Possibilities and challenges
A customer-focused approach is more within grasp today than ever before thanks to advancements in technology. Robust “listening” tools that gather sentiment signals can incorporate vast amounts of data from diverse sources across the internet to help enterprises better understand what to produce and associated quantities. For example, web scraping can monitor social media trends, such as influencers endorsing a product, which might cause a sudden 10% to 15% surge in demand. Transforming this data into actionable insights requires advanced analytics and skilled professionals who are adept at managing and interpreting information. Another use case is for machine learning to analyze retail purchasing patterns to optimize inventory levels. Additionally, the conversations that chatbots have with customers is also a rich source of intelligence to understand product issues and future needs. However, integrating these technologies with existing systems brings inherent costs and complexities that must be carefully managed.
Adopting a customer-centric supply chain model also necessitates a profound cultural shift across organizational functions. Unlike marketing departments, which can pivot quickly, the supply chain is akin to an oil tanker — often slow to change direction. This transformation requires unwavering commitment from the executive team, who must set the tone from the top and recognize the value of a customer-centric supply chain. However, as we’ve seen, executives often view the supply chain primarily as a cost center rather than a strategic asset. To overcome this perception, siloed departments must collaborate, share information openly and align around common metrics — practices that are not typically standard in many organizations. Every team member must understand and contribute to not only quality and cost control but also align to improving the customer experience.
Finally, there is a third pillar of integration: processes, technology and people must be holistically aligned and moving toward the same goal of a customer-centric supply chain. Operations — including supply chains, underlying systems and the people that use them — must be cohesive and not left to wither from destructive cost-cutting. An organization’s operations should function an enabler for customer satisfaction strategies and innovation, but all too often it is seen as budgetary line item to minimize. Only by addressing these three pillars — cultural, technological and integrative — can companies truly transform their supply chain to be a strategic advantage that delivers value to both the enterprise and its customers.
Tracking metrics for supply chain performance
Another challenge for supply chain leaders lies in harmonizing customer-driven metrics with the management of supply chain costs. At times, the cost of delivering goods can even exceed the cost of the products themselves, highlighting the need for strategic trade-offs. Metrics, such as the cash-to-cash cycle, inventory turnover and on-time, in-full (OTIF) delivery rates, serve as the backbone of operational efficiency and can also have a ripple effect on customer satisfaction.
To further drive a customer-centric culture, supply chain executives should also track metrics that directly reflect customer loyalty and perceptions, such as the net promoter score (NPS) or similar metric. But despite the clear benefits of such metrics, only 44% of surveyed supply chain leaders are actively tracking customer satisfaction. The ability to make informed and strategic decisions in this domain is essential for maintaining a competitive advantage and nurturing customer loyalty.
Changing the dialogue
With cost driving most supply chain decisions, is the customer-centric supply chain destined to remain elusive for companies — a goal to admire from afar rather than a strategy to enable today? This involves a mindset shift, from considering the supply chain as a cost center, to one that is still cost optimized but also focused on driving an improved customer experience, resilience and sustainability.
For one beverage manufacturer whose customer preferences have whipsawed from one extreme to another during the pandemic and afterward, the drive toward change has already produced results across their operations. After the transformation that encompassed technology, people and processes, an executive with the manufacturer said: “Our supply chain now uses a dynamic production strategy to maximize operational efficiency, applies market data to help us stay ahead of consumer trends, has an upgraded IT infrastructure to provide leadership with more in-depth data reports, and relies on our talented employees to help us achieve operational excellence.”
Here are three questions to ask for how to reframe your organization’s supply chain as an enabler of growth:
1. How can we enhance our supply chain’s responsiveness to changes in customer demand or market conditions? This should prompt an evaluation of supply chain agility and flexibility and methods to enable them, such as implementing demand forecasting tools and adopting just-in-time inventory practices.
2. In what ways can we leverage data and analytics to predict customer preferences? You must deeply understand your customer base — what they value in the buying experience, and from that value, how much is placed on elements of the supply chain.
3. What should you implement to encourage integration between supply chain, commercial, and finance, data and analytics? Beyond the technology involved, integrated business planning (IBP) as a discipline is crucial, and few companies have nailed that capability as a strategic advantage.
