In Part 2, we look at Supply Chain Strategy.
In Part 3 we look at flow.
In Part 4, we look at Key Drivers
In Part 5, we look at Performance Measurement
“My Dog had a Fight with a Monkey”!
It just came out, at the lunch table. We were having a team lunch and just in earshot I heard Adishree, one of our analysts blurt it out.
I had to get her to repeat the story!
It was a story about how her dog and a local monkey had a huge fight on the veranda of the family home back in India.
The dog and monkey normally got on fine, but this day there was a huge conflict. What had caused the fight? We may never know…
It got me thinking. The same thing happens in managing Supply Chains if we’re not careful. And in particular when we are trying to meet the needs of two sometimes opposing groups.
Those of our customers and those of our shareholders or stakeholders. We focus on one of them too much, to the detriment of the other… and problems arise.
Far too many businesses don’t give the two enough consideration and often get buried in the detail of execution of operations to see the wood for the trees. So here are some thoughts that might help.
Customers
We should always start with the customer needs. They are the lifeblood of any organisation and the Raison d’être of any business, private or public sector.
If you look at any customer base, there is a vast range of types, sizes and locations of customers, many of whom will have differing service needs. And customers place different priorities on their service needs too. That’s why having just one standard customer service policy or ‘offer’ very rarely works well.
Think about your customers and how their needs and expectations might vary. Try these factors:.
- Fashion. Maybe they buy from you because you have the latest fashion or style of products. Does that differentiate your business? Maybe like Zara, the fashion retailer?
- Price. Are your customers very price sensitive? This means you need a low cost Supply Chain.
- Range. Is range important to your customers? The larger the range the more costly and complex your Inventory Management and Distribution will be.
- Service. Do you operate in a service critical market where maybe price almost doesn’t matter? Think critical aircraft spares, IT spares, life saving blood products.
- Quality. Is quality critical to your success or do you offer products and services that are very generic and not quality sensitive? It’s hard to think of a product where quality does not matter!
- Availability. Do your customers need high levels of availability and response? Or are they able to easily buy from elsewhere if you are out of stock?
- Convenience. This is a huge factor now in consumer markets. Hence the growth of online sales, where it’s not always about cheaper prices, but convenience.
- Brand. Do you have a strong brand that keeps customers loyal? Then you’ll need to protect that brand with great service too.
So which of those key factors would be the top 3 for your organisation? And how does your Supply Chain management approach help meet your customer’s needs?
Shareholders.
Now the needs of your shareholders or stakeholders will often be different too. Try these for size:
- ROI. Any commercial organisation will be seeking a good ROI (Return On Investment)
- Profit. Likewise, commercial organisations need to make a profit to survive.
- Compliance. In certain industries such as Healthcare for example, regulatory compliance will be very high on the agenda.
- Maintain Service Obligations. Again in highly regulated sectors like Healthcare, specific service obligations must be met and are non negotiable.
- Protect Reputation. I think for all organisations this is important. Be it brand protection or merely service reputation.
- Increase Share Value. A very clear target for public companies in particular.
- Increase Customer Value. For any commercial organisation a clear path to increased profits is to increase the value of each customer and each transaction.
- SHE (Safety, Health, Environment). Whilst this will be important for most organisations, for those in heavy industry, resources, mining and the like, this may be Priority Number 1.
So again, what would be the top three expectations for your organisation? The three most important?
Now compare these to the top three for your customers. Are some of them seemingly in conflict?
Maybe you have customers seeking low prices but shareholders needing higher profits? That leads you towards a highly efficient and low cost Supply Chain.
Or maybe you have customers who buy high priced products but want better product availability? This might lead to a higher inventory investment and more stock holding locations.
For any organisation it’s a balancing act. Very often it’s a case of what can you afford to offer your customers, rather than merely giving them what they want.
Identifying these critical needs of customers and then shareholders is the first step toward streamlining your Supply Chain so that you can fine tune the balance between cost and service. And don’t be fooled by that old adage, that as service levels increase, so your costs will sky rocket. It’s just not true. But more about that in later Bulletins.
Part 2 of this series of ‘5 Levers’ will build on the understanding of customer and stakeholder needs, to help you frame a very clear and simple Supply Chain Strategy. A Strategy format that will be easy to comprehend and that keeps everyone focused on the right outcomes.
I hope you find this information of value. Feel free to let me know what tips you would like to hear about in our future Bulletins. Just send your requests to my EA Rose.
