Tuesday, December 10, 2013

Got Shiny Supply Chain? Show it Off!

imageThe reliability and efficiency of your supply chain obviously affects your operations and in turn how your customers view your brand. For example, if you are running a promotion, but cannot keep your stores optimally stocked during the promotion, obviously your brand image takes a hit. It does not matter to the customers whether your stores ran out of their favorite sweater because your marketing and supply chain systems don’t talk to each other or a broken supply chain was just not up to the task of supporting the event in the first place. The fact is that efficient supply chains not only drive profitability, but also enhance or sustain the brand image by enabling you to keep your promises to the customers on prices, availability, assortment, and delivery.

Several studies find that your supply chain may even have an (emotional) appeal to your customers. McKinsey reports that the buyers’ favor brands that are perceived to “act responsibly across (their) supply chains”. Another paper recently published in German Academic Association for Business Research also found that the right message about a responsible supply chain can help “lift a brand's reputation”.

It is easy to relate the importance of having a well-designed and efficient supply chain to manage the day-to-day operations of a company: The usual buying, shipping, distribution, and so on. From inside, these functions look similar to other organizational functions that a company must do to conduct its business. Paying the invoices for the merchandise, freight, and the utilities to keep the warehouses running; hiring people and making sure they have a place to sit when they join; and making sure there is ample parking where employees can park their vehicles and not worry about it, would be more examples of things a company must do to conduct business. Pretty mundane stuff and not the kinds of things your customers are going to rate you on.

But unlike your general ledger systems that most of your customers won’t worry too much about, supply chains becomes personal. The health of your supply chain directly impacts your ability to keep your promises to your customers and therefore, it gets their special attention too. Add to that the growing awareness about the environment, global warming, labor abuse, and the effects of activities like manufacturing, packaging, and shipping on all the above and suddenly, your supply chain becomes either a shining example of everything that is right or a shameful instance that must be avoided!

Need examples? Almost all major companies including UPS, Wal-Mart, P&G, Apple, Unilever, Coke, HP, Amazon and others publish annual sustainability reports detailing their efforts towards being green, using environmentally sensitive manufacturing methods, sustainable packaging, and fair business practices. Whatever the format, language, and details, all these companies are trying to send a single common message to their customers: We care.

Why? Because savvy customers decide to be seen favoring or shunning a brand based on their own assessment of how responsible a company’s supply chain is: Because it is a statement about themselves. So, you can help them make that statement and retain them as your best customers or offend them and lose them to companies that do.

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Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon.
© Vivek Sehgal, 2013, All Rights Reserved.

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