Is Your Supply Chain Strategy Inside-Out or Outside-In?

Contribution by Martin Verwijmeren – CEO and co-founder of MP Objects

Digitization has changed everything. It’s changed not only how we interact but how we make decisions with readily available information. This accessibility to information and organizations has flattened the playing field for every organization as they look to market and sell their wares.

This accessibility has forced organizations to embrace better transparency with potential customers and in turn has brought competition. With more informed customers with more choices to spend their money, you see that organizations now have to compete across a wide variety of marketing differentiators including Price, Product, Promotion and Place. The Place differentiator in the marketing mix these days is becoming more important. This is the customer experience.

The truth is that the customer is in more control today than at any time in history. What they dictate goes and any company willing to provide to these growing expectations can usurp their competitors, not just in B2C but B2B as well. The day of low cost and unique products as company differentiators is for all intensive purposes over, it’s experience that is winning.

In this post, I want to explore how we need to think about our supply chain strategies to drive true innovation and performance for our organizations.

Is Customer Experience Truly #1?

In 2013, Walker, a consulting firm, released a study on the Customer Experience. And their big revelation was that by 2020, customer experience will overtake price and product as the key brand differentiator.

However, that is not the only stats we see that are supporting this movement. Take the following stats collected by SalesForce and VisionCritical:

  • 86% of buyers will pay more for a better customer experience
  • A customer is 4x more likely to buy from a competitor if the problem is service related vs. price or product related
  • According to Forrester’s Customer Index, Customer Experience leaders gained 43% in performance – compared to Customer Experience laggards, who saw a 33.9% decrease.

Now, there are two things you probably notice with these stats.

First, they are a bit B2C focused and while I agree that is the case, we are seeing a ton of similar demands being asked by B2B customers (think Walmart and their delivery window mandate).  Every trend in B2C environments shape and influence B2B business and this is just another example.

Second, many are customer service specific. Customer service is obviously important to maintain customer relationships, however, the cause of most customer service calls are interruptions in service and service levels. Efficient and timely supply chain processes have been proven to reduce the volume of customer service related calls.

How Supply Chain Can Take an Outside-In Approach

For years, supply chain has chased the holy grail of consistent cost savings through process efficiency but what we have seen in recent years is that these efforts while they sound good, organizations actually seeing limited value from the initiatives. Accenture recently saw that organizations that look to reduce costs by 3-4% year over year often don’t see a tangible benefit to the bottom line from these efforts.

This is because we are taking an Inside-Out approach focusing on how we operate in our supply chains to create efficiency was built in another business environment. An environment that moved slower, evolved less readily. Efficiency is a tremendous strategy in this type of market as you can consistently improve your process through evaluation of known quantities.

But the world has changed. There are little known quantities and the ones that are have a short shelf life. Change is the new constant and process efficiency is being replaced with agility as our business plans and strategies evolve with our markets. Agility is the new driver of business success because successful companies have learned that adaptation is key to their existence.

For supply chain, this means being as agile as the other areas of the business and partnering with them to provide the best experience for the customer. This takes an Outside-In approach to supply chain strategy; one that’s customer focused and agile to changing customer expectations.

How Can Supply Chain Get More Outside-In

When we look at supply chains that are truly agile, they look, plan, execute and analyze differently than traditional supply chains. They do this in the following ways:

  • External Parties are Internal Parties: Outsourcing is a critical component to running a successful supply chain but supply chain leaders don’t just set and forget with these external parties but they look to build true collaboration with these parties with true visibility into their actions. Technologies are supporting Multi-Enterprise Business Networks are entering the supply chain space to help provide this type of collaboration.
  • Data is End-to-End, Not Siloed: Over the years, technology categories grew up to solve specific problems in the supply chain from traditional ERPs to WMS and TMS solutions. And you’re seeing this in every area of the supply chain. However, as we see organizations look to be more customer-centric, we see technologies such as supply chain control towers come along to help connect and extend existing systems for end-to-end supply chain visibility and control over every order. This is critical as customer requirements become more variable and diverse.
  • Flexibility to Customer Requirements: Exceptions are the norm in today’s supply chain environment for both B2C and B2B and this requires flexibility in your technology stack that can quickly and accurately respond to changes in customer requirements. This might be new product lines, expanding service options, increasing geographies, faster delivery options and other requirements that need to be automated and executed on in your supply chain. This requires technology that provides Supply Chain Orchestration.

The companies that succeed understand change isn’t just the answer but is the only way to survive. They are looking for better ways to sell and serve to their target customer and that means agility in their supply chain processes.

Legacy Systems Are Not the Answer, Supply Chain Orchestration Is

When you have legacy systems that were built a long time ago, outside-in agility was not their immediate concern and you can see it. They do their job well and are a critical piece of technology stack, however, as we look to evolve our supply chain strategy and processes, it’s integral we look for solutions that can work with these systems to provide true supply chain orchestration across all the parties and systems in the supply chain.

Fast growing companies in B2C and B2B quickly winning from global competition have invested in the customer experience and the strategies, processes and technologies such as supply chain control towers that help to ensure optimal experience across the end-to-end supply chain. Differentiating customer experience only comes with an evolution in focus and an evolution in approach and supply chain orchestration is the way to truly disruptive in your industries.