Overview: The Customer-Focused Supply Chain examines how forward-thinking companies are using web technology to reduce organizational costs by connecting with their customers.
The top priority for any size organization is to provide real tangible value to its customers. Providing something that is valued by customers creates a positive ripple effect throughout the organization. It can be expected that if a customer identifies something of value, a purchase of that item will soon follow (either a service or a product). Increased revenue allows the vendor to maintain its operations, including rent, utilities and payroll. If we've done our homework we'll probably wind up having a little something left over - a profit.
Defining Value
Defining value for any customer is an interesting concept, as many people value the same thing in different ways. For example, I once purchased a 1L bottle of purified water for $4.00 while vacationing in Las Vegas. I would be appalled to purchase the same item at the same cost if I were shopping for groceries in my hometown of Bothell, Washington. What was the difference? For one, I was on vacation. For many of us, we expect to pay more for good and services while we are away from home on business or vacation. Secondly, I was able to make the purchase easily from the hotel gift shop, no trips to the grocery store needed. Thirdly, I was able to find the specific brand I was looking for, and knew that if I committed to the transaction (sale) I would obtain the item instantly. The fourth, and probably the most important variable was the weather. With average daily temperatures at, or above 100 degrees, vendors know that tourists have a real need for water.
The lesson I learned was that smart, successful companies have a way to provide goods and services based on how the customer will use those items in the 'real-world'. Why customers use products and services determines their value. In addition, there is an added emphasis on getting these solutions to customers in the quickest, most efficient ways possible. This may be via various distribution channels, business partners or the Internet.
This basic combination of meeting customer needs and providing effective ways to meet these needs is what organizations strive to achieve. Efforts on improving the business supply chain are supported by the idea of reducing operational costs for the vendor. However, Arbutus wanted to examine how improvements in the business supply chain would affect the customer. In some circles this is know as the 'value chain'. We call it the 'Customer Focused Supply Chain'.
Since Arbutus Software implements enterprise web solutions that focus primarily on improving the supply chain, our team examined five Internet websites to see how they provided value to us as individuals. As we examined each site, several critical elements became clear. Websites examined included Netflix, Charles Schwab, FedEx, Amazon.com and Dell Computer.
More than just e-commerce
When most of us think about using Internet technology in a useful way, we think of e-commerce. With millions of us purchasing everything from music, movie tickets to books online, this new and innovative electronic world allows us to find and purchase common items to the most obscure. With the recovery of the dot-com bubble of the late 1990's, we learned that not every business model is set up to successfully sell items online.
However, this doesn't mean that the use of Internet and web technology can't be applied to better serve our customers. One of the first fortune 500 companies to recognize this was Charles Schwab. Taking a large gamble in the mid 1990's, the company expanded its services to include the ability for customers to use web technology to instantly access investment and banking information to their account holders. Now in 2006, this is pretty much the defacto standard for banks and investment firms. If we examine the model closely we see people value the freedom of being able to have an instant report on something as important to them as their own investments, anytime, from any location. This creates a win-win situation, as it reduces the stress on a company's customer-call centers while providing a unique level of service based on a clients' timeframe and schedule.
The point to remember is that if your company maintains data on its customers, sharing just a small part of this information may be all you need to keep customers happy and gain the competitive advantage. If your business had the opportunity use the Internet for more than e-commerce what could you do?
Where's my stuff?
For anyone who has purchased an item from Amazon.com, this title should be familiar. This section of their website allows customers to review the status of their order once a purchase has been made. As a customer, what compels me to use this feature is that information on all my current and past orders are important to me. If an item is lost or is in transit, the information allows me to make contingency plans, as well as to have a point of reference to ensure the accuracy of the order and its estimated delivery date.
Using another example, Dell Computer uses their website to display each step in the assembly and delivery of each new desktop or laptop computer -- built to your exact specifications provided during your shopping experience (quite amazing for any size organization).
Although Dell Computer was in business years before the Internet boom, many attribute the success of the company to the unparalleled level of service provided by its website. It provided them with a distinct competitive advantage by providing a unique level of service unrivaled in their market.
For companies that manufacture and distribute goods (i.e. wholesale distribution) how could your organization use the Internet as a means to reduce paper-based processes while providing an outstanding level of service?
Information to make decisions
With the rise of new business models created by companies such as Netflix, traditional organizations such as Blockbuster are working hard just to compete. Like Blockbuster, Netflix provides DVD rentals for its 3 million customers. However, the company operates without a traditional storefront, and conducts all of its business using its website and a series of distribution centers.
For many, the service provides outstanding value as one can select from over 40,000 movie titles and schedule which items they would like to have delivered in what order. Known as the 'queue', account holders can schedule up to 500 items for delivery over a period of several months. Account level access also allows customers to specify who has access to order which types of content, as well as general information about account status and billing.
By taking advantage of Internet technology, Netflix removes the burden on the customer to make trips to the rental store. This customer focused supply chain keeps the fun in renting movies, while eliminating the hassles for the customer.
Although companies such as Blockbuster have an established and accepted traditional business model, organizations such as Netflix are looking at new ways to build their companies around the customer. In other words, instead of the customer being at the end of the supply chain, the entire process is based on the customer.
Conclusion
To establish the competitive advantage in the information age businesses must prove agility, adaptability and alignment with its customers. Although this paper has focused on specific examples of technology, the first step in establishing a customer focused supply chain is to think about the clients' needs and the little things that could make a big difference in how customers will value your product or service.