15-03-2019

Adding “value” to the logistics value chain

Customer-centricity, the essence of business

Legions of corporate leaders and marketing gurus have articulated their views on the importance of the customer. Sam Walton , the founder of Walmart, went to the extent of calling him, “The boss who can fire anyone in the company including the chairman by spending money elsewhere.” Peter Drucker, the management guru, eloquently summed up the essence of business: “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. The purpose of business is to create and keep a customer.” Henry Ford expressed the paramountcy of the customer by calling him the “source of wages.” These views convey the obvious but often ignored fact of the customer-centricity of any business. It is not an exaggeration to state that we live in the golden age of the customer and hence our priorities need to be focused around him. So what does better customer experience stands for? Of course, total customer satisfaction and ensuring best value for his investment. The customer can then pass on a part of value to his customer in turn. And this is what sets up the value chain.

Technology and trucking

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From a freight and transport organization’s standpoint, the major challenge is to create an eco-system that is both flexible enough to meet the customer’s requirements and also responsive to the needs of other stakeholders. This balancing act makes the transport company “value driven”. Now coming to the issue of customer-centricity in transport industry, we find that planning process and use of technology need to be focused on the “customer expectations”, and on cutting down of downtime, transportation costs and fuel expenses, etc. Value chains based on operational integration and powered by technologies like Internet of Things (IoT) ,electronic data interchange (EDI) , automatic vehicle and container identification systems, data mining, container information systems, etc, further bring efficiency to the logistics industry. Communication is increasingly happening through technology channels like Facebook, Twitter or automated chatbots . In the contemporary parlance of value chain management, the integration of technology in transport operations will soon be marked by the advent of the “digital truck”. Guided by plethora of information the “digital truck” will boost productivity, decrease costs, and increase efficiency. And if you thought digitization is to stop there, then, lo and behold, there is much more to come. The “digital truck” will, in times to come, also communicate with other trucks and technology nodes to automatically match their shipments with available inventory spaces and do rerouting, etc. However, in proliferation of mechanization and automation, in logistics industry intended towards increasing efficiency and effectiveness, the “person” behind customer company gets ignored. After all, we need to understand that the customer company is run and managed by the “humans” and it could be dealing with hundreds of thousands of “humans” if it is in B2C space. We may be missing wood for the trees if we focus more on mechanization than humanization of our business.

On the unforgiving road

The idea is to always operate with customer’s need in mind. We should not allow a glitch to cross path in the interconnected value chain. A small error like improper handling of a query at the helpdesk, warehousing mistake, wrong product storage and delivery problems can be traced back to a human cause, which has the potential to snowball by the time goods reach the end customer. For example, the bullwhip effect is any logistic provider’s or source company’s nightmare! Disrepute follows such a catastrophe in tons! Besides, transportation industry also fights many uncertainties and constraints to maintain delivery timelines and enhancement of delivery windows.

Who rules the roost

If we study our business minutely, we realize that it is the customer of our customer who holds the value capturing power as he pays for the product in the retailer’s store. It is the choice of the customer’s customer that defines what to produce, in what quantity, at what time, at what cost and of what design. The end customer also defines the sourcing of raw material. The customer is the driving part of the value chain and is the cause of why the chain was created in the first place. He is both the beginning and end of the chain. And the fuel of the value chain is the money whose rotation makes it a living system.

Understanding the “value” in the “chain”

Logistics is not a fixed cost element of the supply chain and the value of logistics in ensuring customer satisfaction cannot be overstated. As such logistics companies can erect a platform where planners have increased role in reducing transportation costs and optimizing of resources to give more worth per dollar to the customer. The companies can learn from the experience; gather, analyze and study the data of the past and explore areas where costs can be decreased and optimized for future usage. The logistics providers can reduce waste in terms of fuel consumption, container levels, inaccurate routing and ineffective warehousing and delivery. The logistics service providers can avoid breakdowns and bottlenecks in the value chain. In case there is an operational change, a dynamic strategy can identify best routes, transport modes and delivery windows to avoid incurring losses in addressing the changing variables. Keeping in view the customer’s customer we have to do effective, cost efficient logistics management. Transportation should be responsive and economical with end to end visibility. Visibility helps lower cost areas without impacting service levels. It helps meet any contingency arising out of uncertainty. Logistics creates value due to the flexibility that enables organizations to change sources of supply quickly. Managed effectively, these costs can be rationalized into the overall product-package offered to the customer.

Author

Vikram Dua

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