That commerce offers different products for different product segments, we think is quite normal. So why do companies still so often try to push those different products, with different customer requirements, through a uniform process? It is time for an ode to processes that add value. And that starts with differentiation.
Bastiaan is one of the practical experts performing in the Supply Chain Arena© during ICT & Logistiek on 7 and 8 November. Within the exhibition, the Supply Chain Arena is the hotspot for supply chain knowledge and contacts. Entrance is free. Register today!
The processes within an organisation are often set up in a uniform way - regardless of the market segment or specific customer requirements. All products through the same ordering process, through the same factory, through the same warehouse and finally with the same logistics service provider. That can only work if you only have one type of product and one type of customer. Tell me, do you know any companies where this is the case? It pays to take a critical look at the processes in your organisation. It could be the difference between downfall or market leadership.
Customisation or bulk?
Everyone gets it: a custom-made suit takes more time to make, is more expensive and requires a personalised sales process. With a ready-made suit, speed and price are more important. Different markets, different products and therefore: different customer requirements.
Roughly speaking, there are three value strategies by which a company can differentiate itself:
- product leadership - a superior product
- operational excellence - low costs thanks to a hyper-efficient operation
- customer intimacy - high customer focus, customisation
What makes it tricky is that many companies have different product-market combinations (pmc's) with their own value strategies. Yet the processes are often uniform. For example, there is an order management department and it has a method for processing orders. But a customised order would benefit from a different approach than a bulk order.
Turn the organisation upside down
The solution? Turn it around. Stop thinking in terms of departments and start thinking in terms of processes. And differentiate those processes by pmc. That is the essence of supply chain management: adding value throughout the chain, with the customer (and thus the pmc) as the starting point.
There are eight basic supply chain processes:
- Customer relationship management
- Customer service management
- Demand management
- Order fulfilment
- Manufacturing flow management
- Supplier relationship management
- Product development & commercialisation
- Returns management
Each of these runs throughout the organisation. Production doesn't start with the machines, it starts with estimating customer demand and planning supplies. By looking at processes in this way, you can really add value.
How then?
Most companies are still organised in vertical departments, with their own processes, which start at their door and end when 'their job' is done. KPIs are often formulated per department and in each department you will find that the culture is slightly different. A sales person often has a different vibe than an accountant. Yet they should work together to align processes from front to back. How do you do that?
Tip 1: work from the strategy
To set up processes from the customer's point of view, you first need to know what the pmc's are and which critical success factors belong to them. You basically translate the commercial strategy into a supply chain strategy.
Tip 2: let them tell it themselves
Often, people on the shop floor know very well where the bottlenecks are. Call people together, from different departments, and let them tell you what they do, how they do it and what they themselves think could be done better. That gives insight and at the same time generates commitment.
Tip 3: Make it visual
Make the processes visual so that it is also clear how the steps are connected. This helps to stimulate 'horizontal thinking'. That visualisation can be as simple as post-its on a wall. Show it.
Tip 4: share results
A new design of processes also requires new KPIs. Do you only want to know how many orders were delivered 'On Time In Full' or also the return on those orders? This way, you start thinking and rewarding more in terms of value instead of volume. Also show the connection, show that collaboration pays off, share successes. Fewer customer service complaints is the merit of everyone in the chain.
Tip 5: Get commitment from management and board
Although this approach is bottom-up, support from management and board is badly needed in all this. Only if they understand and endorse the principle can you really achieve results.
Start small
This all sounds logical and it is. Yet companies sometimes look up to this change. Change hurts and often people find it difficult. My advice is always: start with a bottleneck that everyone agrees on. Once progress is made, people are more open to change. And count on the fact that a lot is then possible. Differentiating processes leads to happier customers, lower costs, higher margins and a much stronger competitive position.
Meet Bastiaan at the Supply Chain Arena©
Bastiaan is one of the speakers at the Supply Chain Arena© during ICT & Logistics. The programme features numerous presentations on topics including supply chain strategy, processes, implementation and S&OP. Or discuss your own challenge in a Supply Chain Speed Consult with one of the experts. The Supply Chain Arena© is an initiative of BLMC Supply Chain Optimisation, Solventure S&OP Planning Software and Supply Chain Media.
Admission is free, ga to the ICT & Logistiek website for more information about the Supply Chain Arena, the programme and registration.
