YouTube Effect: A Whole New Supply Chain

     Welcome back Readers! I’m Sivakami - A final year MBA student from Amrita School Of Business majoring in Marketing and operations. I have found my space to explore on the various verticals in the area of  Logistics and supply chain and of course not limited to theories and  empirical studies 😅. So come lets discover on our never ending territory 😇 

    Digitization was disrupting the television supply chain. In fact the Television ratings were falling and 95% of new television show concepts failed subsequently. However it was surprising to know that the reason for disruption is not just ‘Netflix’ rather it is the data driven content selection. Basically the user generated content shifts the power to the audience. From a supply chain perspective, it improves the demand prediction and accelerates content creation throughput time from months to days. So tell me now supply chains digitization can only be applied to manufacturing? Think again!

What's up with ABC ?

    American Broadcasting company an American multinational commercial broadcast television network. ABC’s customer promise is to provide entertainment that matches its audience’s viewing preferences and this is hard to predict and it frequently changes. This customer promise is not unique, ABC is in fierce competition with other television studios and internet competitors such as YouTube and Netflix. Supply chain efficiency (measured in high viewership & low production costs) is critical to profitably delivering on this promise.

    Digitization allows the supply chain to have greater visibility on demand signals across the network and offers the ability for mass customization. This is having a significant impact on the media supply chain.

    The traditional media supply chain is slow and prone to forecast error (not unlike the TOM Beer supply chain!). Similar to the traditional fashion industry, it relies on a long chain of producers, directors and distributors that each strive to predict end consumer demand and produce content 6-18 months ahead of delivery. When this works, ABC is able to deliver a hit show to its customers. When it does not, it is left with a product with little customer demand and an expensive replacement process (requiring a long throughput time if starting a new show from scratch or carrying an expensive safety stock of extra purchased shows).

Traditional supply chain 

New Data driven supply chain 

    This happens in real-time, if YouTube initially predicts a video will be popular based on the first set of viewers and puts it at the top of the page but there’s a sharp demand drop the next minute, it will update immediately. As a result, instead of a producer predicting and choosing what is shown to the audience, the consumer is deciding real-time what gets shown by voting with their views, likes, comments and shares.

    ABC could also incorporate popular audience generated videos in its broadcast news coverage of special events such as the Grammy’s and the NBA finals. This could include videos from both celebrities at the event and regular audience members. ABC has the opportunity to combine both the talent of its TV producers and deep data analytics to more reliably predict consumer demand and gain a competitive advantage. 

Happy reading from Sivakami :)