(The Key to deliver the promised components – A health partnership)
Delivering just what your customers need, when they need it, isn’t easy. But some leading companies are combining strategy, business processes, and technology to create what’s known as demand-driven supply chains—a highly efficient mode of operating that scores a perfect 10 for businesses and customers alike.
An increasing number of businesses are turning their attention to supply chain management to create competitive advantage and improve the bottom line. Many managers still view supply chain management as a mechanism to improve profits through cost containment. However, it is important to recognize that effective SCM focuses primarily on meeting customer needs, rather than on cutting costs. Improved relationships with customers and more efficient product delivery processes can result in a clear distinction between firms and lead to sales growth. Alternatively, if cost cutting goes too far, the company may unknowingly eliminate services or product features that may be valued by customers.
The notion of leveraging supply chain service is particularly significant in situations where there exists intense competition on price, product features and promotional initiatives. In commodity-type markets where the standard is high-level service at the lowest cost, firms must reduce wasteful practices across the entire supply chain to create significant value. For example, in businesses like consumer packaged goods and automobile parts, firms have little choice but to compete on service to gain differentiation. Adopting a customer-driven perspective enables firms to view SCM as a tool for creating market value, rather than simply controlling costs.
Management of the supply chain can help firms distinguish themselves from competitors. Rather than limiting promotion efforts to the products they offer, the processes that accompany the products can be viewed as an additional means of adding value for customers. For example, many manufacturing firms have produced brochures that detail how their customizable distribution capabilities benefit customers.
It is rare that cost cutting alone can enable a company to improve long-term profitability and competitive position in a growing economy. Thus financial professionals must look beyond cost containment and focus on customer satisfaction as a major component of the strategic direction of the company. Embracing a customer-driven focus in the SCM process offers many tangible opportunities for financial professionals to actively participate in strategic planning and business decision-making, and to be perceived as valued members of the management team.
To help their firms develop customer-driven SCM, financial professionals should:
• Appreciate the true differences between customer-driven and asset-driven SCM
• Identify and support initiatives that capitalize on customer value-creation opportunities in the supply chain.
Let us now see that what is the difference between a Customer-Driven Supply chain management and a Asset-Driven Supply Chain Management
While many companies openly claim to be customer-driven, in reality, they tend to be more asset-driven.
Managerial effort, performance evaluation and rewards are based primarily upon internally-oriented efficiency and productivity metrics rather than on the satisfaction of customer needs. In terms of SCM, customers value — and are often willing to pay a premium for — high-quality service, flexibility, reliability, customization and responsiveness. Unless firms adopt a focus broader than asset-driven cost control, the attributes critical to customer satisfaction may be overlooked.
In contrast to the internal focus of asset-driven companies, customer-driven companies maintain a more balanced focus by allocating time equally to tracking internal processes and external issues like customer needs and competitor actions. Senior managers may spend as much as one day a week meeting directly with customers. Formal customer service and satisfaction data is collected and regularly evaluated. Joint problem-solving meetings are routinely held with customers. A key determinant in performance evaluation and reward allocation is customer satisfaction.
Extensive familiarity with customers operations is important because SCM is essentially a trade-off between cost and service. In order to realize the potential benefits in terms of increased sales and profits, management needs to understand the customer and recognise the value that customers assign to the various dimensions of service. It is essential that managers work across functional boundaries. SCM should not be considered the domain of any single functional group.
Now let us see that how a Supply Chain can add value
Supply chain management adds customer value in three generic ways: effectiveness, efficiency and differentiation. It is important for finance professionals to recognize the product differentiation opportunity.
As an increasing number of businesses use SCM to create competitive advantage, it is important to recognize the importance of customer-driven SCM. If financial professionals are expected to help their firms develop customer-driven SCM programs, they must first appreciate the differences between customer-driven and asset-driven perspectives as applied to SCM. This important distinction will enhance the credibility of financial managers when operating in cross-functional teams and prepare them to best identify and support initiatives that capitalize on customer value-creation opportunities in the supply chain.
Lets now again go to the paint industry and analyse it.
In the paint industry the involvement is very less to but the product as it is not the product that is in direct contact to the end customer, the product is used by a applicator who is generally a painter. It is in hand of a painter to give a product a desired output, if a painter is will to work on the product from his heart then he can give the product a better output than the company claims to have as he knows that what is the right move and what is not appropriate to be done. Thus in this case it is very important to keep a painter knowledgeable on how to use the product in a proper manner and also to keep him happy with the products. Thus in the paint industry the painter is equally important that to a customer.
Thus if we have to give importance a per a company to the painter, dealer and the end customer then it might happen that the customer will loose and will not be able to get as much importance as the painter and the dealer is given. The reason is simple that the painter is the applicator and he is the sole person who is responsible for success or failure of a product. The next importance is that of a dealer as there are three reasons for it. One is that the dealer is keeping the product at his shop thus he is a aim for a company, the second reason is that every dealer have a few painter attached to him and he is in direct contact with them and is also responsible for a better or a poor picture in the painters mind. Last but not the least is that at times when a customer is willing to buy the product by himself then he is moving to a dealer and asking for a particular product, but due to lack in confidence, which is due to lack in knowledge it is very easy to convert the customer from one brand to another. So due to all the three reasons the dealer even scores very high points for the company.
As when we compare the companies like Berger and Asian which are two market leaders then we look at a very opposite story as they both are very opposite in their working. At one side is Berger Paints who is mainly concentrating on the dealers network and likes to give heavy discounts or supports to the dealer network they have as they feels that if the dealer is happy with them then he will stock only the products they are providing. The further result will be that the dealer will be working on the painters he have and
number of houses. As the result they are able to take lead in a number of markets, one of them is Delhi, which is the biggest market in India as far as the paint industry in India is concerned. The company even after having services like Home Décor, which is a service provider for all the solutions for a home in the paint concern, the perception in the mind of consumer is that the product is more of value for money product. Now keeping this picture in mind the company is trying to change the perception in the mind of consumers with a initiative to change the branding and the services which they are providing. The company is now changing the brand name from the previous name generally used as Berger Paints “Colours of Joy”
they are now moving to some thing like Lewis Berger “Paint your imagination”. Thus with having all the initiative and also are starting the products like illusions which is a paint that looks like a wallpaper they might be able to change the perception in the mind of a customer. By this work they are also hoping that they will improve the market share of Berger paints in the next few years.
On the other hand is Asian Paints who is the market leader for India as a whole. They are more of customer centric and they prefer to work more on the promotions for the products. With the heavy spending on promotions they want that on the name of paints every customer should remember only one name “Asian Paints”. They have even kept their advertisements in the T.V. keeping that thing in mind and always kept the tagline the same “Har rang kuch kehta hai”. In fact they are the only company that is promoting the Brand Asian as a whole, other companies like Berger and ICI are always willing to promote one of the product that is been provided by their bucket. With having so much interest in the customer centric they even go for demonstrations whenever a customer is not satisfied or is confused to choose the products. This has helped them to have a perception of premium companies in the mind of the customers.
INTERFIRM RELATIONSHIP
Internet age challenges have been accompanied by a handsome promise, that being, the promise of being able to collaborate and cooperate with strategic partners to deliver better products to customers in a faster and more efficient fashion.
As a manufacturer, wouldn't you welcome a system where there are no warehouses, inventories or paper invoices, just plug-ins that monitor your supplier network automatically, in real-time, everywhere, simultaneously?
Synchronised execution of manufacturing and supply across a dynamically re-configurable supply chain network, to profitably meet demand, is an ideal scenario.
The mantra is moving from just measuring performance, on internal cost and efficiency, to external processes targeting customer-satisfaction at the shelf. Having a well-harmonised network maintaining high operating margin — not just profits or growth rate — is the goal of any organisation.
Manufacturers must learn to collaborate internally and externally. This builds the culture of information sharing empowering everyone across the board. Collaboration makes it easier for companies to adjust to changing scenarios.
Collaboration facilitates real-time focus on inventory levels, capacity outlooks and new technology drivers, which, in turn, helps in better management of demand. Setting up a collaborative network will help build effective supply chain components.