Self-study SCM Part 1 - Trends in SCM 2025 2026.pdf

# Impact of consumer trends on supply chain management The impact of evolving consumer trends necessitates significant adaptations within supply chain management across various business departments. ## 1. Impact of consumer trends on supply chain management Consumer trends are profoundly influencing business operations, from product development to logistics, compelling supply chain management (SCM) to evolve. Key emerging trends such as generative AI, sustainability, and quick commerce are reshaping consumer behavior and, consequently, supply chain strategies [11](#page=11) [13](#page=13) [4](#page=4) [7](#page=7). ### 1.1 Generative AI's influence on consumer experiences and SCM Generative AI (Gen AI) is a significant driver of innovation in both online and in-store consumer experiences. A quarter of consumers have already utilized Gen AI in their shopping journeys. Notably, nearly 60% of consumers have replaced traditional search engines with Gen AI tools for product discovery and information gathering [7](#page=7) [8](#page=8). #### 1.1.1 Consumer preferences for Gen AI in the customer journey Consumers demonstrate a strong inclination towards AI-driven automated replenishment. To enhance convenience, 61% of consumers advocate for automated reordering systems. Despite its growing adoption, the overall satisfaction with Gen AI is currently moderate to low and has shown a decline compared to the previous year, indicating challenges that need to be addressed [10](#page=10) [9](#page=9). #### 1.1.2 Impact of Gen AI on SCM strategies Gen AI can be a powerful tool for improving the supply chain, which is increasingly recognized as a key driver of customer experience. The goal is to simplify the purchasing process across all channels, with Gen AI playing a role in making science fiction a shopping reality. This includes its application in pre-shop phases where interest is sparked, buying decisions are made, and loyalty is built [23](#page=23) [24](#page=24). ### 1.2 The rising importance of sustainability in consumer choices Sustainability continues to be a crucial factor influencing consumer decisions, with Gen Z leading this trend, with 73% prioritizing sustainable products. This has prompted organizations to implement various initiatives, such as Ikea's Buy Back & Resell program and Sephora's refillable beauty products [11](#page=11). #### 1.2.1 Consumer willingness to pay for sustainable products Approximately 38% of consumers are willing to pay a premium, ranging from 1% to 5% more, for sustainable products. Consumers also show strong support for company-led food waste reduction initiatives, with 71% acknowledging that food waste contributes to environmental problems. An example is Tesco's initiative to convert surplus food into animal feed [11](#page=11). #### 1.2.2 Sustainability and purpose-driven SCM Sustainability, fair trade, equality, social justice, and health and nutrition consistently influence consumer choices. Businesses are increasingly expected to align their goals with the health of the planet and society, a concept known as "Business for Planet". The rise of the conscious consumer and the circular economy, with a push for second-hand and upcycling programs, further emphasizes this trend [25](#page=25). ### 1.3 The surge of quick commerce and its logistical implications Quick commerce is a dominant trend, with 70% of consumers willing to pay extra for fast delivery. This trend significantly impacts shopping habits and logistics, leading companies to invest in technology and infrastructure to meet heightened expectations. Consumers are now willing to pay 9% of the order value for a 2-hour delivery, an increase from 6% in the previous year [13](#page=13). > **Tip:** The increased willingness to pay for faster delivery directly translates to a need for optimized last-mile logistics and potentially more localized inventory. ### 1.4 Consumer prioritization of discounts and private labels Despite the emergence of new trends, consumers continue to prioritize discounts and private labels. A significant 64% of shoppers visit multiple physical stores to find deals, and 57% spend more time searching for online deals. The search for more affordable options has driven the rise of private label brands [14](#page=14). #### 1.4.1 Consumer awareness of shrinkflation Consumers are increasingly vigilant about shrinkflation, with 73% wanting alerts for such practices. Shrinkflation occurs when brands reduce product size or weight without a corresponding price reduction. New legislation in France now mandates supermarkets to display per-unit prices and quantity changes next to affected products on shelves [15](#page=15). ### 1.5 The persistent value of in-store shopping amidst online growth While online shopping continues to gain ground, in-store shopping retains its importance. 60% of consumers interacted significantly with physical stores, while 46% shopped online. The preference for in-store shopping tends to increase with age [16](#page=16). ### 1.6 Brand loyalty and switching behavior Experimentation and a lack of personalization are identified as major reasons for consumers switching brands, with 53% of consumers regularly changing brands and retailers. Last-mile delivery services, e-tailers, and meal kit brands exhibit the highest levels of customer loyalty [18](#page=18) [19](#page=19). > **Tip:** Understanding what drives loyalty for both retailers and brands (as indicated in pages 20 and 21) is crucial for developing effective SCM strategies that foster retention. ### 1.7 Managing and adapting to shifts in consumer behavior Brands and retailers can manage and adapt to these shifts by focusing on three key strategies: adapting to compete, unlocking channel growth, and leading with purpose [22](#page=22). #### 1.7.1 Adapting to compete The supply chain is a critical component of customer experience, and improvements can lead to lower operating costs, brand differentiation, and strategic advantage. AI is recognized as a powerful tool in this regard [23](#page=23). #### 1.7.2 Unlocking channel growth The objective is to make purchasing products as seamless as possible across all channels. This involves leveraging AI and data-driven personalization to understand and cater to customer needs during the pre-shop phase, which influences buying decisions and builds loyalty [24](#page=24). #### 1.7.3 Leading with purpose This strategy involves integrating core values like sustainability, fair trade, equality, and social justice into business operations and consumer offerings. Brands and retailers are expected not only to sell products but also to create experiences that build trust, loyalty, and meet market needs, aligning business goals with planetary and societal well-being [25](#page=25) [26](#page=26). > **Example:** A clothing brand implementing a take-back program for old garments to be recycled into new products exemplifies leading with purpose through circular economy principles and sustainability initiatives. --- # Generative AI in consumer interactions Generative AI (Gen AI) is significantly reshaping consumer behavior and experiences, particularly within shopping journeys, by offering new avenues for product discovery and enhancing convenience [7](#page=7). ### 2.1 Consumer adoption and usage of Gen AI A notable portion of consumers have already integrated Gen AI into their shopping habits. Specifically, one quarter of consumers have utilized Gen AI in their shopping activities. Furthermore, a substantial majority of consumers are increasingly turning to Gen AI for information retrieval, with 58% having replaced traditional search engines with Gen AI tools [7](#page=7) [8](#page=8). ### 2.2 Consumer preferences for AI-driven services Consumers express a pronounced interest in AI-powered services that automate routine tasks, with a particular emphasis on convenience. A significant finding is that 61% of consumers advocate for automated reordering systems, highlighting a strong preference for AI-driven automated replenishment to enhance ease of use [9](#page=9). ### 2.3 Challenges and satisfaction with Gen AI adoption Despite the growing adoption, the overall satisfaction levels with Gen AI in consumer interactions are currently moderate to low. This satisfaction has also seen a decline compared to the previous year. Several challenges contribute to this sentiment [10](#page=10). > **Tip:** Understanding these challenges is crucial for brands aiming to leverage Gen AI effectively and improve customer sentiment. ### 2.4 Gen AI's role in the customer journey and channel growth Gen AI is positioned as a pivotal tool for innovation across both online and in-store consumer experiences. It is instrumental in enhancing the supply chain, which acts as a key driver for customer experience. Improvements in the supply chain, often facilitated by AI, not only reduce operating costs but also serve as a differentiator for brands, establishing a strategic advantage. The overarching goal is to simplify the purchasing process across all channels [23](#page=23) [24](#page=24) [7](#page=7). > **Example:** AI is transforming science fiction concepts into tangible shopping realities [24](#page=24). Gen AI plays a significant role in the "pre-shop" phase, which is critical for sparking interest, influencing buying decisions, and building customer loyalty. A core application of AI in this phase is data-driven personalization, where the power of data is harnessed to demonstrate a deep understanding of the customer through various channels, including social campaigns and recommendations within Gen AI interfaces. This approach helps unlock channel growth by creating more relevant and engaging consumer interactions [24](#page=24). --- # Sustainability and conscious consumerism Sustainability and the rise of the conscious consumer are increasingly shaping purchasing decisions, particularly among younger generations. This trend is driving demand for sustainable products and influencing how businesses operate [11](#page=11) [25](#page=25). ### 3.1 The growing influence of sustainability on consumer choices The demand for sustainable products continues to grow, with Gen Z being a key demographic in this movement, showing a 73% interest. This increasing consumer preference has prompted organizations to implement various sustainability-focused initiatives. For instance, Ikea has introduced a Buy Back & Resell program, and Sephora offers refillable beauty products, demonstrating a commitment to more sustainable business models [11](#page=11). #### 3.1.1 Consumer willingness to pay for sustainability A significant portion of consumers are willing to pay more for products that align with their sustainability values. Approximately 38% of consumers have indicated that they will pay a premium, ranging from 1 to 5% higher, for sustainable goods [11](#page=11). #### 3.1.2 Support for food-waste reduction initiatives Consumers also show strong support for corporate efforts to reduce food waste. A substantial 71% of consumers recognize that food waste contributes to environmental problems. An example of this initiative in action is Tesco's practice of converting surplus food into animal feed [11](#page=11). ### 3.2 The conscious consumer and the circular economy The concept of the "conscious consumer" is on the rise, reflecting a broader shift in consumer awareness and values. These consumers are motivated by factors beyond just product features and price, including sustainability, fair trade, equality, social justice, health, and nutrition [25](#page=25). #### 3.2.1 Business for Planet This evolving consumer landscape is linked to the idea of "Business for Planet," which examines how a company's business objectives align with its own performance and, critically, with the health of the planet and society [25](#page=25). #### 3.2.2 Circular economy principles The circular economy is gaining traction, marked by a push for second-hand and upcycling programs. This approach aims to move away from a linear "take-make-dispose" model towards one that emphasizes reuse, repair, and recycling of materials and products [25](#page=25). > **Tip:** When studying this topic, remember to connect the increasing demand for sustainable products with specific business strategies and consumer demographics like Gen Z. Understanding the "conscious consumer" involves recognizing their broader value set influencing purchasing decisions. > **Example:** Consider a fashion brand that launches a collection made from recycled materials and offers a take-back program for old garments to be repurposed. This exemplifies both the demand for sustainable products and the principles of a circular economy, appealing to the conscious consumer. --- # The rise of quick commerce and delivery preferences The increasing consumer demand for rapid delivery is reshaping shopping habits and logistics, with a notable willingness to pay a premium for speed [13](#page=13). ### 4.1 Consumer willingness to pay for speed A significant majority of consumers, approximately 70 percent, express a willingness to pay more for fast delivery services. This trend is directly influencing how companies approach their logistics and technology investments. Specifically, consumers are increasingly willing to allocate a portion of their order value for expedited shipping. Last year, the willingness to pay for a 2-hour delivery was around 6 percent of the order value, which has now risen to 9 percent [13](#page=13). ### 4.2 Impact on shopping habits and logistics The growing emphasis on quick commerce, driven by the demand for faster delivery, is profoundly impacting consumer shopping habits and the underlying logistics infrastructure. Businesses are responding by investing heavily in advanced technologies and robust infrastructure to effectively meet this evolving consumer expectation for rapid fulfillment [13](#page=13). ### 4.3 Loyalty in delivery services Certain segments within the delivery and e-commerce landscape have demonstrated particularly high consumer loyalty. These include last-mile delivery services, e-tailers, and meal kit brands. This suggests that efficient and reliable rapid delivery is a key differentiator in fostering customer retention within these sectors [19](#page=19). > **Tip:** Understanding the quantifiable increase in consumers' willingness to pay for faster delivery (from 6% to 9% of order value for 2-hour delivery) is crucial for comprehending the financial implications of quick commerce [13](#page=13). --- # Brand and retailer loyalty drivers Understanding the factors that influence consumer loyalty towards both brands and retailers is crucial in today's competitive market. ### 5.1 Reasons for brand switching A significant portion of consumers, specifically 53%, are prone to switching brands and retailers regularly. This indicates that loyalty is not always inherent and can be influenced by various external factors. Common motivations for consumers to change their brand or retailer affiliations include a desire for experimentation and a perceived lack of personalization in their current shopping experience [18](#page=18). ### 5.2 Drivers of retailer loyalty Retailer loyalty is influenced by a variety of factors that encourage repeat business. While the document specifically highlights that last-mile delivery services, e-tailers, and meal kit brands tend to exhibit the highest levels of loyalty it also implicitly suggests that the underlying drivers are key [19](#page=19). > **Tip:** While specific categories may show higher loyalty, understanding the universal drivers applicable across different retail contexts is essential for building enduring customer relationships. ### 5.3 Drivers of brand loyalty Similar to retailers, brands also rely on specific factors to cultivate and maintain consumer loyalty. The document indicates that certain categories, such as last-mile delivery services, e-tailers, and meal kit brands, are particularly successful in fostering loyalty. This suggests that elements like convenience, digital experience, and product specialization are strong contenders for driving brand loyalty [19](#page=19). > **Example:** A meal kit brand might drive loyalty by consistently offering new recipes, ensuring reliable and timely delivery (last-mile), and providing a seamless online ordering experience (e-tailer). --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Supply Chain Management (SCM) | The oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. SCM involves the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. | | Generative AI (Gen AI) | A type of artificial intelligence that can create new content, such as text, images, audio, and video, based on the data it has been trained on. In a consumer context, it can personalize shopping experiences or automate tasks. | | Consumer Behavior | The study of individuals, groups, or organizations and the processes they use to select, purchase, use, and dispose of products, services, ideas, or experiences to satisfy needs and desires. | | Sustainability | The ability to maintain ecological balance, often by avoiding the depletion of natural resources. In a business context, it involves operating in a way that is environmentally friendly, socially responsible, and economically viable. | | Gen Z | The demographic cohort succeeding Millennials and preceding Generation Alpha. Generally considered to be those born between the mid-to-late 1990s and the early 2010s. | | Shrinkflation | A subtle form of inflation where a product's size or quantity is reduced while its price remains the same or increases slightly. This is often done to maintain profit margins without a direct price hike. | | Quick Commerce | A rapidly growing segment of e-commerce that focuses on delivering goods within a very short timeframe, typically an hour or less, often from local micro-fulfillment centers. | | Last-Mile Delivery | The final stage of the delivery process from a distribution hub or facility to the final destination, which is typically a customer's residence or place of business. | | Private Label | Products that are manufactured by one company but sold under the brand name of another company. In retail, this typically refers to store brands. | | Circular Economy | An economic model aimed at eliminating waste and the continual use of resources. It operates through strategies such as reuse, sharing, repair, refurbishment, remanufacturing, and recycling. | | Automated Reordering | A system where products are automatically reordered when stock levels reach a predetermined minimum, often used for frequently purchased items to ensure continuous availability. | | Conscious Consumer | A consumer who makes purchasing decisions based on ethical and environmental considerations, opting for brands and products that align with their values regarding sustainability, fair labor practices, and social responsibility. |