Collaborative customer programs are becoming increasingly popular in today’s new normal business environment. Customers such as Cardinal Healthcare, Boeing, and the like are searching for ways to partner closely with suppliers in a way that will achieve a win-win result. There are numerous examples of these types of programs – of course, they are all termed something different such as VMI, consumption-based ordering, auto replenishment, forecast and replace, and the list goes on. Yet the end result is the same: improve service and efficiencies while decreasing lead times and inventory investment.
Why Bother with Customer Programs?
I’m a supply chain and operations consultant and former VP of Operations and Supply Chain for a mid-market manufacturer and have implemented numerous collaborative customer programs which have resulted in dramatic improvements in service, cash flow and cost. For example, during my tenure at PaperPak, an adult incontinence manufacturing company, we achieved the following successes with our #1 customer:
- Recognized by #1 customer as “supplier of the year”
- Increased sales
- Became “part of the customers’ organization”
- Doubled inventory turns
- Improved customer service to 98%+
- Reduced lead times and improved costs
Since then, I’ve partnered with several clients to achieve these types of results. Over time, several keys to success emerged: 1) People. 2) Partnerships. 3) Process 4) Provider
1. The first key to success is people
The right people are your #1 asset. First, senior leadership can make or break any collaborative program. As with any substantial undertaking that crosses functional lines, senior leadership must provide commitment and support, have a high level understanding of the value that can be achieved through the program and be able to explain the whys. Thus, the key resources’ individual goals are tied to the big picture and tools and support are provided. For example, in every customer program, there is some sort of upfront cost, inventory investment, resource investment, etc. (even if it provides a 20:1 return, an upfront investment / process change can be a hurdle); thus, if support doesn’t exist, the program would never get off the ground.
Second, the right planner is critical. I discovered this the hard way a while back. After putting the wrong person in the role, I quickly discovered the importance of finding the right person with the right skillsets for the position. This position requires a delicate balance of analytical skills, customer service skills, communication skills (as planners are always at the center of competing priorities), logistics skills, and financial skills.
2. The second key to success is partnerships
This is back to point #1 – the right people; however, this is in terms of the right people and partnerships with customers and suppliers. The definition of a partnership is simple – ‘win-win’. To create a successful collaborative program, it requires a close partnership with your customer. The ingredients for a successful partnership are trust, the ability to find and create win-win ideas, a focus on collaboration in terms of customer demand, goal setting and metrics scorecard reviews. The same holds true for your suppliers. View your customers and your suppliers as an extension of your company and supply chain. With a partnership, you should be able to turn 1 + 1 into 5, meaning your returns will be exponential over what you will achieve on your own.
3. The third key to success is process
To ensure flawless execution and customer service, process is king. Rigorously following the traditional plan, do, check, act model can yield significant results. It has been shown that although the majority of people spend the majority of their time on the “do” of plan, do, check, act model, the successful implementers spend a very small portion of time (10%) on “doing,” Instead, it is plan (70%), do (10%), check (15%), and act (5%). As this implies, follow-up/ audit is also essential for success – it is how metrics review, best practices and continual improvement is built into the process.
4. The fourth key to success is provider
Last but not least, the software tools and provider supports your people and process. For collaborative programs, this can include EDI (electronic data interchange), forecasting and VMI software tools. For example, I discovered that after utilizing multiple software suppliers and discovering the keys to success through trials and tribulations, it is apparent that bells and whistles do not = success. Instead, what really matters is the following: 1) a partnership approach, 2) the right combination of functionality, flexibility and cost and 3) forecast features.
After these fundamentals are in place, you can drive additional efficiencies and customer intimacy through continuing to focus on the 4 Ps. When connecting the people and process elements, think about using customer collaborative programs as a strategy to link strategy with execution. The benefits will continue to grow as the elements of customer collaboration are implemented throughout the supply chain. As you expand, your results will grow exponentially – increased customer partnerships and intimacy and improved margins and cash flow.