11.5: Using Supply Chain Management to Increase Efficiency and Customer Satisfaction
How Can Supply-chain Management Increase Efficiency and Customer Satisfaction?
Distribution (place) is an important part of the marketing mix. Retailers don’t sell products they can’t deliver, and salespeople don’t (or shouldn’t) promise deliveries they can’t make. Late deliveries and broken promises may mean the loss of a customer. Accurate order filling and billing, timely delivery, and arrival in good condition are important to the success of the product.
The goal of supply-chain management is to create a satisfied customer by coordinating all of the activities of the supply-chain members into a seamless process. Therefore, an important element of supply-chain management is that it is completely customer driven. In the mass-production era, manufacturers produced standardized products that were “pushed” through the supply channel to the consumer. In contrast, in today’s marketplace, products are being driven by customers, who expect to receive product configurations and services matched to their unique needs. For example, Dell builds computers according to its customers’ precise specifications, such as the amount of memory, type of monitor, and amount of hard-drive space. The process begins with Dell purchasing partly built laptops from contract manufacturers. The final assembly is done in Dell factories in Ireland, Malaysia, or China, where microprocessors, software, and other key components are added. Those finished products are then shipped to Dell-operated distribution centers in the United States, where they are packaged with other items and shipped to the customer.
Through the channel partnership of suppliers, manufacturers, wholesalers, and retailers along the entire supply chain who work together toward the common goal of creating customer value, supply-chain management allows companies to respond with the unique product configuration demanded by the customer. Today, supply-chain management plays a dual role: first, as a communicator of customer demand that extends from the point of sale all the way back to the supplier, and second, as a physical flow process that engineers the timely and cost-effective movement of goods through the entire supply pipeline.
Accordingly, supply-chain managers are responsible for making channel strategy decisions, coordinating the sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory, transporting and storing supplies and finished goods, and coordinating customer-service activities. Supply-chain managers are also responsible for the management of information that flows through the supply chain. Coordinating the relationships between the company and its external partners, such as vendors, carriers, and third-party companies, is also a critical function of supply-chain management. Because supply-chain managers play such a major role in both cost control and customer satisfaction, they are more valuable than ever.
For products that are services, the distribution channel is based primarily on location of the services, such as where the company has its headquarters; the layout of the area in which the service is provided (for example, the interior of a dry cleaners’ store); alternative locations for the presentation of services, such as an architect visiting a client’s site location; and elements of atmosphere, such as dark wooden bookcases for bound legal volumes in an attorney’s office, which provide credibility. Services companies also utilize the traditional entities of distribution for any actual goods they sell or supplies they must purchase.
CONCEPT CHECK
- What is the goal of supply-chain management?
- What does it mean for a supply chain to be customer driven?
- How does distribution (place) differ for services products?