Why you need to switch to a customer centric supply chain to stay competitive

10/11/2015

Customer Centric Supply Chain

Customer Centric Supply Chain

In today’s demand-driven omnichannel environment, there are many instances in which customer expectations are not satisfied.

In large part, this occurs because companies’ supply chains are not designed to meet the new requirements of omnichannel distribution.

A supply chain needs to be able to respond to customers’ demands by becoming “customer centric”.

Amazon has been the leader in customer centricity and sets North American expectations for all retailers, consumer products companies and distributors.

What exactly is customer centricity?

Customer centricity is the quality of an organization that places the customer at its core. There is a growing breed of customers saying,

I want it, where and when I want it, once you tell me the price.

This is the personalization of service that will become the standard going forward. This new standard will replace companies saying to the customer, “You will get it when I say you will get it.”

Customer needs must be responded to, and companies must treat these needs by making them the focus of their supply chain requirements. Once a company prioritizes meeting its customers’ expectations and becomes customer centric, the company will redesign its supply chain to satisfy the omnichannel customer.

As a first step, companies should define the fulfillment expectations of their target customers.

Secondly, companies should build a fulfillment model that allows the customer to select the delivery method based on velocity and/or cost. There are many options.

At the end of the day, when the customer is happy the company benefits, both in terms of increased customer retention and profitable growth. Therefore, the key to customer centricity is to tell the customer the price of the different options and then let the customer tell you how to make them happy – and you more profitable.

This standard moving forward will obviously have huge impacts on supply chain design, in order to meet increasingly complex customer requirements.

Don’t set customer expectations, understand customer demands

The first step in addressing the speed of delivery is to understand the customer’s expectations.

If there are no cost implications, the customer wants fast delivery, but even this depends upon the location of the customer (fast in New York City is different than fast in Boise, Idaho), the gender and age of the customer, the item being delivered, the season, and the cost of the item purchased.

In general the speed requirement of the customer varies given the circumstances.

However, the standard of same day in very large cities, next day in average cities and 2-3 day delivery for rural areas, will remain the same.

What needs to be understood is how to deliver a wide variety of products to meet the customer’s delivery desires.

There are four components needed for a company to become customer centric

1. An organization must have a wide selection of products available to the costumer.

2. An organization must have good pricing in order for the customer to buy.

3. An organization must create a convenient process for the customer.

4. An organization must provide a good experience for the customer. Amazon starts with number four on the list, focusing on creating a great customer experience, and thinks backwards while creating its supply chain.

To become customer centric, an organization must have a dependable support network. Entities that need to be a part of the support network include: employees, suppliers, shareholders, and the community.

Start by forming a plan to answer these three questions

How is your organization going to respond to becoming customer driven?

How is your organization going to focus on customer satisfaction?

How is your organization going to provide even better customer service?

When designing a supply chain that meets all of your customers’ demands, the fulfillment options need to be fully understood and evaluated.

Many models need to be considered based on the customers’ profiles including: the fulfillment center model, the click and collect from store model, and the pick up/drop off from a 3rd party location model.

With leaders like Amazon and Apple setting the pace, all other retailers are trying to meet this tempo; two day delivery across the U.S., next day delivery in many locations, same day delivery in several large cities, and two hour delivery in a handful of very large cities, this is hard to compete with.

The reality is final delivery must be local delivery focused. Businesses must “get local”.

To do this inventory needs to be stored closer to the customer. As this happens we will see more localized Fulfillment Centers (FC) and more localized delivery services.

FC’s must be located in highly populated areas making it possible to meet the customers’ expectations.

This has a huge impact on real estate; it was just a few years ago that most FC’s were located in rural areas.

Firms would be wise to consult with their real estate professional and their supply chain professional to understand more about the impacts of eCommerce on their business. Customer centricity may be the ultimate game changer for how to retain and how to acquire new customers.

Customer approval, happiness, trust, and interaction will strengthen both the top and bottom lines of big companies, providing never before imagined opportunities for small and medium sized enterprises, who are active in omnichannel.

You must respond to increasing customer expectations by becoming customer centric.

What has your company done to meet rising customer expectations?

 Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Jim Tompkins

Author: Jim Tompkins

Dr. James A. Tompkins is an international authority on supply chain strategy, focusing on implementation of end-to-end supply chains that are demand driven. Jim is the founder and CEO of Tompkins International. He has written or contributed to more than 30 books, including Caught Between the Tiger and the Dragon, Bold Leadership, Logistics and Manufacturing Outsourcing, The Supply Chain Handbook, No Boundaries and Facilities Planning.

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