Your Toughest Customers Can Help Build Your Business
Customer expectations always rise. Call it a cardinal rule of order fulfillment. It happens one contract and one order at a time. By paying close attention to these demands as they’re being ratcheted up, you not only have time to adjust, you can improve your operational capabilities and thereby bolster future growth.
For example, a colleague recently recalled her personal experience working as a supplier to Walgreens. The Walgreens buyer was always pushing them to get better and respond faster. In the end she says it made them a much better company, and Walgreens got better and differentiated products and services for its customers, which drove revenue growth and improved profitability for both firms, cementing their long-term relationship.
Here’s some of what’s driving customers’ higher expectations today. In retail, as described by the Walgreens example, store managers are under intense pressure to maximize sales per square foot of shelf space. Everyone is focused on increasing same-store sales with better and different products without increasing inventory or creating stockouts. That pressure is reducing order fulfillment flexibility, which is having a huge impact back up the supply chain on distributors, manufacturers and their suppliers.
Automotive OEMs have been pushing to reduce inventory and improve the efficiency of their conversion process for decades. More and more supply chain and order fulfillment models in other sectors are approaching the automotive delivery model. Order on-time and in-full rate expectations are rising. Shipment delivery windows used to be 4-5 days; now they’re sometimes as tight as 1-2 days.
To manage and meet these expectations, manufacturers could build up safety stock, and some have, which adds carrying costs. But that eventually leads back to all of the old problems with forecast inaccuracy, and having too much of what customers don’t want and not enough of what they do. You could just muscle orders through, but that approach only works for so long. Failing to meet the new, “unreasonable” expectations jeopardizes future sales.
The only real option is to buckle down and make your operations as responsive as your most demanding customers now expect.
In this area the “time-based management” principles that TBM was founded on 25 years ago are just as relevant and applicable today.
Staying competitive is still all about a relentless focus on quality and productivity combined with improving velocity and responsiveness. Beyond your manufacturing processes—which we’ve written about extensively--improving supply chain responsiveness starts with redesigning your distribution channels. Then you have to evaluate your logistics network and travel times, and look at your manufacturing schedules and equipment changeovers.
More sophisticated tools are being released every day to aid this effort. In the retail arena, for example, that could mean using advanced analytics to make better use of point of sale data to trigger supplier replenishment and schedule production. However you go about it, figuring out how to meet the expectations of your toughest customers can build a growth engine that will help grow your business faster.
