The rise of customer-centric supply chains

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The changing nature of customer demands—both consumers and business-to-business customers—has ushered in the era of the customer-centric supply chain. No longer in the shadows, the supply chain now makes or breaks the success of a business.

Shifting consumer demand was the center of a challenge a national beverage manufacturer faced following the Covid-19 pandemic. As detailed in a recent case study, the unnamed company worked with Ernst & Young’s supply chain experts to address its challenges, which centered on building a more agile supply chain to address shifting consumer demands.

“Balancing supply and demand throughout the pandemic taught us we needed an agile sales and supply chain strategy that could meet rapidly evolving consumer needs, keep pace with shifting market demands, and produce higher quantities and varieties of products,” a company operations executive was quoted as saying. “To stay competitive, we wanted a novel supply chain strategy, refurbished IT infrastructure, and additional investment and training for our dedicated employees.”

The company and EY’s experts spent 24 months crafting a plan that identified new efficiencies in “each link in its supply chain and developed a solution to better align supply with demand for all products across their multiple U.S. factories.”

Those changes included new aluminum packaging lines, reduced batch sizes to meet realistic inventory targets and enable faster changeover should the need arise and added training and employee investment. The results included a 30% reduction in changeover times and an 18% increase in bottle and can throughput annually. 

“This American beverage manufacturer is now operating with fewer interruptions, maintaining efficiency across production lines, meeting consumer demands with precision, and increasing sales cycles,” EY noted in the case study.

Customer-centric supply chains

The need to react faster to changing consumer behavior is a prime example of why customer-centric supply chains are now in vogue. Businesses, like consumers, are constantly adjusting, whether to address their customers' desires or respond to continuing global supply chain disruptions. Suppliers, therefore, need to be flexible.

Customer-centric supply chains are those that place the customer experience at the center of all decisions within their supply chain.  With the data that is available today, and technologies such as machine learning and artificial intelligence, that process has become easier than ever—if executives wish to take that route.

According to Gartner, 83% of surveyed supply chain leaders say that they are being asked to improve the customer experience (CX) as part of their organization’s digital business strategy. Moving the supply chain to a customer-centric supply chain is the most often approach to doing that as 50% of respondents mention that.

Data, data, data

The proliferation of data, particularly consumer data, is driving breakthroughs in supply chain, and allowing leaders to prioritize the end customer in designing operations.

“These innovations go far beyond the decades-old idea of using customer data for simple demand planning, affecting everything from product development and feature selection to marketing and consumer engagement,” wrote Deloitte in a recent report, “Consumer connectivity: Creating customer-centric supply chains.”

Deloitte noted that the data being used includes sentiment, behavior, and social data.

“Consumer data can help a company understand who its end customers are, what they value, how they act, and what they’re thinking and feeling after a purchase or recent interaction. At a strategic level, it can also provide powerful insights into the consumer forces that are shaping industries. Ultimately, consumer data can help create a sustainable competitive advantage that separates winners from losers,” Deloitte said.

With data in hand, companies can respond quickly and craft strategies designed to increase sales and customer experience.

“For example, if a consumer is willing to pay more for a sustainably sourced product, a connected, customer-centric supply chain can satisfy that preference while building loyalty through satisfaction and at a higher price point. Improved consumer connectivity can also help an organization identify and understand shifts in consumer preferences to proactively assess the implications and capitalize on emerging opportunities,” it said. “As customer-centric supply chains start to collect, collate, and apply the three types of consumer data, they can form a more complete view of consumers. But even before that, supply chain managers can apply data analysis to make more strategic decisions around sourcing, distribution, or returns to improve opportunities across the entire supply chain.”

How to achieve customer-centricity?

While customer-centric supply chains sound nice in theory, asking an organization to rethink its supply chain to put the customer at the center of the operation is not an easy sell to the C-suite. Gartner offers a four-step approach to doing so in its “Four steps to becoming a customer-centric supply chain” report.

Those steps are:

1. Establish a CX mindset. Several action items for supply chain can help achieve this, but the most common are enabling end-to-end visibility and metrics/data collection and access.
2. Measure performance against CX outcomes. Traditional metrics like price charged and services delivered should remain, but they can be complemented by new metrics such as likelihood to repurchase, complaints and first-time resolution rates collected through Voice of the Customer surveys.
3. Analyze CX insights. Collecting data is half the battle, the other half is analyzing it correctly. This means using CX metrics and KPIs as well as customer collaboration initiatives to create joint value.
4. Take action. Using the insights collected, supply chains need to convert these into action. Gartner surveys indicate that order visibility and shipment status are the most common areas of interest followed by product availability visibility.

Cost of inaction

Customers are demanding more, but as Deloitte notes, the cost of inaction is significant.

“Despite the additional challenges and investments associated with consumer connectivity, this isn’t the time to stay on the sidelines while competitors lean into capitalizing on insights from consumer data,” it said. “As companies get better at targeting consumers and choosing what features to deliver, organizations will need to achieve a similar level of targeted product design, influence, fulfillment, and purchasing to stay competitive.”

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