Invest in Flexible Decisions. Beat Supply Chain Volatility

May 8, 2023

A strong decision-making framework speeds decisions and boosts innovation.

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Here’s how to make flexible decisions—fast.

Key Takeaways

  • Organizations face significant macroeconomic challenges. Economic and supply chain volatility are the norm
  • Volatility leaves many organizations indecisive. With indecision, loss aversion takes over and forces many into the status quo
  • Leaders beat loss aversion and boost innovation with effective, flexible decision-making. Innovation drives growth, even amid volatility. In the first 12 months of the pandemic, top economic performers innovated nearly 2x more than peers

Meet the new normal: Economic and supply chain disruption #

Retailers and brands face difficult decisions after years of disruptions and macroeconomic challenges:

  • Eight in 10 US adults expect economic turmoil in 2023.
  • Six out of 10 believe prices will continue to rise while the stock market falls.
  • Freight companies cut demand expectations for H2 2023 as many retailers pause big orders.

Learn to navigate supply chain uncertainty

Volatility, indecision and loss aversion crush innovation #

Volatility leaves many organizations indecisive. With indecision, loss aversion takes over and prevents many from moving beyond the current state—the status quo.

Loss aversion causes individuals to focus more on potential losses than potential gains. Decision-makers, struggling with loss aversion, fear downside risks twice as much as upside opportunities.

And that fear stops innovation in its tracks.

Loss-averse organizations revert to the status quo rather than take risks. They protect existing systems, strategies and business models instead of investing in future opportunities.

Pivot to flexible decision-making #

Leaders beat loss aversion and boost innovation with effective, flexible decision-making. That means redefining how they make decisions.

It’s worth the effort. Inefficient decision-making costs the average Fortune 500 company $250M per year.

Beat the status quo. Focus on impact and optionality #

Here’s how to make flexible decisions—fast.

First, leaders recognize they cannot have 100% certainty. They then focus on impact x optionality.

Define impact #

A decision significantly impacts an organization when it either meaningfully contributes to—or takes away from—strategic goals. Leaders define impact by asking: “How will the decision affect the business if it succeeds? Or if it fails?”

Define optionality

It’s also critical to understand a decision’s optionality. How easy is it to adjust or change aspects of the decision? How reversible is the decision if things go wrong? The more options available—or the faster leaders can reverse the decision—mitigates downsides if something goes wrong.

In action: Skincare brand boosts sales with test and learn approach #

A global skincare brand grew 20% year-over-year. Yet they continuously lost sales due to a 64% shopping cart abandonment rate created by high shipping costs and unsatisfactory shipping options.

But they didn’t stick to the status quo. They embraced flexible decision-making to focus on impact and optionality.

First, the brand focused on impact. They tackled the challenge head-on with a series of shopping experience trials. The findings: Better delivery options and free shipping led to reduced cart abandonment. The brand planned a 15% reduction in cart abandonment to boost sales. They now needed a path to better delivery options—fast.

The brand’s fixed supply chain network couldn’t expand quickly to achieve delivery goals. They need to create optionality and avoid long-term fixed investments. Their supply chain needed to evolve dynamically.

So they partnered with Flexe to rapidly expand their logistics network—all while retaining optionality through a flexible, phased approach. They launched and tested with six nodes across customer demand centers. All while retaining the option to switch fulfillment locations or remove nodes when needed. Zero risk. Zero Capex.

The result: The brand reached 90% of eCommerce customers with a next-day delivery promise. And they reduced cart abandonment by 25% in the first phase.

Flexibility reduced risks, beat volatility and satisfied customers.

Global skincare brand delivers 90% next day with Flexe

Reduce risk. Invest in flexibility #

Loss aversion makes risks appear dire—even when upside possibilities exist. Leaders avoid this trap with flexible decision-making. They focus on both the impact and optionality of a decision to short-circuit loss aversion. More options create greater flexibility. And greater flexibility drives results, without massive risk.

The result: fast decisions, reduced risks and innovations to beat the competition.

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