Monetizing your supply chain data
By Caesar Keluro
Crunching of supply chain data is enabling great possibilities for monetization, heralding a new revenue stream for businesses. With cloud computing power, big data, business intelligence and analytics, data monetization has become more attainable. We have been creating data and transporting it at an unparalleled rate, these activities are fueling the growth in business intelligence and analytics (BI&A) as it is possible to discover opportunities for refining and innovating in our supply chains and to augment supply-chain collaboration. This is not only being enjoyed by retailers but any other company with the technical data infrastructure can take advantage of these benefits and also minimize the drawbacks of data monetization.
A Cloud-based BI&A platform
In recent times, Cloud-based BI&A platforms have ramped up opportunities for data monetization. With retailing, we have seen the arrival of new supplier/customer ecosystems that are emerging, in which BI&A services are offered through a supplier portal, which are cloud-based. These platforms allow retailers and their suppliers to share data and analytics, regularly for a price. Alternatively, any company may monetize its data by exchanging it for other benefits (e.g., merchandising benefits).
Data monetization is when the imperceptible value of data is converted into real value, usually by selling it. These data-sharing ecosystems often involve new players (e.g., public cloud platform providers and/or third-party data coordinators, negotiators or analysts). We know many companies would like to monetize their data. This can be done by converting data into other tangible benefits (e.g., supplier funded advertising and discounts), or by avoiding costs (e.g., IT costs). Likely buyers of your firm’s data include a direct supplier, an upstream supply-chain partner, a data aggregator, an analytics service provider or even a competitor.
A sweet spot for retailers
Research has shown that data sharing in the supply chain improves supply-chain performance. We have learnt that suppliers typically are interested in using a retailer’s point-of-sale data to enhance planning and better manage inventory, thus reducing the bullwhip effect (i.e., the phenomenon of demand variability amplification).
Manufacturers can use downstream data about retail sales to improve product design, optimize operations and develop fact-based marketing and promotional campaigns. The availability of sales data to the supply chain means that demand can be more accurately forecast and, hence, inventory levels can be better predicted; in some cases, assemble-to-order can be achieved. Some suppliers may even use such data for strategic decisions by looking for product affinities to make merger or acquisition decisions.
Point-of-sale, consumer-loyalty and inventory data can be sold to suppliers and some of the cost of analyzing a retailer’s data can be recovered from its suppliers.
Danger and legal trouble
Selling data could potentially wipe out your competitive edge. But a well-crafted contract would ensure that the data sold or shared is used for the mutual benefits of your firm and your supply chain partners. Appropriate assurance practices have to be established.
Pricing models need to take in the associated cost of making data available and its value to the buyer. Companies must develop the technical capacity which includes the hardware, right skillsets, software and network capabilities that enable your company to collect, store and retrieve its data.
The power of outsourcing
Also, local firm may choose to extend or outsource its technical data infrastructure to produce an attractive collection of data that can be sold to suppliers. An appropriate digital platform is basic for a firm and its suppliers to share data safely. Firms can build this platform internally or use the expertise of service providers. Using cloud-based infrastructure can boost the flexibility, scalability and speed of the platform.
We advised that a platform that will enable any firm to market its saleable data is critical to enjoying data monetization. With this any firm can swiftly monetize its data and also possibly avoid some analytical cost by leveraging the analytical capabilities of its suppliers rather than developing the analytical capacity internally. While this helps maximize the data monetization pay-off because it enables sales of data and reduces startup cost; it may also expose your company to be excessive reliant on its partners as a major source of analytics.
How retailers’ data is creating wealth
Retailers have accumulated billions of records every year of point-of-sales transaction data and they are taking that huge amount of data and creating their own commercial data clouds for their suppliers to analyze. With some of these commercial data clouds, FMCGs can just log in and see not only how their own products are doing in those stores but also how a competitor’s products are doing in those stores.
More so, FMCGs and other retailers can analyzing detailed data from retailers, mixing it together with econometric and demographic data, weather data, various kinds of geographic data, and trying to better understand the markets and figure out how to better sell their products. Even more, this technical platform are being expanded to meet new scale requirements arising from the suppliers’ use of the platform to perform advanced analyses on the data.
In all, we advise firms to develop the requisite advanced human capabilities without which they wouldn’t be able to enjoy the use of analytical techniques (such as optimization, predictive modeling, simulation, time series modeling and principal component analysis). Anything short of that, the platform will be ineffective.
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• Caesar Keluro is a co-founder/CEO of Nanocentric Technologies Limited, a technology company helping firms achieve digital transformation. He twits @Kcaesar and can be reached on gurucaesar@gmail.com
