Published in Oracle on Sept. 4, 2019
According to a recent project44 report, 94% of business purchasers surveyed expect the same level of customer satisfaction from a business transaction as they do when making a personal purchase. These expectations revolve around “low-cost, fast and highly transparent delivery of goods.”
We recently caught up with Lisa Anderson, a top industry consultant in supply chain management (SCM), to discuss how the Experience Economy is driving changes in the supply chain.
In 2014, you conducted a survey of your manufacturing and distribution clients. Two-thirds of these firms said they felt compelled to address rising customer expectations tied to consumer-like service offerings. Are rising customer expectations still a top-of-mind challenge for manufacturers?
The issue is just as important to manufacturers today—I would actually say it’s an even bigger issue now.
Look at delivery lead times as an example. I would have said not long ago that manufacturers needed to cut lead times in half to meet customer expectations. But today, really, there’s pressure to cut lead times to a tenth or less of what they used to be.
Basically, for any business that sells direct to consumers, we’re talking about same-day delivery—as baseline service, not as some sort of premium offering.
Are the challenges just as pressing for B2B firms as they are for B2C?
It no longer makes sense even to distinguish between the two sectors, at least in terms of customer expectations. It doesn’t matter what business you’re in or who your customers are. The fact is, there’s still a person behind every purchase, and today, that person is very likely to expect a consumer-like experience.
How do rising expectations create pain points for manufacturers and distributors?
The most prominent pain point is delivery, which we just touched upon. Expectations for same-day delivery mean businesses are under pressure to adjust operations while managing the cost of fast fulfillment. There has been relentless pressure to reduce freight and shipping costs; customers don’t always expect free shipping, but they rarely expect to pay more than a nominal shipping charge.
There are also expectations around visibility: customers being able to track a shipment at any time, in real time, and to consume that information on their own terms.
We’re also seeing a new trend where customers increasingly reserve the right to change their minds about a purchase. It doesn’t matter whether a shipment is days away or an hour away from delivery—if a buyer changes their mind, they expect a manufacturer to accommodate them.
Finally, more manufacturers are thinking about how they can use service offerings or customer experiences to stand out from the crowd. Think of a manufacturer that sells a highly commoditized product—for example, bearings. Your product is like everyone else’s, and you certainly don’t have much room to compete on price. But what if you offer customers the ability to monitor machinery, to spot bearings at risk of failure, and to alert customers to replace worn-out bearings before they take down an entire line?
How can manufacturing firms connect the dots between the realities of rising customer expectations, their own day-to-day operations and processes, and their technology and data analysis investments?
The first step is visibility into the supply chain, because reliability—knowing when a shipment will arrive—is as important as ensuring shipments arrive quickly. You need both today, but visibility into your supply chain is fundamental to everything else.
The next area to focus on is inventory. So much working capital is tied up in inventory, and it may be in a warehouse, on a loading dock, or in transit. There is a fundamental opportunity to reduce cost of goods sold and satisfy customers by improving inventory turns and reducing situations where you are out of stock.
One way to better manage inventory is to look for ways to position your inventory closer to customers, or to collaborate with supply chain partners to build some flexibility into the system. For example, Oracle’s supply chain applications allow for collaboration with supply chain partners to keep inventory closer to its final destination.
Then there’s the next level—where you’re aiming to get the right inventory to the right place at the right time, to meet or exceed customer expectations on lead time and shipping costs, and handling change requests. This is where I’m seeing a really clear need for manufacturers to step up their ability to perform forecasting and proactive analysis. Depending on the sector, for example, manufacturers can turn to point-of-sale data or usage data to forecast demand, and to bring more of the right inventory to the right place at the right time.
Are those forecasting tools valuable for other kinds of decision-making tasks as well?
Absolutely. One thing that clients often ask about today is, “How do we slice and dice all of this data to make more effective decisions?” That’s why dashboards are a big part of these conversations for many clients—having that ability to analyze data and to deliver it in a form that helps you make decisions based on where things are going.
The other obvious question to ask here concerns execution: How many manufacturers are actually taking steps to adjust their technology and their business processes to meet these upgraded customer experience expectations?
Currently, it’s a bit all over the place; some really big and well-known manufacturers are very much behind the times, while some of the most advanced firms are much smaller—at the $100 million revenue level, or even at $10 million.
But, no matter where they are, the more innovative and advanced companies are taking these issues head-on. They’re asking how they can put technology to work—not just to tread water, but actually to get ahead of customer expectations, and to deliver really great experiences that stand out from competitors.