Supply Chain Frontiers issue #14. Read all articles in this issue
In the year 2025 some 25% of the US population will be over 60 years of age, and an estimated 30% of Europeans will fall into this age bracket. The former USSR will be even grayer; it is estimated that the over-60’s group will comprise about 43% of the country’s population. Older consumers require different types of products and services, and companies will need supply chains that support these graying markets.
Presenting research findings from the MIT AgeLab, directed by Joseph Coughlin, CTL Research Director Larry Lapide summarized some of the supply chain implications at the Supply Chain 2020 Project’s one-day symposium entitled Building the Future Supply Chain Now, held in Zaragoza, Spain, this April. From a global perspective companies should expect some marked differences between national markets. In contrast to a more elderly Europe, for example, certain developing countries will be relatively youthful. Iran has more people under the age of 15 than over 50.
Some companies are already gearing up for aging markets. Nike is developing customized shoes that are aimed at baby boomers. Car maker Nissan has identified the over-50 crowd as a major market for the future. There are three core innovations that companies should watch out for, according to the MIT Age Lab.
Retailer Service Hubs
Retailers will become hubs for services, not just products. For example, pharmacies could evolve into extensions of doctors’ offices with arrays of support services such as health screening and nutrition guidance. The change in emphasis will alter the product mix and lend more importance to product/service packages.
Personalization on Demand
Product customization will be pushed closer to the customer. Cars, for instance, will have features more attuned to the personal preferences of owners. In-car navigation systems could provide specific information such as the locations of the nearest gas stations. Retailers would be able to beam personalized sales discounts to individual consumers as they approach relevant outlets. Tailoring products in this way would require more sophisticated build-to-order and inventory management systems.
Home Services
The third emerging innovation is services that integrate information technology - electronic sensors for instance - with daily-use items such as appliances to facilitate an expected increase in home-based consumption. As an example, bathroom fittings could be equipped to monitor vital signs such as the blood pressure levels of occupants and transmit the data to health care facilities. Food products could be automatically ordered on-line when in need of replenishment. Some companies are preparing for these changes by entering into strategic alliances. Examples include a partnership between Panasonic and Tokyo Electric Power to create products that deliver monitoring services in the home. In a supply chain sense these changes will require greater collaboration between trading partners, and more efficient home delivery services to overcome “last mile” limitations.
Aging markets will also bring challenges that are more industry-specific. In the grocery business home delivery may need to become a reliable lifeline for impaired elderly people who can no longer make trips to the supermarket. Also, as one symposium panelist pointed out, the pharmaceutical supply chain will have to become much more service oriented. Courses of treatment are likely to be more complex as older consumers use series of medications that have to be taken in the right sequence. This will require better coordination and more collaboration between drug manufacturers.
For more information see the SC2020 web site. For information on joining the SC2020 research community, email Larry Lapide, CTL Research Director.