Customer Expectations and the Supply Chain

Reviewing the Supply Chain- The importance of involving customer

Globalisation has led to increased competition from international markets. At the same time we see increased pressures on the supply chain to offer customers low cost products and in turn minimising profit margin. A supply chain is a network consisting of a chain of activities, facilities, people and other resources directly or indirectly involved in supply of goods to customers.

The way a business sees its supply chain is fundamental to developing a business strategy which can cope with modern pressures. In the past businesses may have looked at the supply chain as the bridge between supplier and customer. However, to be successful in the future it is fundamental that the supplier views its customer as core to the supply chain. If a business can define the fundamental customer need, then it can realign its supply chain to efficiently meet these needs whilst minimising its costs.

Driving the Supply Chain through Customer Expectations

The success of supermarket chain Aldi is a core example of a firm which have recognised that through driving its supply chain through customer expectations, cost can be minimised. Generally Aldi carries only a few thousand lines in its stores, its competitors Asda currently stock on average 24,000 lines. Aldi understands its customer.  It’s no frills stores can lead to efficiency within the supply chain and means that Aldi can focus on offering its customers the lowest possible prices.

Alternatively, firms such as Apple understand that their customers are looking for high quality products. So they minimise product options in order to give customers limited variability but a great product. Apple’s record profit is due to understanding and aligning its supply chain to meet customer expectations. Alongside this the customer pays a premium for the high quality product which Apple provides.

Supply Chain Lessons to be Learned

Businesses need to involve customer in their supply chains and manage their expectations. Taking the middle ground in a competitive market thus offering high quality at a low cost will eventually lead to demise. The high competition and low margin City Link business model arguably led to its downfall. Through involvement of the customer within the supply chain, firms can realign, thus differentiate from competition through directly meeting customer expectations.

17th June 2015