The customer runs your business: do you have visibility?
customer centricity

The customer runs your business: do you have visibility?

Expectations in logistics have changed irreversibly. An example and tangible tips for supply chain transformation in the age of the customer and digitization.

We have seen many trends in logistics come and go – and even repeat themselves. And over time, logistics has truly been transformed from being the motor of a supply chain to creating value and differentiating a company in highly dynamic and competitive global marketplaces.

Where do we stand today? In the age of the customer and digitization? What’s the ideal supply chain set-up to stay ahead, deliver as promised – and be ready for more changes to come in this ever faster spinning world?

Logistics trends: Slow global growth + Industry 4.0 = ?

Business focus

With decreased levels of global growth, companies are looking to leverage digitization developments with the following focus:

  • Staying on the pulse of the market, meeting customer demands
  • Reacting to digital customer engagements and developing new products and services
  • Aligning production sites towards customers and lowering inventory levels
  • Local resource deployment (workforce, transportation) driving cost savings and waste reduction

We continue to see B2B trends deriving from B2C developments with direct impacts on traditional logistics and requirements for end-to-end planning. One requirement during all of this is the same for everyone across the globe and industries.

It represents a key success factor for meeting customer demand and staying in the game today: Visibility. Considering e-commerce developments and supply chain complexity, this includes collaboration with partners and integration from supplier to end-customer.

Mindset change

We’ve been talking about visibility for years now, of course. But today’s visibility requirements extend far beyond the need to just monitor and react to goods movements in real-time to operate smooth supply chains. It’s now needed to understand and serve the customer – and to keep a competitive edge.

We’re no longer talking about data integration to just prevent supply chain disruptions. What companies need today is an actual change of mindsets from procurement to fulfillment. In the age of digitization, the customer is in the driver’s seat shaping the set-up of modern supply chains:

  • Market developments need to be transparent and understood by all parties in the supply chain
  • Roles of supply chain partners need to change, also involving suppliers more in developments
  • Companies need to be on the pulse of the market and open to explore new business models

Case study: visibility to adapt business to market

Customer centricity and supply chain complexity clearly define today’s supply chains. And end-to-end visibility and involvement are essential requirements to stand out from the competition in demand-driven networks. But, how can this be achieved?

Considering specific industry needs and business models, as with everything, there isn’t one solution that fits all. It’s an individual matter. But I find that many aspects can be transferred and many ideas can deliver impulses to apply to one’s own business.

I was quite inspired by a presentation I saw last year at PLAN – the major annual logistics conference in Sweden. It was held by a visionary supply chain executive of a leading global manufacturer of roller bearings with a focus on distribution logistics. I’d like to share some key aspects with good pointers:

Tailor your offering

Companies need to change to understand and meet the real needs of customers today:

  1. De-commoditize!
  2. Distinguish demand: between “needs” versus “requirements”
  3. Differentiate services: delivery windows, precision, speed, …
  4. Customize: packaging, documentation, labelling, …
  5. Integrate: data, systems, and partners for collaborative process optimization

It may sound contradictory – but much standardization and automation is required to become more flexible and agile and react to fast-changing market demand. In the age of digitization, it forms the basis.

Create value with logistics

The aim is to create value through collaboration and synergies across functions within and across organizations as partners within – and across – supply chains. While this sounds philosophical, the ultimate goal, of course, is lowering costs, offering better service, and increasing sales.

  1. Think “intra”: don’t forget in-house teams and stakeholders
  2. Drive “inter”: end-to-end partner collaboration beyond borders
  3. Measure: levels of visibility and development of reaction time
  4. Focus: moving from sub-optimization and hot fixes to correct prioritization

Put business models to the test

Listening closely to customer demands, businesses cannot afford to remain static and act conservatively today. Strategies and business models need to be explored and trialed in line with market shifts to succeed.

The illustrated example of a traditional planning process demonstrates the challenges of an established set-up struggling to fulfill modern demands:

Based on limited data visibility at point of planning – usually based on order information alone – high levels of inventory are required to reach acceptable service levels. Customer and supplier prioritizations deviate and changes in production planning take place slowly.

Explore collaborative set-ups

The goal to increase service levels, lower inventory cost, and increase distribution efficiency can only be achieved with a more connected and flexible supply chain network. It’s all about getting the right assortments of goods with the right services (and service levels) in front of – and to – the customer in the most efficient way.

Take a look at this example. Reflecting customer centricity and digital opportunities, demand and inventory visualization play a key role in this collaborative business model from procurement to fulfillment.

Insight into demand and supply from all perspectives of involved supply chain participants is crucial to monitor and align KPIs throughout the chain.

Operationally, this translates to aligned inventory management parameters and improved replenishment processes, ensuring a minimum of lost sales and optimized stock levels with direct impacts on balance sheets.

Impulses today and tomorrow

I really like the approach this company has taken. What do you think? At what stage of development is your business at the moment? Where do you have visibility, and where do you lack it?

And next time around, I am happy to share some more tangible pointers on the right approach to get started. But for today, I hope this case study can inspire some ideas for your own operations – please let me know if you have any questions. I look forward to your comments on LinkedIn.

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