Executive Briefings

Improving the Downstream Supply Chain

Analyst Insight: Given today's intensely competitive business environment, as well as consumers who are more informed and demanding than ever, it's imperative that companies develop customer-driven operations that create a distinctive experience through supply chain capabilities. Simply put, product/service features and pricing are no longer enough to meet customer expectations. And since customers in different segments often have very different needs, generic supply chain capabilities won't cut it. - Joseph S. Roussel; Global Operations Advisor, PwC; Brad Householder, Principal, PwC

Improving the Downstream Supply Chain

Companies have been talking about customer-driven operations for years, but most of their supply chain development efforts have targeted sourcing and manufacturing - the upstream supply chain. But today several trends are converging to put a new focus on the downstream supply chain (which is closer to the customer): direct-to-consumer models are emerging in industries that have traditionally sold through distribution, the need for omnichannel order fulfillment and product customization, and a growing attention to the digital customer experience. Companies that master the downstream supply chain - including ordering, planning and delivery - will give their customers the kind of value and experience that will keep them coming back.

Three questions to ask when developing customer-driven operations

Most executives would agree that customer-driven supply chains are important, but according to PwC's recent Global Operations Survey, only 25 percent of operations execs are confident that their operations give their customers value and a distinctive experience. One reason for this low number may be the difficulty they have understanding customer requirements in today’s fluid business environment. One in three operations executives in our survey cited this as a challenge. However, they know it’s a problem they must solve: 61 percent believe that customer behavior will be disruptive for their industry in the next five years. To ensure their operations are customer driven, companies should consider three questions.

Is our customer focus broad enough? When your company discusses customer-focused operations, what does that discussion encompass? If it only means consistent execution of downstream supply chain activities, then the view is not broad enough. Beyond taking an order, delivering the order, invoicing and cash collection, the company needs to rethink the customer experience. True customer-focused operations emerge when Product Line Management, Supply Chain, Sales, Marketing and Finance work together to define a customer experience grounded in customer value and differentiation.

How do our customers evaluate us? Organizations have many KPIs to evaluate their customer service. Often, however, customers use different KPIs to evaluate them. Understanding what customers value, by understanding how they measure you, is a simple but effective way to set requirements for operations.

What are our supply chain segments? Different consumers or channel partners buying exactly the same product can have very different priorities and expectations related to your supply chain. As a result, you don't want a generic supply chain and you will probably need to tailor your capabilities. Identifying the necessary supply chain capabilities by brand, geographical market, channel or customer is critical to align operations with business strategy.

The Outlook

PwC’s Global Operations Survey provides insights into how organizations intend to make operations more customer-driven between 2015 and 2018. Among the top trends identified are expanding the cross-functional skills of executives to improve collaboration. Another priority is focusing resources on developing a few differentiating capabilities, as opposed to capabilities necessary to run the business but are not differentiating.

Companies have been talking about customer-driven operations for years, but most of their supply chain development efforts have targeted sourcing and manufacturing - the upstream supply chain. But today several trends are converging to put a new focus on the downstream supply chain (which is closer to the customer): direct-to-consumer models are emerging in industries that have traditionally sold through distribution, the need for omnichannel order fulfillment and product customization, and a growing attention to the digital customer experience. Companies that master the downstream supply chain - including ordering, planning and delivery - will give their customers the kind of value and experience that will keep them coming back.

Three questions to ask when developing customer-driven operations

Most executives would agree that customer-driven supply chains are important, but according to PwC's recent Global Operations Survey, only 25 percent of operations execs are confident that their operations give their customers value and a distinctive experience. One reason for this low number may be the difficulty they have understanding customer requirements in today’s fluid business environment. One in three operations executives in our survey cited this as a challenge. However, they know it’s a problem they must solve: 61 percent believe that customer behavior will be disruptive for their industry in the next five years. To ensure their operations are customer driven, companies should consider three questions.

Is our customer focus broad enough? When your company discusses customer-focused operations, what does that discussion encompass? If it only means consistent execution of downstream supply chain activities, then the view is not broad enough. Beyond taking an order, delivering the order, invoicing and cash collection, the company needs to rethink the customer experience. True customer-focused operations emerge when Product Line Management, Supply Chain, Sales, Marketing and Finance work together to define a customer experience grounded in customer value and differentiation.

How do our customers evaluate us? Organizations have many KPIs to evaluate their customer service. Often, however, customers use different KPIs to evaluate them. Understanding what customers value, by understanding how they measure you, is a simple but effective way to set requirements for operations.

What are our supply chain segments? Different consumers or channel partners buying exactly the same product can have very different priorities and expectations related to your supply chain. As a result, you don't want a generic supply chain and you will probably need to tailor your capabilities. Identifying the necessary supply chain capabilities by brand, geographical market, channel or customer is critical to align operations with business strategy.

The Outlook

PwC’s Global Operations Survey provides insights into how organizations intend to make operations more customer-driven between 2015 and 2018. Among the top trends identified are expanding the cross-functional skills of executives to improve collaboration. Another priority is focusing resources on developing a few differentiating capabilities, as opposed to capabilities necessary to run the business but are not differentiating.

Improving the Downstream Supply Chain