CUSTOMER CENTRICITY IN SUPPLY CHAIN MATTERS

During the pandemic period, customers have been forgiving delays and problems in the supply chain, but this goodness will not last forever. To lead the market and be competitive, it is necessary to put customers at the centre of operations, this is called customer centricity.

Customer centricity consists in carrying out a series of actions focused on satisfying the needs and desires of customers. To do this, it is necessary to adapt to each type of customer, segmenting them in order to define specific strategies that are adjusted to each type of client. More specifically, the customer-focused supply chain refers to the improvement of the customer experience in the delivery process, i.e. warehousing, distribution and after-sales service.

The graphs below show two types of supply chains, the traditional supply chain, in which the customer is at one side, as its function is to receive the service, and on the other side, the customer-centric supply chain.

• Suppliers use predictive analysis based on the purchasing patterns of their customers to determine the amount of raw materials needed at any moment.
• Warehouse planning depends on a thorough analysis of the purchasing patterns and information from your stock, suppliers, warehouses and market trends.
• In the manufacturing process, customer feedback and market trends are used to improve quality and stimulate innovation, making production increasingly customer-driven.
• Customers have multiple distribution channels to choose from at their convenience, such as in-store pick-up, home delivery, pick-up point delivery, one-day express delivery, and more.

In addition, the newest technological developments should be taken into account, as these can be a strong differentiator, for example, real-time tracking, automated factories, drones…

Starting with a customer-centric logistics system is costly, as you have to invest time in analysis and research, as well as monetary investment, and it can be stressful and exhausting, but in the long-term the benefits will be much greater and the competitive position will be higher.

References:

B. (2017). What is customer centricity? Arrizabalaga Uriarte Consulting. https://arrizabalagauriarte.com/en/que-es-el-customer-centricity/
Bolumole, Y., Grawe, S. J., Caltagirone, J., & Daugherty, P. J. (2021). It’s time to adopt a customer-centric attitude. Scmr. https://www.scmr.com/article/its_time_to_adopt_a_customer_centric_attitude
Pedersen, M., Pitts, B., Reiss, M., & Simmons, S. (2020). The four characteristics of a customer-centric supply chain. CSCMP’s Supply Chain Quarterly. https://www.supplychainquarterly.com/articles/4062-the-four-characteristics-of-a-customer-centric-supply-chain
Tom, K. (2020). The importance of having a customer customer-centric logistics system. Latest Supply Chain Trends | Logistics & Fulfillment Blog. http://www.leansupplysolutions.com/blog/importance-customer-customer-centric-logistics-system/
Unknown. (2016). Customer-centric supply chain planning: The difference is in the details. Supply Chain Link Blog – Arkieva. https://blog.arkieva.com/customer-centric-supply-chain-planning-detail-differentiatio

GREEN LOGISTICS

What does green logistics mean?

The International Review of Applied Engineering Research defines it as the “efforts to measure and minimise the environmental impact of logistics activity”.

Why companies promote the integration of green logistics in their processes?

One reason is of course because changing some of the systems and being more sustainable can reduce the company’s impact on the environment, which is becoming more and more critical and many companies are concerned about improving this situation, for example, an environmentally friendly transport system can significantly reduce pollution emissions. I have attached a video of Wallenius Wilhelmsen, a company dedicated to maritime transport which plans to develop the world’s first zero emission ship.

But their concern for the environment is not the only reason to move into green logistics. Most customers are interested in being able to help the environment in the actions that they take, which is why companies can achieve a competitive advantage and a better positioning in the market thanks to a change in their logistical systems. This will create value for the company, and a better perception of the company in the customers’ minds.

IKEA, one example of a company that is investing in green logistics

This multinational has implemented some measures to reduce its impact on the environment. One of them is the maximum reduction in their transport routes, both in raw materials and finished products. Some of their products go from the factory to the shop without having to pass through any distribution point. The company is also starting to recycle returned products, this initiative is called “second life for your furniture”, the company buys used furniture from its customers, with the intention of remarketing it and giving it a new life.

INVENTORY VALUATION METHODS

During my undergraduate studies, I took several subjects related to cost accounting, in which we were taught the different methods of valuing inventories, and I thought it would be interesting to explain them briefly in the blog as I find them useful to learn how to value warehouse stock.

There are three methods for inventory valuation: FIFO (First In, First Out), LIFO (Last In, First Out), and WAC (Weighted Average Cost).

• FIFO (First In, First Out). As its name suggests, what has entered the warehouse first, should be the first to leave. This is the most commonly used method in logistics, especially for products that have an expiration date, in order to reduce losses, since the products that expire first will be the first to leave. An example of this could be food or medicines, even fashion items.
• LIFO (Last in, First Out). In this case, the opposite happens: the last products to enter the warehouse are the first to leave it. Therefore, this method is ideal for products that do not have an expiration date.

FIFO VS LIFO

https://www.transeop.com/blog/FIFO%20-LIFO-Logistica-de-almacen/416/

• WAC (Weighted Average Cost). This method of stock valuation no longer takes into account the inputs and outputs as in the FIFO and LIFO, instead it performs a weighted average of the different prices of the products that have entered the warehouse by this formula: WAC =(Q1·P1) + (Q2·P2)  / Q1+Q2.

I have made a brief example in Excel of each of these methods because I think it is easier to understand: