Earlier this week the Wall Street Journal ran a front page story on the collapsing economics of recycling. Causes include dropping prices for scrap paper and other materials, and a recent suspension by mega-recycler China of all scrap imports from the U.S. until June 4. Both of these causes, however, stem from the underlying problem of rising rates of contamination in post-consumer materials. In other words, we don’t separate our recyclables well.
The whole thing got me thinking about customer behavior. Are we as customers really so helpless, indifferent or even stupid as to be unable to handle the basic task of putting aluminum in one place and paper in another?
Continuous Improvement is a Two-Way Street
Customer-is-king thinking goes back to at least the 1980s. It has been a boon to business and supply chains by giving us all a focus for continuous improvement. Everyone from Burger King to Boeing has thrived on giving the customer what they want, when they want it. We’ve streamlined our operations, expanded our offerings and delivered ever more precisely into the customer’s hands.
The recycling situation, however, points to a flaw in how we approach consumer behavior in value chain design. Recycling rates have risen for years as processing technologies and public support have grown. The next move forward, though, may depend on consumers facilitating things by better separating waste materials at the source – usually in your kitchen.
This should be easy, but it’s not happening. Diminishing returns on innovation by recyclers mean higher charges for municipal trash collection. Everyone is losing because the system is built around the assumption that consumers can’t or won’t handle their end of the bargain.
Smart Everything, Except Us
“Smart” buildings, “smart” cars, and “smart” bags – the adjective is suddenly ubiquitous. It is also ironic. In the world of driverless vehicles, for instance, Waymo prefers a fully autonomous car to a driver-assisted one like Tesla because we can’t be trusted to make good choices. GPS-enabled navigation means no one can read a map anymore.
Machine learning algorithms based on our demonstrated preferences in things like voice ordering systems or entertainment streaming are great, but I fear they make us lazy. In fact, technology everywhere seems to be dedicated to reducing our responsibility as consumers to help supply meet demand profitably.
Data collected by SCM World on where supply chain leaders think digitalization will help their business show how slavishly we focus on the customer in our operations. We are eight times more likely to put our faith in digital for demand sense than for supply sense and twice as likely to bet on demand response as on supply response. To me this sounds like an unhealthy imbalance.
It need not be this way.
Subscription buying, in-store pick-up of e-commerce orders and crowdsourcing product innovation are real world tools for tapping consumer contributions to economic efficiency. Airlines have spent years tuning their pricing algorithms to improve load factors and profitability with the cooperation of consumers who’ve learned how to play the game.
IKEA is another obvious example of a business built on consumer acceptance of certain responsibilities that make the economics of the value chain work. IKEA can sell cheap, good furniture because customers handle much of the logistics and assembly themselves.
Respect Your Customer’s Human Brain
Business acts as though customers can be reliably satisfied only by focusing on our base, reptilian brain – “cheaper, bigger, shinier… better!” I realize that appeals to higher motivations (like “green” products) have historically fallen flat, but is this really the time to give up on engaging consumers in the pursuit of efficiencies that all can share?
New technologies like blockchain and cloud have the potential to link individual consumer choices and behavior to supply chain operations designed to reward customer cooperation. Smart consumers could be given the choice to buy in ways that make forecasting and load balancing easier.
We do it already when we accept surge pricing from Uber. In fact, consumer engagement in everything from product development to packaging design could open a new world of possibilities to find economically viable business opportunities.
Customers aren’t stupid, but acting as though they are is.
