\/a> Brandless believes that a company\u2019s \u2018brand tax\u2019 requires a complex supply chain. \u201c[T]he people making [the product] have to create a brand, market that brand, identify a distributor to get that brand into stores, find a broker to get it in front of the merchants, and then in the store you have labor and inventory costs\u2026there’s a lot of complexity in the supply chain that we’ve eliminated.\u201d[6]<\/a><\/p>\n

 <\/p>\n

Brandless is implementing its no \u2018brand tax\u2019 strategy in the short term by operating as a direct to consumer (DTC) model and selecting distribution centers with proximity to customers in all fifty states. \u201c[G]oods [are] shipped from two distribution centers, one in California and one in Indiana, and delivered mostly within two days.\u201d[7]<\/a> Moreover, all of the brand\u2019s products are logo-less, and it has set a single price of $3 for all items. These strategies allow Brandless to avoid the middleman, the necessity of adding a price tag to each item, and, based on experience, the accompanying, dynamic logistical system-wide updates required with price changes and markdown updates.<\/p>\n

 <\/p>\n

In the medium term, Brandless plans to realize the efficiency gains that accompany digital management of distribution centers, as automation allows easier logistics and inventory management. Further, it is looking to maintain its pricing advantage by partnering with key suppliers to recognize greater scale, reduced costs, and receive higher margins on its 115 standardized units, a simplified assortment of skus.[8]<\/a> The result? Reliable suppliers, cost-savings, greater visibility to where the product lies in the supply chain, faster delivery time, and less variability in product assortment.<\/p>\n

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\"\"<\/a><\/p>\n

https:\/\/brandless.com\/about<\/p>\n

 <\/p>\n

While Brandless\u2019 innovative approach is commendable, a few key factors will impact its ability to survive. In the short term, the brand must be strategic with its approach to customer acquisition. One could argue that this cost can be high for DTC; while there\u2019s more reach and a growing familiarity in having an online presence, Brandless doesn\u2019t have an established brand tied to it to suggest high-quality and\/or trustworthiness.<\/p>\n

 <\/p>\n

In the medium term, Brandless must evaluate if it should expand its target market beyond the millennial consumer, who may not be as loyal as anticipated. One option is to partner with other retailers to expand their reach, \u00e0 la Harry\u2019s and Target.[9]<\/a> The company will also need to determine whether or not it needs to reconsider its pricing model and product assortment. While these two elements function as the company\u2019s main value proposition, they suggest less flexibility to dynamic retail and product adjustments utilized by key players like Amazon and Jet, who are able to adjust item-level prices based on P&L analysis.[10]<\/a><\/p>\n

 <\/p>\n

While Brandless\u2019 approach is creative in its logo-less nature, simple pricing approach, and DTC model, it\u2019s fair to ask: what will happen to customer loyalty as a result of a changing product mix \u2013 or lack thereof \u2013 and as new brands enter to compete on a similar pricing promise? Will they miss out on consumers who make purchasing decisions based on brand?<\/a><\/p>\n

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<\/a>[1]<\/a> Knut Alicke, Daniel Rexhausen, and Andreas Seyfert, \u201cSupply Chain 4.0 in consumer goods,\u201d McKinsey & Company, April 2017, https:\/\/www.mckinsey.com\/industries\/consumer-packaged-goods\/our-insights\/supply-chain-4-0-in-consumer-goods, accessed November 2017.<\/p>\n

<\/a>[2]<\/a> Philipp Berttram and Stefan Schrauf, \u201cIndustry 4.0: How digitization makes the supply chain more efficient, agile, and customer-focused,\u201d Strategy&, 2016, p. 7, accessed November 2017.<\/p>\n

<\/a>[3]<\/a> Knut Alicke, Daniel Rexhausen, and Andreas Seyfert, \u201cSupply Chain 4.0 in consumer goods,\u201d McKinsey & Company, April 2017, https:\/\/www.mckinsey.com\/industries\/consumer-packaged-goods\/our-insights\/supply-chain-4-0-in-consumer-goods, accessed November 2017.<\/p>\n

<\/a>[4]<\/a> Graham Hotchkiss, \u201cBrandless tackles online FMCG with simplified pricing model,\u201d Planet Retail, September 2017, https:\/\/www.planetretail.net\/NewsAndInsight\/Article\/160910, accessed November 2017.<\/p>\n

<\/a>[5]<\/a> Melissa Kvidahl, \u201cQ&A: Brandless, an online retailer with a mission and a $3 price point, arrives amid buzz,\u201d New Hope Network, August 2017, http:\/\/www.newhope.com\/people-and-company-profiles\/qa-brandless-online-retailer-mission-and-3-price-point-arrives-amid-buzz, accessed November 2017.<\/p>\n

<\/a>[6]<\/a> Ibid.<\/p>\n

<\/a>[7]<\/a> Paul Page, \u201cToday\u2019s Top Supply Chain and Logistics News From WSJ,\u201d The Wall Street Journal Business: Logistics Report, July 2017, https:\/\/www.wsj.com\/articles\/todays-top-supply-chain-and-logistics-news-from-wsj-1499856779, accessed November 2017.<\/p>\n

<\/a>[8]<\/a> Graham Hotchkiss, \u201cBrandless tackles online FMCG with simplified pricing model,\u201d Planet Retail, September 2017, https:\/\/www.planetretail.net\/NewsAndInsight\/Article\/160910, accessed November 2017.<\/p>\n

[9]<\/a> Ibid.<\/p>\n

[10]<\/a> Ibid.<\/p>\n

Word Count: 800<\/p>\n

<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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