What do our customers expect from us?
The Total Quality movement from the 1980’s preached that the people we work with are either “suppliers” or “customers.” We played the role of either one. The idea of TQM was to do the right thing right the first time when we, as “suppliers,” serve our “customers.” We would expect the same from our “suppliers” when we become “customers.”
In the context of supply chains, however, customers are the downstream users of our products and services. They obtain and consume the items we sell in recognition of the value we put in them. Our customers are where demand for our products and services originate, and in which we strive to fulfil.
In contrast to TQM, supply chain flows are predominantly one-way from “supplier” to “customer.” As merchandise flows from one link to the next, we add value to the items via the operations we own and manage. Demand from our customers determines the value of what we sell and deliver.
We create demand via the marketing of products & services in which we entice customers to buy what we’re selling. The sale marks the final stage of demand creation.
When we make a sale, we convince customers to not only buy items for their characteristics or specifications, but we also persuade them to accept the terms & conditions that come with the items. A sale finally happens when customers agree to the terms & conditions of the sale, obtain the items they are buying, and pay for them.
When we sell to our customers, we form a pact with them. Customers would agree to buy our items given the specifications and terms & conditions that accompany them. Examples of terms & conditions are price, terms of payment (e.g. cash-on-delivery, credit approvals), and warranties. In turn, we commit to supply the items to our customers based on agreed schedules or promised availabilities.
The pacts we make with our customers come in different forms. They can be two-way, that is, both vendor and customer formulate an agreement for the supply of items or services. Examples of two-way pacts are:
- material supply contracts between vendors and buyers such as for mining ore, drilling petroleum;
- magazine, newspaper, Internet, streaming media subscriptions;
- utility service agreements such as for electricity & water;
- purchase of automotive vehicles or household appliances where buyers & vendors negotiate final pricing & terms before delivery or pick-up;
- contract for the construction of a residence, or the building of an airplane or shipping vessel.
Pacts can also be one-way, that is, enterprises pitch items to would-be buyers with promises of benefits, services, and/or availabilities. Customers buy into the pacts via order & purchase of the items. Examples of one-way pacts are:
- E-commerce portals where vendors advertise items with accompanying promises of availability, delivery, and pricing;
- Product advertisements & promotions such as where fast-moving consumer goods (FMCG) corporations pitch brand benefits and availabilities at retail outlets like supermarkets & stores;
- Purchase of merchandise (e.g., food, hardware, household goods) at retail stores in which vendors display items on an as-is where-is basis.
Execution of the pact between we as vendors and our customers starts with the order. The order is the final step in the demand creation process and the trigger to demand fulfilment. The order quantifies what the customer wants to buy and formalises our obligations as “suppliers” to its fulfilment. The order lays out the pre-agreed terms & conditions of the pact we made to our customers and formalises our obligations in supplying the items.
In one-way pacts between we the vendors and our customers, the order and the pact are virtually the same. Examples are:
- Clicking the check-out confirmation on the e-commerce portal;
- Picking or retrieving items from the store shelf and checking them out for payment at the store cashier.
In two-way pacts, the order is either the customer’s requisition or the vendor’s supply schedule as per the pact. Examples are:
- Customers’ purchase orders or buying requisitions;
- Subscription’s schedule of deliveries (e.g. daily newspaper deliveries, emailed newsletters);
- Clicking buttons to stream subscribed on-demand media such as movies, television shows, games;
- Claiming of products, gifts, packages as per customers’ signed up agreements with vendors.
Customers expect us to keep our end of the pacts we make with them. They expect us to honour our obligations, not just a few or some, but all of them.
And this is why the perfect order is the supply chain professional’s key performance metric.
The principle of the perfect order measure is straightforward: fulfil orders completely, on-time, at the right quality, and at the mutually agreed service level. All four (4) elements: completeness, timeliness, satisfactory quality, agreed service level, should be present. All four must be done right together; otherwise, it’s not a perfect order.
The perfect order is the jumping point to the perfect payment. When we supply perfectly, customers are obliged to honour their side of the pact and pay us. The sale closes when customers become fully satisfied with the items they bought and pay us.
The perfect order is what we as enterprise owners and supply chain professionals shoot for. It measures how well we keep our promises to our customers, in which we should be able to do so without exception.
We create demand by captivating customers with the items we market. In so doing, we realise sales via the pacts we make with our customers and the orders they place. Pacts and orders spell out our obligations as suppliers to fulfil our obligations to supply our customers with the items they agreed to buy.
The fulfilment of our customers’ orders is the essence of demand fulfilment. As the order wraps up the task of demand creation, it triggers the process of demand fulfilment.
Many enterprises don’t fulfil demand perfectly. It has become more of the norm than the exception that we don’t supply items in accordance with the pacts we make with our customers. We simply have not been keeping our promises with our customers.
It’s a tragedy but not one that we should live with. Instead, we should take it as a challenge to improve what we’re doing. We can be perfect in demand fulfilment. The adage: nobody’s perfect, does not apply.
Perfect orders are goals as much as they are measures. Pursuing them requires the highest standards and comprehensive excellence in the processes that underlie demand fulfilment.
But it begins first with the commitment to those standards and to the notion that we can excel. A lot of hard work will of course be required and all we need to do to start is to gain the confidence we are up to the task.
What do customers expect from us? Perfection in keeping promises and serving their orders. Nothing less.
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