Impact of Supply Chain Agility on Customer Satisfaction

• Toshendra Kumar Sharma
• April 19, 2018

In today’s world where customers have more choices than ever, it is essential that companies focus on delivering the best possible experience to their customers. Luxury brands like those of the fashion and retail industry have customers that have come to expect nothing but the best. In that case, it is necessary to ensure the timely delivery of goods against all the volatilities and turbulences that present themselves in supply chain operations. Even retail brands like Target and Costco have to make huge advances in their supply chain operations to stay competitive against giants like Walmarts. Here’s a look at the practices that make for better supply chain management and how that affects customer satisfaction.

Focusing on Customer Satisfaction

So far, our discussion of using efficient supply chain systems has focused mainly on bringing down cost by increasing efficiency. While cost cutting is undoubtedly an integral part of every manufacturing operation, several upscale brands care more about overall customer satisfaction. Agility with regards to supply chain operations refers to the adaptability of the operation in real time. To that end, the agilest operations are the ones in which uncertainty is mastered, and the operation is responsive to any volatilities. For example, luxury fashion brands are concerned more with the increase in speed, quality, and flexibility that blockchains can bring to their operations. Even everyday use items like groceries and fresh produce can benefit a great deal from agile supply chains. By making their operations agiler, companies can save a great deal on wastages in the case of fresh produce or raw materials. Better communication throughout the operation makes for better planning of the delivery. For example, in the case of inelastic everyday products, a delay in shipping a batch of products can make for a bad experience for the customers. If instead, the delay was accounted for, management can procure the goods from other sources. Furthermore,  keeping the operations agile makes for more competition from suppliers and hence, better prices for the goods in bulk. Therefore, they can pass the savings down to their customers making for better customer experience.

Walmart, one of the biggest retail chain in the world has unique ways to deal with sources of turbulence and volatility in its operations. Walmart boasts of one of the most complicated and intricate supply chain models in the world and stocks products made in more than 70 countries and at any given time. Walmart operates more than 11,000 stores in 27 countries around the world and manages an average of $32 billion in inventory regularly. These are impressive numbers, and a more in-depth look at their operations can yield several insights about well-run supply chain models. Walmart runs one of the agilest operations in the world as customers have come to expect the best goods at the lowest prices from Walmart. Walmart goal since its inception has been to provide customers with the goods they wanted whenever and wherever they wanted them. To that end, the company has focused on developing an infrastructure that allows them to do so. The critical parts of the infrastructure include:

• Fewer links in the supply chain – From early on, Walmart has focused on removing as many intermediaries as possible. For doing that, the company works directly with manufacturers to cut costs and more efficiently manage the supply chain. This has helped keep Walmart their distribution costs to a minimum – nearly 50% less than its competitors Kmart and Sears.
• Strategic vendor partnerships – Walmart has long focused on long-term collaboration with vendors who can provide goods at very high volume and the lowest prices. Due to this, Walmart’s global suppliers, warehouses, and retail stores function as a single entity.
• Cross-docking – One of the logistics practices that Walmart has pioneered and relies heavily on for everyday operations. Cross-docking saves on storage cost by directly changing one mode of transport for the other. That is, it works by unloading items from an incoming truck or railway car and loading these materials directly into outbound trucks, or other modes of transport, with no storage in between.

This shows the immense complexity required in maintaining the world’s largest retail chain and provide customers with the best experience possible. Herein lies some great lessons for other supply chain management systems that want to be as efficient as possible.