A couple days ago, I was watching a TV-show on Netflix at home called Stranger Things (great TV show by the way…), and I was wondering… why is Netflix so appealing to such a large audience? If like me you are watching Netflix, you are among the 128 million users worldwide (this number doubled in less than four years!).
The Netflix Era:
Netflix has a really good supply chain, linking entertainment companies to end consumers in a way that has never been that easy. They went from renting DVDs by mail to delivering a service on the Internet. They now use a completely virtual (or digital) supply chain, which brings several advantages:
- No lead time (subscribers can “consume” content whenever and wherever they want)
- No need to manage an expensive network of distribution centers: this allows to cut costs and to develop more rapidly in any market having an Internet access
- No need to manage stock: as it is virtual content, it can be streamed as many time as possible. Nevertheless, Netflix should update their inventory as soon as possible because movies and TV shows lose their value over time.
This supply chain strategy also has several risks that should be considered:
- Upstream supplier risks: depends on entertainment companies to provide the content subscribers want
- Downstream distributor risks: depends on ISPs (Internet Service Providers): some cable companies have complained that Netflix was increasing the traffic levels, and that they should thus pay higher fees.
- Competitive risks: Netflix competes in a cut-throat market against companies such as Amazon (around 85.3 million users), and Hulu (around 32 million users).
This virtual supply chain also allows to easily analyze the data they are collecting. This helps to better predict what every users will probably want to watch. For example, if you watch a lot of action or superhero movies, it is highly possible that they will recommend you to watch Marvel TV Shows such as Daredevil. You can watch a short video on how Netflix uses Big Data:
Netflix does not only have a good supply chain strategy, but it also can be used in many different companies. For example, the way they use Big Data can be really useful for predicting future costs, future stock level but also to choose among several suppliers (You can see more about it right here: https://www.savi.com/supply-chain-visibility-netflix-model/).
So as you can easily understand, Netflix’s success relies on a well operating business model that connects suppliers to consumers on an “easy-to-use” platform that can be accessed anywhere at any moment. The next time you are watching your favorite TV Show, just think about it… 😉
Some facts about Netflix:
- 128 million users
- 1 billion hours of content per week
- 10 largest Internet based company with $11.69 billion in revenue
- 5,500 employees in 2017
- In Canada, 56% of the Internet users have Netflix
Videos you can watch on Digital supply Chain: https://www.youtube.com/watch?v=obXUBlgo2ow
If you want to know more on Netflix’s strategy : https://www.impigertech.com/blog/supply-chain-management-lessons-from-netflix/