The Customer-Centric Supply Chain: Lessons from Volkswagen & Adidas

With big data, increasingly sophisticated segmentation, the ‘Amazon effect’, and the omnichannel experience taking center stage, customer expectations are higher than ever. In order to compete, companies need to take a customer-centric approach to their supply chain, which means starting with a focus on the end consumer and mapping the supply chain backward from there.

To do this effectively, organizations need to: utilize data from different sources, choose metrics carefully, and align teams around those metrics. At last year’s American Supply Chain Summit, we heard from thought leaders at Volkswagen Group of America and Adidas Group about how they are doing this effectively and seeing great results. 

Utilize Data from Different Sources

Companies must study their customers carefully and understand their preferences, such as the channels they like to use and when they like to use them, lead times, delivery methods, and, of course, demand. With access to tremendous amounts of data, such as POS data from retail stores, warehouse shipment data, returned merchandise, and delivery times, the trick is in combining and utilizing this data to gain real insights. As Amazon has shown, companies who do this most successfully, stand to gain a lot. 

Choose Performance Metrics Carefully

Although companies have access to more and more data than ever before, it doesn’t mean it is all important. When attempting to take a customer-centric approach to your supply chain, it is important that the metrics you choose to measure success by are metrics that really matter to the customer. Bonnie Lawrence, Manager, Inventory Planning at Volkswagen Group of America, told the audience at the 2017 American Supply Chain Summit about Volkswagen’s transition to a customer-centric supply chain. Previously, they had thought of the dealers as their customers, since they were the ones buying the parts from them, and the ones that made the complaints. In 2011, they made the shift to focusing on the end consumer as their customer, and instead saw the dealers as partners and as an extension of the company, helping them to retain that customer.

This new focus on the end-to-end supply chain meant they needed to change the metrics they were focused on, as they found old incentivization schemes for dealers (e.g. stock order utilization discounts) did not actually provide value for the customer. Often, in fact, the expectations of dealers and customers did not align – for instance, when the vehicle owner goes to the dealership they want their car fixed while they wait, or at least by the next day, but the dealership wants to keep inventory as low as possible, so they may not have the part on hand. Volkswagen had to find new incentive schemes for the dealers that would ultimately provide value to the end customer and change their operations to better serve both the dealers and customers.

Align Teams Around Those Metrics

Once you have defined what matters to the customer, you need to align the organization around this, just as Volkswagen had to align their operations with the expectations of the dealers and the customers. This is a common issue internally, as sales teams are usually incentivized on volume, whereas the supply chain team is typically incentivized on costs. The two are not generally in alignment.

Nic Vu, GM & SVP, Direct-to-Consumer at Adidas Group was also a speaker at the 2017 American Supply Chain Summit, where he told the audience about how Adidas has been leveraging their supply chain to create a better experience for customers. He says Adidas went from 5 to 40% of the North American running shoe market in the last few years, partly because of product (the popular UltraBoost shoe), but also because they “got the supply chain right.” To do this, they had to build trust between the sub-functions of the organization. Previously, he says, supply chain could be bonused on throughput and capacity, whereas he would be bonused on sales and profitability. Now, he says, they have shared KPI’s – both Vu and the supply chain executives he works with are bonused the same way, on all four metrics. He says, “When I was getting called to the carpet as GM of DTC and I didn’t make my numbers four years ago, guess who I was blaming? Probably the supply chain folks. Today, I don’t blame anyone, because I have a partner who’s helping me with the problems before they become problems.”

Join the conversation on how to create a customer-centric supply chain at the 2018 American Supply Chain Summit, April 9-10 in  in Dallas, TX!  VIEW THE PROGRAM