‘The key to real

Customer Value is
effective Supply
Chain Management”.
Student ID: 2016129
The main objective of this assessment is to discuss whether ‘the key to real customer value is
effective supply chain management’ by providing an in-depth critical analysis of relation
between supply chain (SC) strategies and customer value (CV), and literature review of this
along with as an example.
LITERATURE REVIEW
First, one should look at the definition of CV to understand if effective SC strategies
are the key to real customer value. Holbrook describes CV as (1) interactive, (2) relativistic,
(3) embodies preference, and (4) experience, which is a bit difficult to understand.
Specifically, (1) it depends on the relation between consumer and the product, (2) it includes
comparison of one product to another; it differs from person to person; it depends on the
situation where evaluation occurs; (3) it contains preferences such as good/bad, like/dislike,
positive/negative; approach/avoid, (4) all of these are attached to the relevant consumption
experience rather than the product itself. (Holbrook, Morris B., 2005).
Some of the key characteristics of CV are it is perceived uniquely; it is conditional and
contextual; it is relative; and it is dynamic (Smith and Colgate, 2007). To maintain CV, many
major brands use constant suppliers and latest manufacturing techniques to maintain quality
of the product. In addition to this, many e-commerce channels like Amazon, Flipkart etc are
developing exponentially from past 5 years by providing reduced transaction and search
costs, shorter lead time, lower prices, more frequent price modifications, increased
competition, and more streamlined business processes. (Coppel, 2000). As customers are the
ultimate decision makers in the market, rise in the expectations of the customers and
alternatives in the market make competition among companies tougher thus they must thrive
to retain their customers in this fast-paced generation.
Companies that deliver superior value to customers on a regular basis can hold them for an
extended period. This is essential for establishing a customer retention focus. Customer
defection is less likely if you achieve consistently high levels of customer satisfaction and
loyalty. (Weinstein, A., 2002; pavan, a.,1994 ). A typical company spends six times more to
acquire a new customer than it does to keep an existing one (Habbel, no date; “Marks and
Spencer fashion casestudy - Strategy and management blog by Henry V Iversen,” no date). A
lost customer reduces company profits by $118, compared with a $20 cost to keep a customer
satisfied. (O'Boyle, James, 1983). Loyal customers provide more repeated business and are
less likely to switch. (Bowen, J. T., & Chen, S., 2001). Customer services is tangible or
intangible value adding activities that are associated with product to meet customer
expectation and satisfaction. (Kursunluoglu, E.,2011).
Since loosing a loyal customer reduces the company’s profit, managers are working on
designing supply chain by keeping customers at the centre. This customer-centric SC is built
to satisfy customers’ ever-changing needs. Such SCs are progressively becoming a part of the
21st century strategic supply chain. (Melnyk, Stanton, D.J., 2017). Companies use feedback
from customers, learn customers desires, and tailor their services according to this strategic
segments to achieve customer satisfaction. Social learning tools is one of the efficient
methods in modern days, for ex. Asus took advantage of social learning to ensure their
product was meeting customer needs by understanding the current perception of existing
products in the market, market trends and customer expectation. (Graeme Anderson, 2017).
Along with this, the market chosen for the product and the nature of the product itself are
significant factors of the SC strategy of the company.
As customers are the centre of the SC strategy, most of the firms are shifting from forecast-
based to demand-based structures. Demand-led SC leads to identify sales patterns and
customer preferences and to match them by restructuring its store product layout and its
category management, which results in the increased sales and profitability. Waller (1998)
cites Marks and Spencer as the leaders in the customer driven logistics but in early 1990s
they experience many problems as they missed the shift in customer expectations and did not
respond those expectations. (Walters, D., 2006). To respond to the fluctuations in demand
one must maintain inventory, where methods like lean and agility can be used to
optimization. When should a firm implement lean or agility? Lean is used to get greater
outcomes from least input by minimizing wastes. (Goldsby, Griffis & Roath, 2006).
Whereas, agile is used when there is short lead time to serve fluctuating demand with high
levels of availability. (Hiebelar cited in Bruce, Daly, & Towers, 2004). Companies using lean
method require rapid replenishment of products, and strictly maintain delivery times, order
completion and accuracy. Key to this is the use of bar codes, EDI, and shipment tracking.
(Abernathy cited in Bruce, Daly, & Towers, 2004).
As neither lean nor agile alone can assist in building an effective SC, a hybrid called
“Leagile” is adopted. Both lean and agile approaches are combined at the decoupling point
for optimal SC management. Leanness is used in the upstream side of the decoupling point
and agility is adopted in the downstream in the SC (“Marks and Spencer fashion casestudy -
Strategy and management blog by Henry V Iversen,” no date) . As a result, leagile allows
elimination of excessive inventory cost and non-value-added wastes at inventory stage
(upstream SC) and provides high customer service to meet fast-moving orders in production
stage (downstream SC). (Mason‐Jones, Naylor, & Towill, 2000). The key point here is to
strategically position the decoupling point to achieve different levels of efficiency to satisfy
different market segments.(Habbel, no date)

Habbel, R. W. (no date) THE HUMAN FACTOR Management Culture in a Changing World.

“Marks and Spencer fashion casestudy - Strategy and management blog by Henry V Iversen” (no
date).

 
References
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217. 

Bruce, M., Daly, L., & Towers, N. (2004). Lean or agile: A solution for supply chain
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……Coppel. J, 2000, "E-Commerce: Impacts and Policy Challenges", OECD Economics

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Fisher, M.L. (1997), ``The right supply chain for your product'', Harvard Business Review,
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……Graeme Anderson, 2017. Generating Consumer Insights for a Product Launch: ASUS
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insights-product-launch-asus-case-study

…….Gummesson, E. (1987). The new marketing—Developing long-term interactive

Holbrook, Morris B., 2005, “Customer Value and Autoethnography: Subjective Personal
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It could be argued that the strategy would have been, and indeed is appropriate for
high volume “standard” items, such as men’s shirts and socks, but not for “innovative” or
“special” ranges such as M&S’s exclusive short-life cycle, designer-led, high margin
autograph range.

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