Supply Chain Leaders Feel the Heat After the Election
On the morning of the election I listened as Stephen Meyer from Gartner shared findings from a 2016 survey with supply chain officers across the medical device industry.
Stephen explained the mean cost reduction goal of 3.6% across the enterprise was only met with a mean achievement rate of 3.4%, yet the largest share of the survey participants expected a significantly higher spike in cost containment goals this year. The survey reported that only 9% of supply chain folks exceeded their cost reduction goals in recent years.
A global supply chain leader in the life sciences industry said, “We are expected to grow top line revenue, cut costs, and improve customer experience at the same time to ensure we remain competitive and don’t lose market share”.
At this point I could not help but think that these supply chain leaders are similar to the presidential candidates. They are under intense pressure, everyone expects more of them than is reasonable, and they are all dealing with the implications of globalization and trade deals (outsourced manufacturing, quality control, tariffs, etc.). Both are expected to make improvements and deliver.
Stephen went on to explain areas of improvement which include: changing portfolios of products and solutions, distribution networks, and placing effort on processes, tactics and deals. The survey respondents identified process improvement and removing the causes of process inefficiency as a close second in priority.
Stephen struck on the point that most companies don’t fully understand the perfect order concept. Over the last 5 years I’ve seen a subtle but very apparent shift in executives sponsoring Esker projects. Today, it’s typically the VP of supply chain inheriting customer service into their group and the board expecting to see improvements. These sponsors are keen to speed up order processes and improve first pass rates.
When orders are processed correctly the first time it frees up customer service representatives (CSR)to improve delivery schedules and collaborate with customers and providers — which results in more meaningful work, a more engaged employee and a higher net promoter score.
By getting an order into your ERP system faster it provides visibility and allows you to determine the best distribution center to use, lowering overall inventory cost and warehouse overtime. Most supply chain leaders are under pressure to lower days sales outstanding, but it actually increased on average in the medical device industry last year.
When there’s a problem with items the customer has ordered (discontinued part codes, inability to meet requested dates, etc.) it’s important to identify issues and proactively discuss these or alert the customer, so they have the ability to react and meet the service level agreements of their own consumers. That’s often not possible if CSR’s are manually entering orders or huddled with IT staff trying to fix EDI orders that failed.
The message I have received from Gartner in recent years is that customer experience will soon be the top driver that determines customer loyalty. Innovations are soon copied, so service becomes the differentiator. The other message our customers are acting upon is the need to innovate, cut out errors and use technology such as machine learning. That in turn enables global trends such as the shared service centers to really serve the customer and operate effectively even in low cost regions.
Investing in people, process and technology is a proven winning ticket. Medrad Inc. incorporated Esker into their journey to improve customer experience. By lowering order entry by seven minutes, improving customer satisfaction by 7.5% has helped Medrad Inc. enable a 4.4% increase in profits, and 10% increase in market share.
I think the supply chain leader is well aware of globalization and the fact that many jobs have moved overseas, the supply chain leaders I have met are busy training their staff and deploying technology that will deliver the “wow” factor to customers, lowering costs and improving overall efficiency.