Mastering diverse customer expectations with customized supply chains

Many global companies are currently facing considerable challenges within their supply chains, e.g. increasing transport prices, currency fluctuations, rising labor costs, local shifts in customer demands and competitive pressure on both price and technology. In many cases, supply chains are designed to serve stable demand with high reliability. Other examples show extremely customized network structures tailored to very specific customer requirements, virtually regardless of cost considerations. We frequently find a mismatch between customer flexibility on the one hand, and supply chain efficiency on the other. In many cases, this is caused by a lack of alignment with other business functions such as Sales, Finance or Marketing.

So the simple question is: how can such diverse customer expectations be handled in an efficient manner, considering existing trade-offs and conflicting targets? To answer this, we have developed our latest Point of View “Supply Chain Customization”. In this publication, we describe how complexity of the supply chain can be reduced and why concentrating on key assets helps companies increase their service levels and enhance overall customer satisfaction substantially.

Our Supply Chain Customization approach starts with the identification of potential clusters for setting-up standard segments of comparable customer needs. To do this segmentation, relevant segmentation criteria have to be defined first. Then, relevant factors such as customer characteristics, geographies and products are analyzed to identify similarities among them. In the next step, all segments are further characterized in terms of time, costs and quality. This procedure serves as a preparatory step before defining optional services per segment in order to increase overall flexibility and customer satisfaction.

In classical segmentation approaches, a set of fixed services is defined for each of the identified segments. Our approach, however, foresees a more detailed analysis of each segment in order to further customize the supply chain in order to meet customer expectations more fully. By offering optional services in addition to default settings (e.g. shorter replenishment cycles, express deliveries or guaranteed ATP-levels), the three performance dimensions of time, cost and quality can be further improved. We have done so successfully in the past years at numerous clients in the manufacturing industry and at logistics service providers.

After redesigning their supply chains, organizations are able to reduce their transport costs due to optimized replenishment cycles and distribution activities. Precisely tailored sourcing and manufacturing networks help to manage uncertainty and decrease overall supply chain costs across various scenarios. Supply Chain Customization therefore is a reliable method for increasing flexibility of your business, adapting to changing market conditions and focusing on profitable product segments.

The guiding principle of Supply Chain Customization is focusing on customer demands holistically. It matches the requirements of customers with your internal capabilities by focusing operations on areas where the highest benefits can be generated. By applying the basic steps described within our new Point of View, the approach will help boost your supply chain efficiency and drive the overall profitability of your business.