The Amazon Effect: Why We Must Pay Attention to Our Customers
In today’s new normal business environment, the only constant is volatility
Two thirds of manufacturers and distributors have customer service gaps when compared to Amazon and mega-distributors, like Amazon, according to a research study performed by LMA Consulting Group Inc. Amazon has created not only a buzz with their innovative service options, but it has also raised the bar for service permanently. If manufacturers and distributors want to maintain their customers, they must pay attention immediately.
For example, a large manufacturer in the aerospace industry receives feedback on a daily basis that service must dramatically improve, and lead times need to be slashed. These concepts used to provide a strategic advantage; however, they are no longer enough. Now, companies must be on the leading edge and proactively creating relationships with key customers to thrive. In another example, a middle-market manufacturing company in the consumer products industry finds that lead times must be reduced by 25-50 percent to maintain an edge.
According to the research study, which surveyed manufacturers and distributors to better understand service expectations, websites are gaining in criticality. Although many companies display products and services online, there is an increasing gap when compared to the additional services mega-distributors offer. Having a website just gets manufacturers and distributors in the game. Instead, to thrive, it’s important to leverage the website as a portal for key customers to allow for tracking of order status, payment of invoices, and returns. The bottom line is that 24/7 accessibility is the expected norm.
A majority of survey respondents feel that customers have become apt to price shop and negotiate price. Certainly, if manufacturers and distributors go down this rabbit hole, the outcomes are bleak. Thus, differentiating the company with value-add products and services is incredibly important to business success. Whereas quality used to be important, it must be an assumption. Instead, customers are looking for reduced lead times and dramatically improved service including options. Offering options and product and service customization is expected.
In response to the elevated customer service expectations, in addition to focusing on lead times, manufacturers and distributors are redesigning websites, providing more data and information to customers and extending hours. More and more companies are finding ways to capture data from customers to leverage and improve service and profit. Thus, although spreadsheets remain the top tool, business intelligence and big data are gaining in popularity in order to utilize the information in a way to make better decisions.
Manufacturers and distributors have not lost touch with the critical importance of leveraging technology in addressing these requirements, as it’s a great way to improve service while managing costs and cash flow. There has been a steady stream of interest in enterprise resource planning (ERP) systems upgrades and in utilizing tools such as e-commerce and customer relationship management (CRM) systems. The key is determining which technology will provide the best return on investment, given each company’s unique set of customer requirements and capabilities. Implementing too many systems at once can be devastating vs. significant success with implementing the “right” system at the “right” time.
The greatest challenge that emerged from the survey is balancing what customers want with the resources and costs to implement the required changes. This can be a tall order for manufacturers and distributors. The never-ending battle to find the optimal mix of service, inventory, and margin will be prevalent for years to come.
A few strategies to successfully navigate the Amazon effect include the following:
1) Start with your people;
2) Involve your supply chain; and
3) Provide tools and support.
- Start with your people: Undoubtedly, the most often overlooked, untapped resource is your employees. Have you ever seen a company with unhappy employees with happy customers? That scenario rarely exists. Beginning with a focus on creating a culture of engagement and empowerment is a good place to start. Find ways to explain value and involve cross-functional teams in creating customer loyalty while managing resources and cost.
- Involve your supply chain: In today’s global, interconnected world, a singular company focus, no matter how effective, will result in a deterioration of profitability over the long term. Manufacturers and distributors must look for strategic partners throughout their supply chain and find ways to collaborate to accelerate cash flow, improve margins and delight customers.
- Provide tools and support: Last but not least, the best strategies fail in execution; thus, the key to being one of the 20 percent who succeed is to focus on blocking and tackling. Provide training, coaching, and mentoring for star performers. Explain the value, and provide methods and tools for creating internal best-practice processes. Encourage further utilization of systems and support investment in the best technologies for creating a customer service edge.
In today’s new normal business environment, the only constant is volatility. Getting a clear picture of customer needs and priorities is an essential starting point. Creating a value-add customer experience is a must. In order to stand out above the noise, manufacturers and distributors need to involve employees and supply chain partners and provide tools and support to create a customer service edge.
Publication date: 02/04/19