VideoAs customers become more selective, and maintaining a competitive edge increasingly means keeping customers happy, satisfaction rates are becoming the main drivers of supply chain management strategies. "Supplier management is important to us, says ColorCon's Cozzone, but it's "nowhere near as vital as understanding our customers and being proactive with them."
One reason that customer satisfaction has been underemphasized is that it can be such an amorphous concept. Measuring satisfaction, concedes SeeCommerce's Mansbach, is as much an art as it is a science. SeeCommerce has been helping companies take a demand-driven approach to their supply chains by beginning with customer satisfaction targets and translating those into departmental metrics throughout the supply chain.
A company that wanted to achieve a 96 percent customer satisfaction level, would first convert that figure into the requisite days of safety stock, as well as days for product development (if any), manufacturing, and delivery.
If five days of safety stock was the optimum level to help achieve 96 percent customer satisfaction, the executive in charge of inventory would need to be able to quickly identify if stock levels had fallen to four days (which might cause the company to miss a delivery date) or risen to six (which might mean that working capital would be tied up in inventory and thus unavailable for use elsewhere). After identifying an exception, the executive would still need to hunt down the cause of the problem and return safety stock to the appropriate level. (Some companies have begun segmenting their customer base so they can devote more resources to their more valuable customers.)
9. You Ignore the "Custom" in "Customer"
As customers increasingly demand tailor-made products, customization is starting to make a stronger mark on the demand side of the supply chain. The better to meet customer demand, more companies are adopting "postponement" strategies — holding off production until after an order has been placed. Think Dell. The computer company will stock software, CPUs, and other components but won't assemble the final product until customers submit their specifications.
Holding "components" in inventory, and assembling them only after the customer has place an order, is a postponement strategy that is more appropriate for Dell than for Benetton. Nonetheless, the apparel maker does very well by manufacturing thousands of undyed garments, then dying them only when it receives an order for a particular color. This same strategy is used by any number of companies that offer personalized products, from coffee mugs to cardigans. "It's just not very efficient to keep inventory for every single item customers might want," says AMR's Lapide.
For its part, Spanish clothing retailer Zara focuses on satisfying an important group of internal customers — the managers of its more than 1,000 stores worldwide. Zara makes it a priority from stores to designers and manufacturers. Since Zara designs and manufactures most clothing in its own facilities rather than turning to outsourcers, the company can deliver new fashions from sketch to store in 10 to 15 days. That quick turnaround provides better customer service while minimizing inventory, says Forrester's Tohmay. (What's being called PLM software — for "product life-cycle management" — is helping many companies manage products from conception to manufacturing to service and retirement.)
10. You Don't Have a Unified Monitoring System for Your Supply Chain as a Whole
Even if you've overcome many of the obstacles discussed above, it's critical to monitor your supply chain as a whole.
"Many of the monitoring tools in the market right now are all about alerts," says Forrester's Tohmay. These systems allow managers set up business rules, and if something falls outside those parameters, an E-mail alert will automatically be sent to the appropriate people.
"That's helpful," contends Tohmay, but "the user still needs to resolve a problem." Strong monitoring tools should not only have the capacity to synthesize available data, they must also have the analytical intelligence to come up with recommendations, if not solutions. Companies have gotten pretty good at collecting vast amounts of information, she adds, but they're still weak when it comes to making sense of the data, finding the significant drivers and separating the noise from what's significant, says Tohmay.
That's precisely what SeeCommerce — and a growing number of software companies including i2 Technologies, SAP, and Manugistics — help managers to do. Using Web-enabled portal technology, the systems help managers track key indicators, identify exceptions, and notify key stakeholders who might be able to resolve a problem.
Managers at DaimlerChrysler's Mopar unit, for example, use Web-based portals to monitor the supply chain from their desktops. They can select a specific country, for instance, then drill down to see all the production plants in that country, the inventory levels at each plant, and the SKUs for that inventory.
"They don't want to see everything that goes wrong," however, says Mansbach, only those items that are "material and potentially costly." Rather than look at 300,000 order lines and sift through oceans of information, for example, Mopar's managers can use monitoring software to get a bird's-eye view of the entire supply chain, so they can determine where their resources can be used more efficiently. (Find out more about how companies are "Working on the Chain" to make their supply chains as cost-effective, transparent, and responsive as possible.)
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