How responsive is your supply chain?

I ask that because I’m intrigued by some recent comments from Michelle Meyer, director of supply chain solutions at Hitachi Consulting. In an article that ran in SupplyChainSolutions, Meyer wrote that most companies understand the need to become more responsive to shorter product lifecycles, fluctuating inventory levels and changing costs, but few actually recognize the impact that becoming more responsive will have on their supply chain. What’s more, they underestimate the fundamental shifts necessary to move from being simply efficient to becoming truly responsive.

Hitachi Consulting and AMR Research, now part of Gartner, recently surveyed 164 manufacturers to better understand the way those companies detect change, how they respond to change and what they perceive as the biggest obstacles to becoming more responsive.

It’s always beneficial to learn how best-in-class companies perform, and that’s certainly the case here. Meyer analyzed the survey results to determine how successful companies make their supply chains more responsive and customer-centric while also keeping costs down.

The answer is that the companies that have become more responsive started by designing their supply chains from the customer backwards, and then built-in appropriate performance metrics to ensure the organization is aligned with a customer-centric strategy. Meyer outlined the steps that some of these best-performing companies follow. These companies:

1. Measure total supply chain cost instead of sub-optimized parts. Many manufacturers use metrics that measure volume and unit values, and, consequently, focus on per-piece or per-transaction costs. Best-in-class companies, on the other hand, begin with high-level customer satisfaction metrics and measure total supply chain cost, not individual pieces. Then they measure their entire supply chain against the total customer experience.

2. Have very different supply chain organization structures. The most responsive supply chain organizations include traditional areas in the supply chain function, but they also include procurement, manufacturing and the customer experience organization, as well as distribution functions. Many of these successful companies also have finance, IT and business process improvement teams within their supply chain organization to deliver business process improvement and an elevated level of finance capabilities. But most importantly, in this environment, the supply chain organization takes on a role where the supply chain becomes the vehicle to create the customer experience.

3. Understand the value of connections. Best-in-class supply chain organizations work hard to make connections—to suppliers, third-party providers, outsourced manufacturers, third-party logistics companies and their customers. They invest in systems and processes that promote a unity of purpose across the value chain. As a result, their supply chain becomes the physical manifestation of how they interact internally and externally—and how connected they are willing to be to other parties.

4. Put technology in its place. While there definitely is a role for technology in support of a world-class supply chain, the most successful companies realize that people and process come first and that technology is simply an enabler.

Companies that fundamentally redesign their supply chains from the perspective of the customer experience are significantly different, Meyer says. They give their teams clear, customer-oriented and cross-functional objectives. They also develop comprehensive metrics and an organization structure that supports being customer-oriented. The result is that their supply chains become the engine that drives the customer experience.

I’d like to hear from you. Is your organization working to be more responsive and customer centric?