Bringing Customer-centricity in supply chains through metrics and KPIs

After the recent article I published about the power of Customer-centric supply chains (see footnote #1) I was asked the question “what is your strategy to drive Customer-centricity in supply chains?” (see footnote #2).

I have had the chance to work for companies with long histories: Unilever, Carlsberg, FrieslandCampina all started from Consumer needs (soap, beer, milk) in the late 19th or early 20th century and created supply chains adequate to resolve their issues, be it oil sourcing, yeast quality or short shelf life raw material. In my experience, supply chains are historically push oriented, mostly due to the unambiguous nature of the production needed to ensure massive amounts of undifferentiated products at the lowest possible cost. Modern trade is somehow a recent creation concomitant to the rise of consumerism and Customer focus has also become paramount to success.

In transforming and driving customer-centric supply chains for the last 12 years I have learnt to resolve every supply chains problem starting from the perspective of the Customer: whilst the answer might not be entirely right at first, it will for sure not be completely wrong.

From this experience across 4 different global businesses, I have a small and pragmatic frame of 3 simple steps to drive Customer centricity in supply chains. 

Step 1: Address the right number

The first step to customer centricity is to address the metrics and KPIs which matter to your Customer, be it service level, case fill, A+ shelf-life, on time delivery, drop size, credit management, return management, etc…

When appointed VP Supply Chain for Unilever Italy I toured all our Customers to get a sense of how they perceived our supply chains performance. The team prepared us for a very difficult conversation with one of our top Italian retailer as our CaseFill was in the low 90%. Very quickly during the meeting though, and to my great surprise, our Customer mentioned Unilever being their “best Supplier”: as it turned-out, all our deliveries were On Time in their half-hour windows, and, paramount to them, we were booking all slots in their new online warehouse system - Their new warehouse was already too small for their growth and what mattered the most to them was the predictability of truck rotations in their yard and docks occupancy.

Customers are all very similar: they want great experience yet it is always different, they want great service, but their expression of service is always different.

Step 2: Address the number right

Once you know which metrics and KPIs really matter to your Customer, the second step to customer centricity is to measure the metrics and KPIs in the right way. The only way that is right is the Customer’s: perception is reality and therefore, measuring performance as your Customer does, aligns you to their views of what the problem is. This outside-in perspective is paramount to address the performance gap as perceived by the Customer.

When I joined FrieslandCampina we were reporting service level for one of our top Dutch retailer in the low 98%. Basically satisfied with this result and ready to move on to more pressing matters, I was then explained that the Customer had another number (in the low 95%). After some investigating we understood that the Customer had the specific practice of withholding orders for items they believed we, as their Supplier, were out of stock for more than a few days. From the Retailer perspective this made perfect sense as they would order more to other suppliers and adequately manage their shelves, but from the Supplier perspective this drove the wrong perception of a great service… and effectively big amount of lost sales. Only when we started measuring service level the way the Customer did could we see the problems they had and address the root causes.

Customers notice when you listen to them: great business execution comes from having this intimacy with your Customer and isolating individual nuances.

Step 3: Spread the number all the way

Once you measure the metrics and KPIs that really matters to your Customer and use their arithmetic to do so, the third and last step to customer centricity is to irrigate the whole supply chains with these metrics and KPIs. Customer centricity certainly pivots around the front-end but is not its sole preserve: the outside-in perspective on your ability to deliver great experience to the Customer needs to be shared all the way across the supply chains in order to drive the much needed intimacy which will gear the full end-to-end towards the Customer.

During my tenure as VP Planning and Customer Service Excellence at Carlsberg, I had the chance to visit many breweries around the world and would randomly be invited to the morning meeting on the shop floor. In this stand-up 15 to 20 minutes sharp meeting every aspects of past and future production performance are discussed by all factory functions heads. I was often surprised by how far away from the Customer these conversations could be, but for of our UK site: there, the service levels of key Customers and promotions were displayed and discussed on a daily base. We were fast at rolling this across productions sites globally, bringing the Customer at the heart of the up-stream supply chains. Since then, I have carried asking in every business meeting “where is the Customer in this discussion? What is in it for the Customer?”. 

It is only when factory and warehouse operators know what really matters to the Customer that they can take full accountability and make the right decisions every time, every day.

The customer is king: try to understand why and then, it is full steam ahead with the digital supply chain transformation.

1. The article “Customer is King: Transforming supply chains through digitalisation of planning capabilities”, written and shared as a member of the AIM10x Innovators Network is a call for action - based on my experience - for supply chains to become even more Customer-centric through digitalisation. The article is featured on my LinkedIn profile.
2. The question “What is your strategy to drive Customer-centricity in supply chains?” was asked to me by Helmut Leitner, a fellow colleague President of the CSCMP roundtable Switzerland and the Creator of Integrated Business Sensing (IBSing), a framework designed to nurture team engagement and boost organisational performance in line with and supporting IBP.

ABOUT THE AUTHOR

Pierre Mille is a member of AIM10x Innovators Network (sign up now to the network). The author wishes to thank Helmut Leitner for the original question.