Don’t Call It ‘The Customer-Centric Supply Chain’
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
At the recent Council of Supply Chain Management Professionals’ annual conference (CSCMP), Tesla turned out to be most emblematic of the reason why we’re all going to hear about retail and supply chain a lot more over the next few years. It’s because it’s all about the customer.
At the event, Tesla had a retail story to tell, as they described some of their customer-facing initiatives ("owner experience") and the impact some of those strategies are having on supply chain.
I don’t like the term "customer-centric supply chain" — it’s like "demand-driven."
Tesla turns that concept on its head. They focus on the services and activities that their customers are trying to achieve, and then turn to their supply chain to deliver it. "Supply chain", in their case, modifies "customer-centric", not the other way around. For example, they are in the process of building charging stations across the country. Their goal is to make it possible for a Tesla owner to drive coast-to-coast by stopping only at Tesla’s charging stations — a service that the company plans to offer to its customers for free for as long as they own a Tesla car.
Yet in order to enable this capability, Tesla is going to have to get into some retail locations pretty quickly. And to serve their desired service level of a quick charge — half the battery capacity charged in 20 minutes — they are rapidly on track to become the largest purchaser of batteries in the world, which in turn poses some significant supply chain challenges. This is customer service defining supply chain requirements. And that’s something much bigger than a customer-centric supply chain.
Macy’s, in its own way, echoed that sentiment at the conference. When asked why they were pursuing RFID, the Macy’s executive basically said the company knew it needed to do ship-from-store, and the only way they could ensure inventory accuracy was by turning to RFID.
Inventory accuracy happens to have a lot of ancillary benefits, which the company is currently exploring. In the meantime, Macy’s took a customer need — we want to be able to promise any available inventory to our customer no matter where she is, and no matter where the inventory may be — and in the end had to spend a significant effort educating their suppliers (a process still in flight) as to why it’s worth tagging every individual item. The answer, by the way, is not that it will make the manufacturer’s life easier too, but that both retailer and manufacturer will sell more stuff.
Customer need has not defined the retail supply chain in a long time. Store needs, efficiency needs, cost needs — these have defined the retail supply chain for decades.
But I think that’s about to change. Just don’t call it customer-centric supply chain.
Discussion Questions
Do you likewise see customer needs playing a bigger role in driving the retail supply chain? Will inventory replenishment and accuracy become more important in the years ahead?
What is a consumer-centric strategy of not putting the needs of the consumer at the center of everything the company does? If companies may not have not been doing that, then they do not have a consumer-centric strategy. In a competitive environment in which some companies are designing products, services, purchase processes, prices, and delivery options around their consumers, those companies not using that approach will lose out. Why would a customer purchase a product or service that did not meet their needs as well from a company that made it difficult or more expensive?
Absolutely and it’s about time. Supply chain suggests a push model which is why I have been using the term demand chain since the early 2000s as that’s a pull model based on customer needs.
And inventory replenishment and accuracy should have been a high priority for retailers over the last decade, but if not, it certainly will be in the coming decade.
Absolutely call it a “customer-centric supply chain”!
In the “old” world of retail (which wasn’t that long ago), supply chain was totally product centric. It was all about getting products distributed and keeping them in stock on the shelf for consumer purchase.
In today’s omni-channel world, consumers increasingly expect a seamless experience, end to end. They not only expect to purchase a car or appliance, but to integrate delivery and services online, in person, or both.
Perhaps the better term is “omni-channel personalized supply chain.” Consumers are no longer purchasing just “products”. They are buying personalized solutions with service … any time, and everywhere. And they expect the “supply chain” to get them real time reports on any device, any time and everywhere.
Twitter will be as much a part of the “supply chain” as the order window at the store or online.
Good article Nikki. When you stop and think about it, what are the other choices as to who or what should drive the supply chain? There’s a certain ‘duh’ element to this conclusion.
And given the focus of the Instant Poll, we need to understand that this is far more than a mechanistic matter. As weird as it may sound to some, I believe every step either adds or subtracts a kind of quantum energy upon the product. It is more than JIT or accuracy or cost control.
Every minute component of the supply chain is a component of the customer experience. Far too often the customer doesn’t even come to mind until stuff is displayed on the floor or put onto a website. Some time back I consulted to a company making infant car seats and saw an example of what Nikki is talking about. All through the factory circuit from receiving to shipping were huge pictures of babies and toddlers sitting securely in their product. Every mold, weld, stitch and nut and bolt was evidence of infant customers driving the supply chain.
Customer needs have always been critical. The push-orientation was probably fine for an era, but seems to have persisted for too long and now the customer angle must be designed in.
A personalized world with nonlinear shopping trips requires accuracy and detail at a very granular level.
New companies can design this thinking in from the start (like Tesla) while established companies have to learn to adapt quickly to succeed.
I see more open data and new types of collaboration with manufacturers being important dimensions for the industry to grapple with.
It would be great to see this thinking adopted across retail in a big way, but it’s not realistic. Tesla is a unique company and Macy’s has muscle like Walmart has, but as we move down the hierarchy of merchants, there is a nexus where the vendor is bigger/more powerful than the purchaser and they probably won’t want to be told how to manage their production. For example, can you see a regional drug chain telling P&G how to manage supply/production of its products to meet their customers needs?
Clearly inventory tracking/management is the first step in improving product availability and increasing on-the-spot sales. I was at an RFID conference in Chicago in October of 2001 hearing about the Gap RFID inventory trial, whereby every item in-store could be inventoried in a few minutes. Gap still hasn’t implemented that and they are a substantial brand. Change is slow in the retail supply chain.
Absolutely and absolutely! We live in a pull, push market these days and that means customers want to pull the goods at any time and from anywhere then have them pushed to them expeditiously.
It is quite the challenge for the supply chain, but retailers like Macy’s are making it work!
Other retailers need to grab hold of their inventory with one view of the customer and make it work also. Just sayin’….
This is what I call the “right products/right prices/right shoppers” principle that mostly drives self-service retail. There is nothing wrong with this focus, that has played a major and successful role in creating the global $14 trillion retail business. HOWEVER, it pretty much tends to overlook the PROCESS by which shoppers find and select the merchandise (selling themselves.)
No doubt there are continuing gains to be made in supply chain management, but they are minuscule in comparison to the gains that could be made in the efficiency of the shoppers themselves.
The concept of “right product, at the right place, at the right time in right quantity” had always been the mantra of successful retailing. It was relatively easier in the days when sales channels were not many and as integrated as now; inventory was replenished separately for individual channels; and most important – customers were not socially connected. Today, tech savvy, socially well-connected customers demand services and products as per their needs…order anywhere, deliver anywhere, return anywhere and this will require a very agile and a responsive supply chain, call it whatever you may.
The harder part of course will be to get the manufactures and the retailers to sit across the table and agree to it, even though there are tomes of research on the benefits of them working together.
This is another look at an age-old issue. Consumers drive demand. The retail supplier ecosystem is supposed to fulfill that demand. When did the consumers’ needs ever cease being the biggest driver in the supply chain? AND, when did inventory management cease to be less than important?
We still have merchandise that is out of stock online and offline. That is a basic problem that we have to address once and for all. Technology is helping, however, merchandise flow optimization is far from perfection in the global supply chain.
The short answer is: of course and OF COURSE!
Why do we feel compelled to modify and describe the “supply chain”? Is it because we have to find a higher purpose of sorts around it? Do we name it according to the shift in power to consumers as we realize that the retail planets do not revolve around products but have always revolved around customers (just because we didn’t recognize it, doesn’t mean it wasn’t there all along. Or do we call it “Real-time” or “Fast” since that reflects the speed of information flow today? Or do we call it “Digital” since so much has been digitized? Every time we modify it, we take away something from what else it is and can be.
It’s not about the characteristics of the supply chain. It’s not about the functional roles in the supply chain. It’s not even a “supply chain” anymore; the very term is problematic. We’re still talking in concepts of a world that used to be linear, mass- and push-driven, (relatively) predictable, and batched work buckets.
Today, consumers have much higher expectations than ever before, not only about the products they purchase, but the experience they have while making the purchase decision and the use of these products (parts, service, assembly, upgrades, etc.). The entire idea of how they research and buy is dramatically different from just 10 years ago. Everything happens faster and, feels like, at the same time; integration across the enterprise is a must, not a luxury. Faster cycles of “What-ifs” are the new norm. The notion of consumers wanting to know about inventory positions is spreading from web to store and back again – if your inventory is inaccurate, how can you compete or make sound business decisions?
Technology can facilitate a lot of things but the tough nut to crack is organizationally – the people and teams that are using the technology, can we learn to work differently? Can collaboration actually mean something more concrete than idealized chatter? can we break down the internal silos? Can we really put the customer ahead of our internal processes? There are new skills needed here and new types of work relationships that must develop.
As Matthew Keylock posted earlier, this is a “personalized world with nonlinear shopping trips” and our old paradigm is broken and we need not just a new vocabulary, but a complete shift in how we view what we grew up with and affectionately called “supply chain”. We have to transcend the myopic view of equating supply chain with efficiency and cost control and that it’s something that happens after demand is generated. We have to start asking different sets of questions and thinking differently about the business.
The successful retailer in 2025 will look nothing like the successful retailer of 2000 or even of 2010. With all the attention on the consumer and the revolution around shopper/brand interactions, the rest of the organization has to change at a even higher rate in order to catch up with the unrelenting consumer revolution.
There is more to “customer-centric” strategies than simply “providing quality service.” Of course anyone in the service or retail industry needs to strive to provide quality service. The modifier “customer-centric” should be taken to mean that the provider attempts to understand its customer, and provide service that is tailored to these customers. For supply chain, this should mean understand what your best and most loyal customers want and make sure it is available when they are in the store.
100% availability is not the goal – if you ever achieve that, you are overstocked. The goal is to maximize the availability of those products or services that your best customers care most about, so you do not frustrate them when they want to do business with you. That is true “customer-centric” supply chain.
Be it the supply chain or any other part of the process, it should always have the focus on the customer. The new way of doing business is to be customer-centric, which means that decisions are focused on the customer versus the system or operation of the business.
“It’s the Economy Stupid.” Arriving at an understanding of what the essential truth is to win the vote of the customer is an act of creating a brand. Sam did it with EDLP and these companies are doing it in their own way. Like EDLP, it takes investment in the infrastructure. Adapting the business model to deliver the winning vote is the cost of doing business. Taking a stand on what needs to be built is entrepreneurship at its best – when it works.