Supply chains are service systems creating and delivering value to customers. In this episode Tony Hines discusses value, customers and service. Attention is focused on what value means to customers in the supply chain and how consumers perceive value received from brands in consumer markets. This informs what happens inside supply chains and guides strategic choices.
Value and the value based consumer. Brands spend a great deal of money reaching out to consumers. Consumers seek value from price, service and how the brand compares to competitor offerings. Brands need to be ethical, sustainable and fulfil the promise in delivery. Structures, policies and strategies need to be clear and they expect transparency, consistency and reliability.
In the early part of the twentieth century scale was the key source of competitive advantage. By the latter part of the twentieth century expertise in supply chain management was needed. Nowadays, it is critical to focus on the needs of the customer. Value is created by understanding customers and what drives value for particular customers (c.f. 7V’s). Serving customers effectively and efficiently are the twin objectives of supply chain leaders. Effectively giving consumers what they want when they want it on time and complete. Efficiency is about achieving higher value added through process management keeping input costs low and output values high. Service is necessary to add value and retain customers. Whether this is created through flexible manufacturing systems, faster response times, reduced lead times it is paramount for supply chains to be agile, lean and adaptable. Supply chain leaders need to understand the value drivers to pull the right leavers. Value is not created until all costs are covered by revenue. Value is created through service to customers.