Thursday, August 10, 2017

If Your Supply Chain is Not Customer Centric - You Are Dead

My previous post discussed why Amazon is killing the retail market.  My thesis is simple and it has nothing to do with Amazon being a financial juggernaut.  It was not always that way so we have to ask ourselves how they arrived where they are today.  The reason: Customer Centricity.  Amazon bills themselves as ..."The Earth's Most Customer Centric Company".  They are passionate about the customer.  So, what are the supply chain implications:

  1. Stop Talking About Cutting Costs and Start Talking About Increasing Revenue: The stereotypical supply chain manager prides themselves on cutting costs.  They talk about taking inventory out, moving to cheaper modes of transportation, consolidating warehouses or, God forbid, outsourcing to get cheaper labor.

    What they don't talk about is "How can I make the supply chain better to get products to the customer faster so we can drive sales".  Yet, this is the question they should be asking and this is the question the Amazon supply chain managers think about every day.  If you want to know what a "cost centric" supply chain looks like, look no further than Sears.  They are cutting costs right out of business.
  2. Get Supply Chain Managers Closer to The Sales Force:  If your supply chain managers are not on the road with sales people periodically, meeting with customers and listening to the nuances of what they want, you are not a customer centric supply chain.  I have met a lot of supply chain leaders who say they are customer centric and then I ask them to name (by name, not company) 5 customers who are in a position to buy their product (not the logistics people of the customer company but the actual customer) and they almost never can do it.

    Also, if you are selling to an intermediary (i.e., MFG selling to retailer) don't forget the ultimate customer is the consumer not the intermediary.  The intermediary is only going to buy your product if the consumer is pulling it through the channel.  Because of this, you have to understand the real needs of the consumer.
  3. Velocity is a Weapon:  Customers and consumers want speed.  When supply chain managers cut costs that is generally a euphemism for cutting speed.  It generally means, buffering inventory, slower transportation modes, conducting mode shifts by "trapping freight" and building truckloads etc.  Make no mistake, these are all revenue and sales killers.  Speed wins!
  4. Look to the Future:  Don't build your supply chain for today!  Look to the future.  What will customers and consumers want in the future and ensure your supply chain can flex to the future.  This is one of Amazon's super secret sauces.  10 years ago who would have believed people would pay $100 per year to get access to 2 day or next day delivery?  The only company that did was Amazon which left others far behind - in some cases so far behind they can never catch up.
  5. Listen to the Language Your Company Uses and Change it!:  Here is what I mean:  When Amazon discusses customer service they say, "2 day delivery".  When others discuss it (and I have heard a lot of retailers say this) they say "next day shipping".  Notice the nuance here? Amazon's statement is customer centric - when will the customer receive it.  The other statement is internally focused - when will I ship it.  This is a critical difference and it highlights the issue. 
Of course costs cannot be ignored and you have to do this in the most efficient manner possible but my point is that a growing company, with great customer centricity, can drive more revenue.  You cannot cut costs fast enough to overcome lower and lower sales (see Sears for a case study).  

Bottom line:  BE CUSTOMER - CENTRIC!

Amazon Mission Statement:  "Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."

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