Customer value is the measure of a company’s contribution to its customer based on the company’s entire range of products, services offered and intangibles. Effective supply chain management aims to provide optimal customer service for minimal cost.
However, companies cannot fulfill customer needs if they do not have a clear understanding of customer requirements. The most successful international companies are those that know how to assess customer needs effectively and apply the findings to their strategies for supply chain management. They must ensure that their offerings are adapted to suit local tastes and preferences and must have their products available when customers want them. Companies must also offer a price for their goods or services that is both competitive and profitable.
Before mapping out global supply chain management strategies, companies need to have a thorough understanding of customer requirements in all targeted international markets. This information will be critical in mapping out networks and supply chain strategies.
Selecting where to make improvements
Providing optimal customer service is different than providing a maximum level of service. Sometimes the cost of providing additional services is prohibitive and the competitive environment does not require it. There is no need to plan a supply chain that will result in a faster delivery time if it does not result in happier customers or an increase in sales, profit and market share.
Although satisfying clients’ needs is a primary objective of the global supply chain management process, companies must ensure that their operations are viable and are conducted in a manner that does not exceed their capabilities. For example, companies must evaluate their distribution options based on:
- the size of the target market for a product; and
- the service requirements of potential customers.
Required levels of customer service are closely linked with distribution options. For example, if customers expect a product to be delivered in twelve weeks and the supplier’s lead time is five weeks, the company can be confident that there is no need to maintain a distribution facility close to the customer base. However, if customers seem to demand a product on an irregular basis, and they can readily obtain a competitor’s product, companies will have to decide how they can adapt their supply chain to accommodate this need. For example, they might have to consider opening a local distribution facility, using a local distributor or shipping the product by air freight to the customers. Which choice they make will depend on costs and the level of customer satisfaction afforded by each choice.
It is usually more complex for a company to provide high levels of service to international clients than to domestic clients. This is often due to factors such as the distances to reach foreign markets, the variety of transportation modes that might have to be used, multiple transfers and handling procedures, and regulations involved with transporting goods or service personnel across international borders. Therefore, companies selling their products in international markets must develop strategies that provide the same high level of customer service offered in domestic markets. This might require opening and operating facilities in foreign markets. The facilities should then be staffed with personnel that are familiar with customer needs and with the degree of customer service required in those markets. An adequate level of inventory and a number of replacement or repair parts would also need to be maintained at the facility.
(Sourced from FITTskills Global Supply Chain Management—Online course: Learn how to manage your global supply chain efficiently. Register now!)