Setting the Bar
Two thirds of manufacturers and distributors have customer service gaps when compared to Amazon and mega-distributors like Amazon, according to a research study performed by LMA Consulting Group, Inc. Amazon has created not only a buzz with their innovative service options but they have also raised the bar for service, permanently. If manufacturers and distributors want to maintain their customers, they must pay attention immediately.
In response to the elevated customer service expectations – in addition to focusing on lead times – manufacturers and distributors are redesigning websites, providing more data and information to customers and extending hours. More and more companies are finding ways to capture data from customers to leverage to improve service and profit. Thus, although spreadsheets remain the top tool, business intelligence and big data are gaining in popularity in order to utilize the information in a way to make better decisions.
Lead Time Advantage
For example, a large manufacturer in the aerospace industry receives feedback on a daily basis that service must dramatically improve and lead times need to be slashed. These concepts used to provide a strategic advantage; however, they are no longer enough. Now, companies must be on the leading edge and proactively creating relationships with key customers to thrive. In another example, a middle market manufacturing company in the consumer products industry finds that lead times must be reduced by 25-50% to maintain an edge.
Outstanding Quality is the new Normal
A majority of survey respondents feel that customers have become apt to do price shopping and negotiate price. Certainly, if manufacturers and distributors go down this rabbit hole, outcomes are bleak. Thus, differentiating the company with value-add products and services is incredibly important to business success. Whereas quality used to be important, it must be an assumption. Instead, customers are looking for reduced lead times and dramatically improved service including options. Offering options and product and service customization is expected.
Real Time Online
According to the research study which surveyed manufacturers and distributors to better understand service expectations, websites are gaining in criticality. Although many companies display products and services on-line, there is an increasing gap when compared to the additional services mega-distributors like Amazon offer. Having a website just gets manufacturers and distributors in the game. Instead, to thrive, it is important to leverage the website as a portal for key customers, to allow for tracking of order status, payment of invoices and returns. The bottom line is that 24/7 accessibility is the expected norm.
Manufacturers and distributors have not lost touch with the critical importance of leveraging technology in addressing these requirements as it’s a great way to improve service while managing costs and cash flow. There has been a steady stream of interest in ERP (enterprise resource planning) systems upgrades and in utilizing tools such as e-commerce and CRM (customer relationship management) systems. The key is determining which technology will provide the best return on investment, given each company’s unique set of customer requirements and capabilities. Implementing too many systems at once can be devastating vs. significant success with implementing the “right” system at the “right” time.
Getting It Right
The greatest challenge that emerged from the survey is balancing what customers want with the resources and costs to implement the required changes. This can be a tall order for manufacturers and distributors. The never-ending battle to find the optimal mix of service, inventory and margin will be prevalent for years to come.
A few strategies to successfully navigate the Amazon effect include the following:
The Only Constant in Business is Volatility
In today’s new normal business environment, the only constant is volatility. Getting a clear picture of customer needs and priorities is an essential starting point.
Creating a value-add customer experience is a must. In order to stand out above the noise, manufacturers and distributors need to involve employees, supply chain partners and provide tools and support to create a customer service edge.
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