Transforming to a customer centric supply chain Transforming to a customer centric supply chain Transforming to a customer centric supply chain

In a digitally-driven and competitive market, both business and individual customers expect optimal delivery of goods and services.

Lisa Bora, Partner, Customer Brand & Marketing Advisory, KPMG, says gone are the days that customers would happily receive goods through set distribution channels and tight windows of delivery. Now, they expect anytime, anywhere delivery, with flexibility built in.

“In a world which is largely made up of commoditised products and services, the customer experience is the differentiator,” Bora says. “When you look at differentiating through customer experience, how you service and deliver to a brand promise is critical.”

A key ingredient in success is having a customer centric supply chain at every step, from behind-the-scenes operations right through to facing the customer.

“Supply chains that fuel superior customer experience are even more critical for organisations who work across multiple channels. Sound omni-channel management requires a sophisticated supply chain,” Bora says.

Bora says that transforming from a supply chain primarily focused on cost, to one that is also connected across the entire organisation, and is agile in the face of evolving customer trends, can help drive revenue growth.

In this episode of the KPMG Customer First podcast, host Lisa Bora, Partner within KPMG’s Customer, Brand & Marketing Advisory business, and her guests focus on the logistics sector, which is facing unprecedented challenges with the changing expectations of customers and heightened focus on delivery. They discuss long-lasting changes that retail and CPG sectors need to address, from last mile and reverse logistics to orchestrating eco-systems, the difficulties of fulfilment for small businesses as well as growing customer expectations and feedback challenges are all considered.

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In a customer centric supply chain, the front, middle and back office operations of an organisation must be seamlessly connected, and all departments must be working to a unified strategy.

However, Bora says achieving this can’t just be about applying a technology transformation, but requires a transformation that considers processes, people, culture, and, essentially, customers’ needs.

“Customers are from different segments with different needs, so when you look at the transformation, for some it’s about a fast service, so then the supply chain is critical. For others, it’s about delivering additional value and services, therefore maybe less logistics but more about value-added partnerships. Referencing the customer base to really refine the levers that matter to them, and then having your transformation strategy revolve around those levers, is critical,” Bora says.

Reducing the complexity of inventory across entire store networks and digital channels helps to drive efficiencies.

“It’s important not to add unnecessary inventory across all channels, nor create reasons for unnecessary mark downs or other stock challenges,” Bora says.

When the supply chain is transformed to be customer centric, that is not the end of the road. It must be continually revisited to address evolving trends in customer expectations.

Bora offers the example of customers increasingly wanting ‘hyper-localisation’ (to ‘buy local’), which requires supply chains to be flexible, and to have access to a greater network of suppliers.

Another trend is the desire for ‘immediacy’, such as delivery within the hour. Combined with very flexible return policies, this can significantly impact supply chain logistics, and create cost complexities.

"How do companies manage the returns component of the supply chain when customers buy 10 items to try something on at home, but really only desire to buy one of these items from the start?” she says

Other growing trends include retail customers buying on consignment, or end-consumers using subscription or rent models.

“These dynamics will significantly change operational business models in the future, and the only way to effectively respond is by having a sophisticated supply chain aligned to all of these trends,” Bora says.

Bora points to online fashion retailer The Iconic as a domestic business with a truly customer centric supply chain.  

“It is an organisation that always provides a great example on committing to delivery as opposed to the promise alone. They have heavily invested in their expanded fulfilment centre at Yennora (NSW), and have created an automated picking and sortation solution that has improved their order fulfilment capacity by about 40 percent.”

An international example of a business aligning its brand promise to an excellent supply chain is cosmetics retailer Sephora, Bora says. Sephora uses data to predict buying behaviour, and to plan the supply chain accordingly.

“Sephora tracks trends related to your product consumption, then sends a message saying ‘your goods are due for replenishment soon’, and gives you options to renew both in-store or online, based on inventory detail. This is a great example of personalisation, from a brand and customer experience perspective, but also connecting the supply chain perfectly,” she says.

The Sephora example shows that leading organisations don’t just ‘react’ to changing customer expectations, but they set new industry standards.

Bora points to another fashion retailer, Everlane, which promotes sustainability and transparency as part of its brand promise. To support this, it uses track and trace capability throughout its supply chain to reveal to its customers the origins and journey of its products.

“Their supply chain performance is actually a part of the customer experience,” she says.

A customer centric supply chain should help foster stronger customer loyalty, and ideally greater profitability.

“This is reinforced by Forrester research that shows these organisations achieve two-times increments in performance. We also see that the top 50 customer-aligned organisations have the strongest EBITDA returns,” Bora says.