Strategic Supply Chain Management - Supply Chain Online

26 Strategic Supply Chain Management
elements. The company doesn’t even press the seeds until an order comes
in—a “press-to-order” production method. Barlean’s also uses Express
Mail to ship orders so that they arrive faster and fresher—a more expensive
choice, but one that further supports the company’s commitment to
quality. In the crowded health supplements market, Barlean’s uses the
supply chain to deliver on its commitment to quality, profitably growing
sales every year by 40 percent since 1999. 9
Competing on Service
Companies that compete on service tailor their offerings to their customers’
specific needs and are known for exceptional customer service.
These companies customize their products and services to build customer
loyalty and lock in repeat sales. To excel at service, all of a company’s
customer-touching processes and information systems such as order capture,
order fulfillment, and invoicing must be fast, consistent, and troublefree.
The ability to integrate internal processes and systems with those of
key customers is a core skill.
Our research shows that best-in-class deliver companies—those with
exceptional order-fulfillment processes overall—are more than 20 percent
more profitable than average companies and are growing their top-line
sales 25 percent faster. 10 Why does better service lead to such striking
financial gains On a basic level, companies with superior customer service
processes avoid the costs related to expediting and the short-term
churn that other, less adept companies face.
On a more strategic level, companies that excel at customer service
develop the ability to segment their customers. They understand the relationship
between cost to serve and profitability and can assess the cost of
offering customized services. As a result, they avoid offering customized
services to customers who don’t meet hard business criteria. They also
tend to focus on the higher-value segments of an industry and on developing
relationships with their priority customers, resulting in lower
account turnover and a decrease in customer retention costs—all of which
add to the bottom line.
A case in point is Shell Chemical. It offers its manufacturing customers
an inventory-management solution called SIMON (supplier inventory
management order network) that simplifies their purchasing process
and cuts costs from the supply chain at the same time. With Shell’s automated
replenishment system, customers no longer place orders, run out of
inventory, or build “safety cushions” of stock. Instead, they’ve integrated
their information technology (IT) systems with Shell’s so that they can