SUPPLY CHAIN

Companies grappling with lack of alignment

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One of the key findings of Barloworld Logistics’ 2014 supply chain foresight survey is that SA companies are battling to achieve their business and supply chain objectives due to lack of alignment of internal and external functions, processes and systems.

Lack of alignment within business functions is ranked by 48% of respondents as the second top most constraint that is inhibiting their progress towards achieving customer centricity. This issue is hindering companies from finding ways to set up their businesses differently so they can address different market segments with customised solutions, instead of the traditional one size fits all approach.

The need to do this is being driven by the rising power and increasing demands of the customer. Lack of alignment is making it difficult for companies to come up with more innovative products and services and focus more on understanding what customers need.

This requires more complex and segmented business models and companies are grappling with this because they are not ideally aligned. The alignment of all functions to enable customer centricity is rated as important or extremely important by 97% of supply chain foresight survey respondents.

Yet only 19% of respondents rate their measurement systems to deliver customer centricity as being very aligned, 57% rate them as quite aligned or they need improving and 19% rated them as not being aligned. Focused alignment of departments and customer interfaces were seen as one of the top three actions that would be hardest to implement to improve customer centricity.

To achieve better alignment companies must move away from a silo-based mentality towards functional activities and business models, which is so prevalent in many businesses. It is interesting to note the increasing awareness of the lack on alignment of internal functions among respondents this year, whereas in previous surveys the focus was more on the lack of alignment of external functions and partners.

Internal misalignment is often linked to a lack of understanding of the business strategy and how each function fits in with the overall business strategy and objectives. For example, in the past customer service was seen as the domain of sales and marketing.

But if companies want to achieve true customer centricity all functions of the business need to understand the impact they have on the customer and how they can better cater to customer needs.

Survey respondents rated procurement as one of the worst aligned internal functions in the business for delivering excellent customer experience.

This is fascinating seeing that this function is integral to the sourcing of raw materials and components and the products that customers need. Misalignment is often linked to how procurement staff are measured and incentivised.

For example if they are measured on buying at the best price, it might mean buying in bulk to get the biggest discounts, which is often why procurement is centralised in the first place. But this is false economy if it results in being left with obsolete stock because of a lack of understanding of the customer’s needs.

On the other hand, low cost retailers might buy in bulk and discount the goods until they are gone. Whatever the case, the procurement strategy needs to be aligned with the business strategy.

The fact that alignment has moved up the list of respondents’ priorities this year is an indication of the realisation of the inability to respond to the rapidly changing dynamics of the market to meet customer demands.

From an external alignment perspective, the supply chain executes the business strategy, and the closer the supply chain and the business are aligned to what the customer wants, the easier it will be deliver it to them. So companies need to ensure that all elements of supply chain, both internally and externally, are integrated to deliver what the customer wants.

This needs to be supported by the use of technology to gather information and convert it into business intelligence.

Seventy five percent of respondents believe total alignment of all players in the supply chain is a critical element of delivering customer delight.

To achieve closer alignment, companies need to identify all the functions of the business and how they need to be connected and encourage functional business units to work together to better serve the customer. In the past the focus was always about collaboration in relation to external entities, which still remains important.

But in this year’s supply chain foresight survey respondents acknowledge that they also need to look at internal collaboration. Lack of alignment is hindering companies from responding affectively to changing market needs.

So they are less able to take advantage of new opportunities than newcomers to the market who are not fettered by existing infrastructure and legacy systems. Feedback from survey respondents is that they feel they are bogged down with baggage and entrenched cultural mindsets and it is hindering them from changing the way they do business.

Customer centricity is key

Meanwhile, it is interesting and positive to note that survey respondents recognise the need to understand their customers better, and 90% of them agree that customer centricity is integral to business success. They show a deep understanding of customer centricity and acknowledge the huge benefits that can be derived from it.

The majority of respondents (71%) agree that human relationships with the customer is far more important than processes and systems, but only 11% felt that most SA companies are very customer centric. These statistics show a disconnect between the desire to achieve customer centricity and the ability to do so.

Key factors driving customer centricity cited by respondents include greater customer expectations (63%), increased competition (59%), improved communication technologies and use of social media (52%), increase in technology and internet usage (52%), speed of change and innovation (52%) and belief that customer centricity drives growth (48%).

Survey responses also reflect an awareness of the need to focus on issues on the ground that has a potential impact on customer centricity, which include an internally focused culture.

Difficulties with finding the right skills were cited by respondents as the top constraint that is inhibiting their progress towards achieving customer centricity. This was followed by lack of alignment within business functions (48%) and no structure or plan to innovate or embrace continuous change (44%).

Sixty six percent of respondents agree that customer centricity requires lengthy time and investment. The latter is linked to a generally strong focus on cost among respondents, which had dipped in our previous surveys over the past few years.

A key message that comes out of the survey is that doing business the way it has always been done it is no longer viable due to the rapid pace of change.

There is a need to find new ways of working with partners and with different market segments and to come up with more innovative, customised products and services. This will require companies to align their internal and external functions across their businesses, and change their business processes. They will also need to harness technology to enable them to understand their markets and customers better through the ability to collect, collate and analyse data more effectively.

A major challenge highlighted in the survey in that only 23% of respondents are geared to capture customer information to improve service levels and be proactive in delivering what customers want. Survey responses indicate that the supply chain is seen as being integral to servicing customers better and enabling companies to be agile enough to respond to the fast changing dynamics of the market, which links back to improving efficiency.

Ninety two percent of respondents said customer centricity cannot be achieved without a supply chain strategy focused on delivering customer value. Seventy eight percent of survey respondents ranked improving customer service as the top strategic supply chain objective and 77% said supply chains are enhancing customer centricity.

This highlights the need to ensure that all elements of the supply chain both internally and externally are integrated to deliver what customers want. This needs to be supported by the use of technology to gather information and convert it into business intelligence and to anticipate and be proactive and agile in responding to customers’ needs.

While this might cost money in the short term, it will create greater value for the customer, which will in turn lead to business growth and longevity.

Kate Stubbs

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