Up and comer Sven Esser delves into not only how the 'Supply Chain' impacts the customer experience but what kind of new model the supply chain needs to adopt to not only fix the contemporary problems.
I think it's time that I introduced Sven Esser to you all. I've known him for the past two or so years and have found that he is always thinking about how to take the complex processes that govern how business is conducted at scale and make them better. Because this bright young guy is also an empathetic human being and an accomplished CX practitioner, he views the world through the lens of CX in all ways. Thus, a customer-centric view of the front and back offices is always at the forefront of his thinking.
In this post, he addresses the foundational problems that are now manifestly obvious with traditional supply chain management. It is fascinating to see what kind of beneficial business outcomes could result from a CX-focused supply chain management effort. It is also an eminently practical thing to do at this juncture in history.
After reading this, I highly suggest you contact Sven to continue the conversation. You can reach him here.
Okay, Sven, my friend, what's the plan?
Decisions on transport, storage and handling services are less and less based solely on current or future purchases. Contemporary decision-making increasingly considers the impact that transport, storage, handling, logistics will have on the customer and the customer's experience with the company. That raises a significant, highly strategic question for all businesses -- especially those at scale: How can logisticians -- as main players in the supply chain -- differentiate themselves as CX becomes an obvious part of the decisions being made about supply chains each day?
First things first: Let's address what Customer Experience (CX) and Supply Chain Management (SCM) mean and how they symbiotically operate.
The objective of enabling a positive customer experience is to increase customer loyalty and satisfaction, which can help generate sustainable growth. While it seems to be a marketing-driven initiative, it is actually much more. Given the way that customers communicate and interact, it is becoming increasingly apparent they don't care about the specific channel they are on, though they may respect the protocols. The customer's concerns and, thus, the company's concern is about the added value the company delivers to him or her.
Personally, I've been an advocate for customer centricity since the early days of online business. With the technology available to us, and the willingness of people to communicate their thinking via social channels, we have such a great chance to listen and understand the user/customer through the data we can collect online. This fascinates -- and drives -- me. We have evolved a long way toward gathering that knowledge of the customer since the beginning of this journey. Nevertheless, to actually do something with the knowledge we've gained about individuals, a shift in mindset is required to rethink existing business models and our approaches to partners, customers, and users.
You might think Supply Chain Management (SCM) is a very different topic than what I propose to address. However, the relationship between CX and SCM is symbiotic and, especially under current global circumstances, very important. I'll explain how.
First, though, we still need to take a look at the basics of supply chain management (at least in the context of CX).
SCM provides material handling and software for all parties involved in the creation of products or services, order fulfillment, and information tracking (suppliers, manufacturers, wholesalers, transport and logistics service providers and retailers). So SCM is procurement + product lifecycle management + supply chain planning (including warehouse planning and maintenance of company resources and production lines) + logistics + order management. One of its great strengths is the clarity of data management for better requirements planning.
Through CX's lens on the supply chain, we see that the customer is more and more in the driver's seat. In effect, they are looking for the supply chain to "know" them. My POV? That means that not only we will need to change how we interact with the customer, but we also need to adapt our products to that individual customer... One of the best examples already in practice is automotive, where the vehicle buyer can do a nearly atomic configuration of what they want from and in the vehicle and, even with that personalized vehicle, due to the modularity and thus flexibility of the products, get it normally delivered within 3 months. For example, one customer is focused only on the car's security features and doesn't care about the entire media and connectivity systems; someone else is the exact opposite. With the huge set of possibilities in a car configurator, the customer can happily get what they as individuals want and thus are getting real value from the purchase that they are making. There is a delicate balance, though. I use my car every day, and if one thing in this complexly configured vehicle fails, I get really angry. This we will see more and more in other areas… customized (physical) products as a part of our (customer) experience. Therefore, SCM and CX need to be integrated.
In the past, SCM was only for improving efficiency, quality, and stability. The KPIs have historically been around the process of how goods are made, delivered, and sold. But as customers become more demanding, SCM has been evolving to the point that a large part of it now revolves around the customer and what they want. Amazon, of course, is a prime example of that.
That said, we see huge issues based on the COVID-19 pandemic stretching the supply chain to its limits and with specific things like the accident of the Ever Given, the ship that got jammed into the Suez Canal. The impact of all of this combined has been nearly devastating to supply chain functioning. At the same time, the changed end-customer expectations, behaviors and needs aren't relaxing, and customers aren't all that compassionate about the problems. Even though just-in-time has been around a while, we are now at a point where real-time is more the required norm -- though, of course, not easy to achieve. The idea, given customer expectations of the 1:1 personalized products and services, is to provide that "in the moment." While every step is planned in just-in-time, and there is less room for changes/interruptions, real-time is entirely different. Real-time means adapting and changing things always. SC enables us to produce things where it is cheapest, often in China. Delivering short-term demands makes this difficult… but CX is requesting exactly this.
How can we meet these expectations? There are more and more data sources that are relevant; there are more and more tools we are using to handle business and customers… we are getting great insights. Customers ask us to be their trusted advisors for the full-service solution they need. This is often much more than the core products & services we offer, which is why we are implementing more tools, processes, services, etc.
Now let's bring this home and have a look at a simplified supply chain journey:
A supplier is delivering raw materials or partially finished products to a parts manufacturer or to a warehouse. From there, the product goes to the next warehouse or a distributor/shop that delivers to the end customer.
As part of this journey, there are many customers and one key stakeholder-- the logistics company. Here is a simple view of the product flow:
Supplier >> Logistics Company >> Manufacturer / Fabric >> Logistics Company >> Shop >> End-Customer
This is the supply chain. Supply Chain Management needs visibility and collaboration at every touchpoint in this journey. Who is the most important customer in this journey? For me, it is the brand who, for example, could be designing a new TV. This requires them to collect all materials, produce the TV (via its own facility or with partners) and ultimately deliver it to the end customer (directly or through other retailers). They are not responsible for each step in the supply chain, but they are interested in making sure that everything works together. As a B2B customer, they want to have a successful supply chain/logistics "journey", which leads to a great experience for the brand and with this later on for the end-customer. They are the one who needs to create a delivery CX for the end customer.
The traditional strategy for SC was Just-in-Time (JIT), which was a production and delivery strategy in the old days that is still the case today. The processes were optimized in a way that reduced the storage requirements. Today, and this will be more and more, we are living in a connected world, and our customers ask for more and more flexibility. How can we deliver this in the future? Just-in-Time isn't really the answer to this because it was designed to build efficiencies into production for the company and not really focused on the customer or their particular requirements.
How then do we understand the supply chain/logistics strategy then, in the context of customer experience and, thus, customer value? We can talk about delivering value not just-in-time but in "the moment of time" (MoT) -- meaning customer delivery when the customer needs it. To do so, we need to understand our customers on a 1:1 basis and act in real- or near-time… cross channels and cross devices. With such a MoT strategy, we generate value and, with this, an outstanding experience.
To begin to get that kind of individual understanding of the customer to build out the personalized delivery that I am talking about, we start by bringing together all systems which store relevant data. That means, for example, data from engagement systems (for sales, marketing, service, etc.) or backend systems like an ERP… every system where relevant customer data are stored, internal and external. In the example above, you can assume that there are many (B2B) customers who have very different interests/needs/pains that have to be addressed. The job of the brand and the actions of the supply chain have to be tailored to deliver the right value to each customer. If this is in line, we can deliver the end customer's outcomes.
Predicting customers' interests/needs and next steps -- based on the customer data we have -- can help within the supply chain.
Supply chain managers will still need to keep costs down and comply with all the regulations, which can be a challenge. On the other side, customers expect speed, flexibility, and individual value. Supply chain managers are between the chairs of changing requirements/regulations / logistic circumstances and the predictions of customers' requests. At the end of the supply chain, there is the customer, and this is the reason why we need to bring supply chain systems together with CX systems to collaborate in both directions. SC needs to meet the changing needs and requirements in real-time. Disruptions affect every customer experience because on-time delivery is a key point for every customer. Disruptions need to be avoided and, if they happen, they need to be dealt with in the right way.
Customer demands are changing, stronger regulations are being put into place, and environmental protection has become a requirement for supply chain management. They are not just siloed topics. Sustainability is more and more an important business success factor. Topics that are just a "need" today can be very quickly become a pain point. One prominent example these days are harbors. It is since a long time an ongoing need to raise the capacity. Today ships are waiting 40 days and longer to enter a harbor. This is now a huge pain point in logistics. Amazon just stepped in with their own ships, allowing them to deliver goods to smaller harbors far away and transport those goods by truck… just to get the situation fixed.
Transportation, storage and handling performance are not enough these days. Customers are expecting a real-time tracking as a base function… More importantly, they expect a high-quality completion of the entire supply chain and – in case of disruption – proactive information about it, its impact, and solutions to deal with. Prescriptive and predictive analytics are the key elements here.
The supply chain platform of tomorrow is moving away from tracking into visibility and collaboration platform.
Just to give one example. Shipping a refrigerated container in the past versus today. It was enough to guarantee the right temperature over time in the past. Then a cooling log was required to keep track of that temperature. Now customers want to have a live connection to their container to check the temperature on demand. Or better get informed right away if there is a disruption. If there is an issue with the cold-chain and the temperature change makes the product unusable, this will already have been recognized immediately, not only when the ship docks 2 weeks later. By recognizing it right away, a re-order can be started immediately, and a plan developed for how to manage the spoiled goods when they finally arrive in port.
Such services are rising more and more and will make the difference in selling supply chain / logistic products. Such services are the added value that will be a key element in the supply chain in future.
Industry 4.0 needs real-time capacity, security, flexibility and scalability combined with a transparent and collaborative platform
As described, delivering value at the right time is important, doesn't matter if it is in B2C or B2B. Therefore, we need to listen to understand. We will collect more and more data in future. Through this, connecting real-time data is one of the most critical factors. However, connecting systems is just one part. We are experiencing a huge transformation in business overall. If it is being done effectively, a transformation needs to dissolve not just data silos but requires a breakthrough in mindset. Changing the way that we have been doing business for decades is a frustrating and challenging task. Often such a transformation end just in a translation -- meaning while the look and feel and even requirements may be different and new, the methods of doing business remain the same: same book, different cover.
Obviously, changing the customer experience requires changing those old ways of doing business -- moving them away from the company first, customer second, to the customer first, and it involves not just the company but every stakeholder that they interact with. That means customers, partners, potentially other businesses in the company's ecosystem. To accomplish this requires a customer-centric organization and the right mindset. Many companies will claim they are customer-centric. But are they really?
Customers are asking us to focus more on delivering individual value. While most companies tend to focus on their own goals and what it takes to achieve them, when they begin to transform to customer-centric, hopefully, it will end in the company focusing on value to the customer instead.
But how do we get rid of the silos that are a brake on the progress to customer-centricity?
One approach suggested on overcoming that -- one that directly impacts the supply chain would be a single department, a customer department that has back-office and front office support. We would have to create a new set of KPIs to meet the requirements of this customer "bureau" within the company. Think about the KPIs of the employees in this existing structure we have today? Are they customer or brand-focused? How about the department KPIs in your organization? How about the KPIs we need to have in a couple of years? How do we move from a brand-focused KPIs or departmentally focused KPIs to customer-focused KPIs? Questions that are still to be answered but, at this point, need to be on the table.
The supply chain has the possibility to connect all these dots (exactly this is what the customer is requesting for a great CX) and deliver customer-focused added value. A new approach to delivering products to customer companies can be enabled to get faster results for customers and thus meet their real-time expectations. With a model in a place like this, the customer can, via their feedback, influence the design of this new form of the supply chain. This will impact how we build products and what business models we need to create to support this. Today products will be built in a decentralized fashion and shipped to the customer. That leads to a future where the customer is getting a more personalized approach to his products, via his/her choices of what they want that product to be -- a more modular approach, something discussed as far back as 1999 when Joe Pine and James Gilmore wrote their iconic book: The Experience Economy. This will change the entire supply chain by focusing more on the customer and the impact on the customer and no longer as much on the efficiencies per se.
What I often see are so-called transformation projects which (metaphorically, of course) want to make a blue circle look green -- and not much more. Such projects end most of the time by just putting a yellow shell around the blue circle, and you get green. That's not true transformation. That is much more a translation, as I mentioned earlier. A different look on the same thing. A transformation needs a top-down approach but takes place via many small steps bottom-up.
Dividing a transformation into small milestones with many smaller topics behind makes it easier not to end in a translation.
SCM is a complex process with many stakeholders that need to be brought together and aligned. To adapt to future business and requirements, we need to lay down the tracks today, so those stakeholders can travel the path to the endpoint of a larger true transformation to a supply chain that truly serves and impacts customers -- with the customers' cooperation along the small steps pathway.
Let's sum up the big issues we are facing:
Given these obstacles, how can we get a transformation done? It is about connecting the dots. For example, connect the data siloes and get a holistic view of a customer, whether B2B or B2C.
CX often focuses on the 360-degree customer view and a deeper understanding of a customer and their behavior. Mostly, that holistic customer view is used to understand more about the customer, but having that available can help companies transform, not just in how they treat customers, but how they run at all levels from the front office (sales, marketing, customer service, commerce) to the back office (supply chain, etc.) By eliminating data silos, all departments have the data they need and the insights they can glean equally available and thus, can work together more effectively. Having that data, it is important that we do not just sync data but also intelligently use the data for insights and support consent (GDPR).
To be successful, this kind of transformation takes place bottom-up while it needs top-down support. If you are on your company's board and want to make sure that your company is more customer-centric, take a look at Figure 1 as a 10,000-foot view on the way to start the effort.
What does this approach mean for supply chain management and the obvious improvements that the approach brings in CX?
SCM is a management approach for the set-up and optimization of logistic processes. As outlined earlier, if we take a contemporary approach to it, SCM can fulfill customers' interests/needs/pains and expectations, along with its traditional value (increasing efficiencies et al). It will have a direct and positive impact on business outcomes and goals. If a business does it this way, it not only delivers value but also shows empathy (hopefully based on intrinsic motivation) via its actions and interactions, which then generates trust. While trust in business is used often as a marketing buzzword, in truth, it is the foundation of all company, employee and customer relationships. It is the key to customers' desire to stay a part of your business.
So, for example, if we look again at the monitoring of a refrigerated container traveling via ship that we discussed earlier. The supply chain program that considers the customer's needs, not just the efficiencies of the processes needed, e.g., a customer-centric supply chain program, has added value because the customer is engaged. Why? They have information on the transport and status of the product at any moment in time and also has the means to address issues in real-time, thus allowing for the resolution of the problem that appears via collaboration and communication with the shipper. This is not about making money; this is about delivering the right services at the right time to generate trust; first, customer loyalty second, and, thus, revenue because the customer trusts the company and remains committed to it.
One last example.
I just ordered a new car which will be delivered within 7-14 months. Ugh. … The delivery window is too distant and too broad, and thus vague. I need the car today, so of course, 7-14 months is too far out but even allowing for that and accepting a poor delivery plan, there is a 7-month gap in when it might be delivered. That isn't just "oh, the service person will be there between 8am and 12pm" -- a 4-hour window -- which is bad enough to most of us -- but a 7-month window? Really? How can I plan for anything with that window? Like anyone else, I make some allowances for the semiconductor/chip and parts shortages globally, and we know that Covid-19 has enhanced these issues. But it isn't just that. That window is also the result of poor planning and forecasting and thus a supply chain management issue that isn't focused on helping me resolve the 7-month window problem. As a customer, I want the company that I am buying the car from to provide me with options that I might choose given the length of the window and the uncertainty it causes. I have no option other than to not buy the car that I wanted to buy. There is no flexibility built into the program. For example, they could have told me, given the car you wanted and the lack of availability of these particular parts that are required by this particular option that you chose, if you dropped or changed the option, we could get it to you in 6 months. Not the best thing ever, but at the same time, using a customer-centric framework for the supply chain program at least gives me some choice. Better than the vague fait accompli that I have otherwise, even if not ideal.
To sum it up: A customer's experience with a company is perhaps the most vital decision-maker in whether or not the company is going to retain the customer. The supply chain's success or failure significantly impacts that experience. That success or failure is incredibly powerful in either establishing and retaining trust or in the loss of trust by a customer in that company. The current lean concept of the supply chain clashes with customers' current demands because it lacks resilience and focuses purely on the efficiencies of its processes. By focusing the approach on knowing the customer and allowing the customer to participate and engage with the company around their personalized needs, changes supply chain from a process efficient to a customer-focused effort (which still needs efficient processes) and at the same time supports a much better customer experience with that company which then engenders increased trust, thus loyalty, and therefore greater revenue.
Thank you, Sven. Two things from me:
The Watchlist entries are in. This year we have 59 (down a little from prior years but not bad at all) submissions. The pandemic has made me thoroughly re-evaluate what I want to see from a winner at this juncture. It will be VERY tough to win this year - magnitudes tougher. I see my job as trying to keep all 59 submissions from winning. That means if they do, they will not only have been through an obstacle course designed to fail them but stood out as a true and important impact player in some way. Each winner will be getting an entirely separate post on ZDNet on why they won. The Watchlist winners will be announced with an Awards Show on CRM Playaz in mid to late February (most likely mid). Watch for the date - to be out there soon. It will be followed by a post here with more detail on what I have seen and why some of the companies won (and what my criteria were). Stay tuned for the date soon. Check here, LinkedIn, Facebook, Twitter, and YouTube to announce the date of the show and the post.
The CRM Playaz will have a big announcement (at least big to us) by the end of January or very early February. Watch for it on the same resources mentioned in #1.