Customer promise is often set before supply chain gets involved. A later order cut off. Higher availability. Shorter lead times. Greater responsiveness. More choice. Each can make the proposition to the customer stronger, but each also changes what the supply chain has to do to deliver it.
That tension ran through the discussion at the SupplyChain360 Forum in London, where senior supply chain and logistics leaders explored how the function is creating greater value for the enterprise.
The panel brought together Zoe Farrelly, Vice President UK and Ireland Supply Chain at PepsiCo; Jean Yves Chan, Supply Chain Transformation Director at Mattel; Funda Tatlidil, Supply Chain Director UK and Nordics at BMI; Jayanta Chatterjee, Global Supply Chain Director at Castrol; Sumit Shekhar, Enterprise Supply Chain Lead at Mars; and Steven Timberlake, Vice President of Growth for Northern and Southern EMEA at Infios. Neha Singh chaired the discussion.
Across very different operating environments, a common question emerged. If supply chain carries much of the cost and complexity behind the customer promise, how much influence should it have over what that promise actually is?
The promise and the economics need to meet
One example shared by Steven Timberlake makes the issue tangible. An ecommerce business wants to extend its order cut off to midnight. From a customer perspective, the logic is straightforward: customers have longer to order and the proposition becomes more competitive.
But the supply chain data shows something else.
“An ecommerce provider decides they want to offer a midnight cut off because that will make them more competitive. But we only get three orders between 11.30 and midnight, and the knock on effect of getting a truck there to take those last three orders out is completely not cost effective.”
The question is not whether the warehouse and transport operation can accommodate the later cut off. It is whether the additional customer value justifies what has to change behind it. A service improvement viewed in isolation can look compelling; once the additional labour, transport, inventory or operational complexity required to deliver it becomes visible, the decision can look very different.
Timberlake’s conclusion was that supply chain needs to be part of that conversation:
“You want to change that? We need to tell you what the best commercial and operational way is for us to achieve that.”
This moves supply chain beyond execution. Instead of asking how to fulfil a promise that has already been made, the function can help determine the best promise for the business to make in the first place.
Availability is part of the proposition too
The same principle applies to inventory. One example discussed during the Forum involved giving major customers visibility of future product availability before they place an order. If a supplier already knows that a particular product will be unavailable for several days, allowing the customer to place an order and subsequently reporting a service failure creates work and frustration on both sides.
Sharing that information earlier changes the interaction. The customer can alter the order before it is placed and the supplier avoids creating a commitment it already knows it may not fulfil. That is more than improving forecast accuracy or service level. It is using supply chain information to shape the customer’s experience of the business.
Another example came from a global marine supply chain, where the window for serving a vessel in port can be extremely narrow. Understanding where a ship is likely to berth, what product it requires and whether that product can be positioned there in time directly influences whether the supplier wins and fulfils the business. In that environment, availability is not simply an inventory KPI. It is part of the commercial proposition.
The customer is becoming part of the supply chain
This becomes more important as customers themselves become more sophisticated in how they manage supply. Several examples during the discussion pointed towards customers seeking greater visibility into suppliers’ networks, inventory positions and ability to fulfil.
A customer no longer necessarily wants to place an order and wait to discover whether it can be fulfilled. It may want enough visibility to make a better decision itself. The opportunity is therefore not simply to improve internal visibility, but to determine where sharing supply chain information externally can improve decisions on both sides.
That requires a different type of relationship between supply chain and the customer, particularly where service, inventory and fulfilment decisions have historically been managed through separate commercial and operational conversations.
Better service is not automatically greater value
None of this argues for reducing service. It argues for understanding its economics.
A faster fulfilment promise may create considerable value in one part of the portfolio and almost none in another. Additional inventory may be essential where availability protects an important customer or high value product, while creating unnecessary working capital elsewhere. Greater responsiveness may justify additional logistics cost when it protects revenue or margin, but not when the incremental customer benefit is negligible.
The question therefore becomes more precise: what level of service creates the most value for this customer, product and channel, and what does the supply chain need to deliver it profitably?
Answering that requires information that rarely sits within one function. Commercial teams understand the customer and the proposition. Finance understands the economic consequences. Supply chain understands the inventory, capacity, lead time and execution choices required to make it happen. Customer promise becomes stronger when those decisions are made together.
Supply chain needs to move upstream
For supply chain leaders, this creates an opportunity. The function has spent considerable time improving its ability to execute against demand, with better planning, visibility, automation and analytics making that increasingly sophisticated. But some of the greatest value may come before execution begins.
Should this product always be available? How quickly should this customer receive it? How late should orders be accepted? How much capacity should be protected? Where is additional resilience worth paying for? What does each of those promises cost?
These are not purely operational questions, nor are they purely commercial ones. They sit at the point where customer proposition and supply chain economics meet.
If supply chain is accountable for delivering the customer promise, its greater opportunity may be to help design that promise in the first place.
