August 30, 2012

Effect Of Supply Chain Management On Customer Satisfaction

Supply chain management typically establishes the process of planning, sourcing, procuring and controlling the movement of the raw material to finished goods right from the hands of the suppliers into the lap of the customers. These activities can be seen as originating from an order of the customer to the delivery of the products which will interconnect various stakeholders from customer to retailer to distributer & wholesaler to manufacturer to vendor and supplier.

The SCM system of a company can directly influence the customer satisfaction and hence the profitability of the company. In recent years manufacturers have realised that the SCM can be leveraged as a big differentiator in providing customer satisfaction & value by eliminating the barricades between customers & suppliers. The decision taken by one of the links of SCM can be detrimental to the effectiveness & profitability of the entire chain.

A company having great customer service has an obvious advantage over the competition. To stand out amongst today’s aggressively competent marketplace, a company should capitalize on every opportunity that presents itself and SCM is one of them. If a company is exceeding the customer expectations then it can also expect the customer retention and also affect word of mouth publicity. A good SCM will help in adding to the customer satisfaction in following ways:

1.    It can deliver the products in the fastest time and without errors. It can help in the reduction of the lead times to the orders.
2.    It can help the companies to maintain optimal level of inventories at point of sales so that what customer demands is always in stock.
3.    It can help the customers to track the status of their orders.
4.    It can help the companies to reduce their spending on raw material inventory by controlling the stock.

 In case of E-commerce companies like e-bay, myntra, tradus and others, who are selling products online, the SCM is an inherent part of the business. Companies which are creating additional value by exceeding customer expectations are a source of delight for the customer and can ensure their publicity through reviews and feedbacks which they get from the customers. For example, Flipkart has spent a lot on creating warehousing infrastructure as well as a sound delivery system with Bluedart to ensure that in major cities the product is delivered within 24 hours & at the earliest in other places too. In such a venture, it is equally important to collaborate with the right logistics partner who can deliver as per the company’s targets and help in improving customer satisfaction by leveraging their competencies.

A good SCM will also provide huge opportunity to the make-to-order companies to influence customers, like companies producing capital goods. The integration is not only required for delivering the product to the customer but also at the backend where the company needs to integrate the deliveries from various suppliers of raw materials and sub-assemblies as per their production schedules. This will enable them to reduce the lead time on the orders and keep control on the inventory.

In case of make-to-stock companies like FMCG & consumer durables, the SCM apart from looking at the backend & frontend logistics, also needs to include the inventory and display of the products at the dealer and retailer locations. The target should be to enhance the customer satisfaction along with returns to dealer/ retailer. In such businesses where the offerings are similar, the need for differentiation by providing better services is greater.
When a company is able to meet the customer expectations, the customer is satisfied but when the company exceeds those expectations the customer is delighted. With the increased global competition and with the need to differentiate their products in terms of features & services it has become imperative for organisations to improve the quality of their SCM to gain preference with customers by enhancing the value provided to them. It is only through a better quality and value adding supply chain that a company can pave a path for its success in the long run and sustain itself in the market which thrives on satisfying the customer.

1. Article on "How Supply Chain Management Decisions Impact Customer Values” on
2. Paper on “Customer Satisfaction from a supply chain perspective: An evolutionary process in enhancing Channel Relationship” by Stanely Fawcett & Michael Swenson, Birmingham Young University.
3. Paper on “Consumer Behavior, Supply Chain Management and Customer Satisfaction: An Investigative Study in Small and Medium Enterprises” by Samuel P.D. Anantadjaya, Astari Walidin & Egah Sari, Swiss German University. 

The article has been contributed by Anubhav Sood, who is presently a first year PGP student at IIM Raipur. He has worked with Telco Construction Equipment Company for 5 years. His areas of interest include project management & customer service.

1 comment:

  1. Wonderful post! I'd like to share. The most effective way to reduce disruptions in supply chain is to keep ready a back for every process. For example, you should always source extra raw material than required for a phase of production and make sure it reaches your warehouse a week before the commencement of production to safeguard against sudden shortages. thanks!!