The Customer Relationship in Supply Chain Management

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The entire purpose of inventory is to have product available to sell and make money. The issue is knowing when to have that inventory and knowing when a customer will need it. Sounds pretty easy doesn’t it? Well, it isn’t. There is nothing at all easy about inventory management. Purchase too much and hold it too long, and inventory costs rise. Purchase too little and your company misses sales opportunities. Neither is acceptable. Before discussing a possible solution, it’s best to review how the proper supply chain can shorten lead times, improve customer relationships, and grow market share. Afterward, we’ll look at the strategies adopted by some of the best companies and see how they maximize the customer relationships by a constant supply chain.

Most companies are aware of what it costs to manage inventory. However, the key to sales success is to have the inventory when customers need it. It’s a catch-22. Companies need inventory to sell and capture opportunistic sales, but often can’t afford the costs to hold that inventory. However, the right supply chain approach can lower product lead times. Lower lead times on critical parts helps to grow sales and put companies ahead of their competition.

A growth in sales means you are able to service customers better and faster than the competition. Customers come to rely upon the strongest companies and the ones best able to get them out of a bind. When companies capture opportunistic sales, they do so by having the inventory available at a moment’s notice. This allows sales to increase the number of new customer accounts.

At the end of the day, increases in sales are what increases market share. Companies who are able to increase market share are able to increase their sales volumes, shorten lead times, and increase their inventory turn over rates. More customers after a given product means less incidence of obsolete or outdated inventory. Increased sales to multiple accounts helps to lower inventory costs by decreasing the time it takes to sell that inventory. It’s a continuous feedback loop where increased sales and market share mean lower inventory turnover rates and lower inventory costs.

While this all may seem like a pipe dream, there are companies whose supply chains are so well run that they are able to do all of the above. In fact, it’s perhaps the number one reason why some companies become market leaders and dominate a market, and others become market followers and fight for scraps. So, what approaches do these companies use to ensure they put their customers’ requirements front and center in their supply chain approach? More importantly, how do they maximize the customer relationship in supply chain management?

Please click on page 2 to learn more about customer relationship in supply chain management including tips on vendor support, marketing, inventory grading, and vendor supply agreements.