Supply Chain: Adapting Process to Create Customer Value

Foreword: All too often organizations treat processes, policies, and procedures as though they are laws written in stone. While there are some processes that are fixed due to regulations, most processes, procedures, and policies may be adapted. In old school leadership and management paradigms there is an adage, "You are not trying if you are not breaking rules". Old school thinking was that policies, procedures, and processes were guidelines as they understood the background, effects, and outcomes of varying parameters around a process that policies and procedures baselined. 

This post discusses one approach to adapting process in order to create a competitive edge over competition and build customer loyalty as operators in the supply chain.

Adapting Process to Create Customer Value

The bottom line up front is that customers make buy decisions based on real or perceived value they receive from the product or service. The seller then must make all efforts towards delivering that value. Anything and any activity not contributing towards delivery of customer value is wasted time, effort, and money. The classic responses and efforts to solving this challenge have been leaning out the operational processes, performing continuous improvement projects, and acquiring certifications such as ISO 9000. Leaning out processes and continuous improvement focus on cost and quality which affect value but are rarely directly linked to customer value. After all, the customer does not care about the error rate on a process or how many times a subcomponent is handled. ISO 9000 enthusiast often fly banners proclaiming to ‘meet or exceed customer expectations’ but this is a nebulous statement because it is not qualified nor quantified. After all, what are the customer expectations? Well – value is complex to grasp because it can be many thing to many customers. However, customer value can be reeled in and met.

Figure 1: Have It Your Way

 

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Let us reflect on an old 1974 Burger King commercial themed have it your way, Figure 1. Pardon the pun but let us unpeel the onion behind have it your way. Burger King had set up a process that collected customer orders then adapted assembly to customer specifications that reflected direct value to the customer. While assembly of a Whopper is linear and the bill of materials is simple, the key point is that the process is adaptable. Extra ketchup was measured to an extra squirt which was quantified in terms of ounces having a specified cost associated. Normally, two pickles were used but the pickle station would be bypassed on hold the pickles resulting in a savings. At the time, orders were tracked on paper systems which were summarized and filed as a report from each geographically dispersed operation. Thus, Burger King could track and manage costs and even adapt the standard process to common or popular demands.

Cutting edge technology and information systems offer higher consistent quality and greater responsiveness to market demands but can require a large capital investment. A labor intensive system and process offers enormous ability for flexibility but is prone to errors resulting in higher scrap rates and rework as well as limited by human talent and skills on hand. The trick is not to begin with the process but instead with the customer or as Stephen Covey's second habit states begin with the end in mind (Covey, 1989, pp 102-153). Understand the customer and their needs first.

This begins with building a relationship in which the customer feels comfortable to express not only the hard requirements but those little things that really sweeten the deal them. Those little things could be a different cap with a pour spout or a little tighter quality than required. For example, the product may be within requirements but has lumps that makes pouring difficult. Adjusting the solution within the hard requirements to make the product more smooth may increase the usability of the product to the customer. This is similar to the Burger King customer who wanted extra ketchup to perhaps make the grilled burger with its charred spots slide down easier.

Once these little things are understood then common desirable qualities should be observable in the research collected. Now the process can be designed to adapt desirable qualities to the customer requests. In designing the process and adaptability, designers should look at the core process and identify breaks points where adjustments can be made in order to tweak the product for the customer. Administratively, the primary model number may be the same with an extra identifier for the standard tweaks in order to avoid shipping adapted finished goods to the wrong customer.

Adapting process is not rocket science but does take some rigor and willingness to make the necessary adjustments where possible. Not all customer desires can be accommodated without compromising the hard requirements or fundamentally changing the process all together. The goal is to seek that happy medium where the customer enjoys an edge that differentiates from the competition in a positive and meaningful way. When this is happens the customer achieves optimized value.

References:

Covey, S (1989) 7 Habits of HIghly Effective People. Simon & Schuster. USA