First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  July 24, 2008  

Four "Hidden Gem" Supply Chain Ideas


I don’t know about you, but one of challenges many of us face is to actually remember all of the good ideas we hear over the course of a few years.

With that in mind, I have gone back and looked through my notes and columns for some ideas I thought were worth making sure we didn’t lose track of. In doing so, I tried to find ones that were not “standard wisdom,” but rather ideas that present a unique insight or approach on supply chain – hidden gems, if you will.

So here we go, trying to hit a number of different supply chain areas:

Customer Service Does Not Equal Customer Satisfaction: Whether we’re buyers or sellers, it is easy to get caught up in the whole process of supplier “scorecards” and the series of metrics (on-time delivery, fill rates, etc.) that are compiled in such reports. Those metrics are important, for sure, and poor performance in those areas will certainly be bad news for the supplier eventually.

But does scoring well in terms of those customer service metrics really mean you have a high level of customer satisfaction? Maybe not, as I believe I first heard Dr. Jim Tompkins of Tompkins Associates say. There may be any number of other issues lurking underneath the numbers (lack of communication, not enough new ideas, lack of responsiveness to special needs/requests, etc.) that mean the customer is actually not well satisfied with the relationship and service regardless of the metrics – and thus more prone to switch business to a competitor. The key takeaway: have consistent dialog that gets at the perceptions beyond the numbers..

Gilmore Says:
To reduce "customer sacrifice, build a supply chain that is capable of customizing the products and supply chain services a customer receives and therefore provide something very close to an exact match to they really want

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Most of our current notions about customer satisfaction are incomplete. The most common definition for customer satisfaction is something like this: satisfaction equals what we expect to receive minus what we perceive we did receive.

Meaning, in short, that if our experience meets or exceed what we expected, we will say we were satisfied.

But does that mean we received the product and service(s) we really wanted? Absolutely not. Customer sacrifice can be defined as equaling the gap between exactly (key word) what the customer wants and what they ultimately settle for.

As consumers or businesses, therefore, we can be satisfied with what we receive from a supplier, but only in terms of our expectations. But that “satisfaction” could still be accompanied by a deep sense that we didn’t really get just what we wanted, and if someone else could just provide it…

Customer satisfaction surveys are unlikely to discern the level of sacrifice individual B2B or B2C customers may be experiencing.

The key takeaway: be sensitive to “customer sacrifice” as an issue that may not be captured by customer satisfaction (or service) metrics. One answer: build a supply chain – or maybe better a demand chain – that is capable of customizing the products and supply chain services a customer receives and therefore provide something very close to an exact match to they really want.

Stop Trying to Collaborate with Customers Who Aren’t Interested: This is the recommendation made by Dr. John Gattorna in presentations at recent CSCMP conferences as well as his excellent book “Living Supply Chains.” The basic point: customers can be segmented in part by how collaborative they want the relationship with a supplier to be. Some value it highly, and are willing to put a lot of skin in the game. Others do not. Yet, many companies, because of their own interests, waste a lot of time and effort trying to collaborate with these customers, with (no surprise) very limited success.

Many companies I have spoken with have acknowledged this is a lesson they too have learned, after spinning their wheels with some customers for far too long. The key takeaway: segment customers by the type of collaborative supply chain relationship they want (Gattorna suggests there are four types) and focus more resources on the customers who really want to collaborate and are willing to put the effort and resources behind it.

Lost Project Time Can Rarely Be Made Up: I have heard this from a number of sources, but the point is not made nearly enough. When a supply chain initiative, especially a technology-related one, gets behind schedule, it is almost always better to acknowledge the reality and slide the schedule back appropriately than to try to invent ways to get the project back on the original time track.

Those schedule recovery efforts in reality almost never succeed, and bring with them tremendous risk. Trying to make up the lost time often involves taking shortcuts in review processes and system testing, for example. The worst examples of this, perhaps, are in the Warehouse Management System area, where go live is planned with too little runway before a peak shipping season or new building has to be active. When the original schedule slips, the actions taken to compress the remaining schedule ultimately result in a system that has major problems when it goes live on or near the date intended, causing far more grief than sliding the schedule would have.

The key takeaways: (1) It is almost always better to accept the slip and move the schedule back, and (2) it is smart to build in a healthy level of contingency time into the schedule to begin with, or at minimum leave a substantial amount of time between the “go live” date for whatever it is and the real need for the system.

I thought I would have more room, but that’s it. I have a lot more – will do this again soon.

Any reactions to our four “hidden gems” supply chain ideas? Do you think we are too focused on service metrics rather than true customer satisfaction or possible sacrifice? Do companies spend too much time trying to collaborate with customers that don’t really have the interest? Do you believe lost schedule time in supply chain projects really can be made up? Let us know your thoughts at the Feedback button below.

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