CUSTOMER LED SUPPLY CHAIN DESIGN AND STRATEGY

Customer Led Supply Chain Design and Strategy

Customer Led Supply Chain Design and Strategy

Part 1 [900]

In today's highly competitive global marketplace, the pressure on Walkers to find new ways to create and deliver value to customers grows ever stronger. There is a growing recognition that through logistic efficiency and effective managment of the supply chain both cost reduction and service enhancement can be achieved.

The goal of Walkers supply chain management is to link the marketplace, the distribution network, the manufacturing process and the procurement activity in such a way that customers are serviced at higher levels and yet at a lower total cost.

The most significant change to impact western companies has been the maturing of the markets in which they compete. Mature markets have certain characteristics which mark them out as being significantly different from growth markets.

It has been suggested by some industry commentators (Maddox, 1995) that, with the decline of the mass market and the consequent fragmentation of markets into smaller segments, conventional media-based advertising, particularly TV, is costing more and more to deliver the requisite ratings. This is causing a rethink in many organizations as to how they allocate their marketing budget. For example, it is reported that in the UK, Heinz is planning to divert most of its marketing communications budget from TV and apply it instead to direct marketing.

Mature markets exhibit similar characteristics to commodity markets in that customers perceive little difference between competing offers. In such conditions, while customers might have brand preferences they have less brand loyalty - meaning that if the preferred brand is not available, they will willingly accept a substitute. Even product/markets with high rates of innovation do not seem immune from this tendency to “commoditization”; take, for example, the personal computer market, where clones and “me-toos” now account for significant market shares.

Almost by definition the combined effect of the previous three factors is a downward pressure on price. As a result, there is a temptation to seek to achieve tactical gains in sales volume through discounting in one form or another which is compounded by the continuing demands for price reductions by powerful customers. Paradoxically, the more that organizations compete on price, the more they reinforce the customers' view that they are indeed commodity suppliers.

A further significant difference in today's marketing environment, compared to the past, is the continuing concentration of buying power in many markets. Concentration has occurred as organizations merge or grow through take-overs, and as the inevitable result of a competitive process that leads to the “survival of the fittest”. This process of concentration seems to be present in just about every industry. The grocery retail market is a very visible example. Figure 1 shows the percentage of the total market in western European economies accounted for by the top five retailers in those countries. In that same market, there are beginning to emerge pan-European buying groups which will add to the concentration ...