The customer-driven supply chain explained

Consumers demand more control over products and more insight into the supply chain, which is reshaping how successful logistics businesses operate.

The traditional supply chain model operates with a product-driven approach, that is now only appropriate for a few. A customer-driven supply chain instead transforms how businesses operate and how they connect with their customers by putting them at the center of the supply chain process.

A customer-driven supply chain prioritizes the customer's needs in all decisions, from product design to delivery. It means that you do not look to your own product for your next business decision, but base it around what your customers want and need.

As a result, businesses can increase customer satisfaction, improve reputation and drive long-term growth.

In this article, we will cover the following topics:

  • What is a customer-driven supply chain?
  • The key elements of a customer-driven supply chain
  • Differences between traditional and customer-driven chains
  • Challenges in shifting to a customer-driven supply chain

What is a customer-driven supply chain?

A customer-driven supply chain is a process that sees the needs and preferences of customers as the driving force behind strategic business decisions and activities.

A customer-driven supply chain simply prioritizes the customer's needs. The goal is delivering what the customer wants, when they want it, and how they want it – at a competitive price.

In a customer-driven supply chain, companies must also be flexible to adapt quickly to changing customer needs and preferences. This may require a more agile supply chain that can respond fast to new market trends, or shifts in consumer behavior.

Leveraging technology, such as big data and the internet of things, to deeply understand customers and their behavioral patterns is essential to the customer-centric supply chain.

By looking at the right data, you are able to create a seamless and personalized customer experience. By providing the customer with the right data, you are able to build trust and empower your customer to make more informed decisions.

Main characteristics of the customer-driven supply chain

Focus on the following characteristics to adopt a customer-centric approach:

Customer focus: Putting the client first is the most critical aspect. Consider the customer experience at all touchpoints of your business.

Only by truly understanding what challenges your customers are facing can you provide a solution. If you are able to tailor your product or service offer to the customer specific needs, you are on the right track.

Transparency: Traditionally the logistics market has been opaque, but more transparency is in the supply chain is in demand. Customers, in addition to cost transparency, want to know where their shipment is all the time. So a customer-driven supply chain should offer real-time visibility, tracking of shipments, with reliable and up-to-date ETAs.

Data-driven decision-making: Gathering data is relevant for all freight forwarding KPIs – such as  route habits, loads, and times – to make informed decisions about supply chain operations. Understand what data you can collect and provide to make customer operations more efficient. Help your customers by analyzing big data into digestible pieces that will improve their forecasting, decision-making, or processes.  

Agility: The supply chain must be flexible and agile enough to respond quickly to changing customer needs and preferences.

Communication and collaboration: Companies must work closely with their customers, understand their needs, and go the extra mile to resolve any potential issues.

Practice an open line of communication and build trust with honest communication throughout the customer journey.

Technology: The use of technology, e.g. artificial intelligence and machine learning algorithms, is essential to gather and analyze data about the customer and the marketplace. If you can automate and standardize any processes for your customers, you will be saving them time and manual labor.

What differs the traditional from the customer-driven supply chain?

The difference between traditional and customer-driven supply chains can be summarized as follows:

Traditional supply chain:

  • Focuses on cost-saving and efficiency
  • Prioritizes internal processes and procedures
  • Limited visibility into customer preferences and demands
  • Inflexible and slow to respond to changing customer needs
  • Doesn’t prioritize customer satisfaction and loyalty

Customer-driven supply chain:

  • Focuses on customer satisfaction and loyalty
  • Prioritizes customer needs, preferences, and demands
  • Offers real-time visibility into customer needs and demands
  • Agile and responsive to changing customer needs
  • Improves customer satisfaction and loyalty, boosting sales and profits

Challenges in shifting to a customer-driven supply chain

Adapting to a customer-driven supply chain can be a challenge for many. But for long-term success, it’s essential in today's fast-paced and competitive marketplace.

Understanding the customer: Companies must deeply understand their customers, their preferences, and the factors driving their decisions. This requires gathering data about your customers, such as their history, preferences, and habits. However, this information can be difficult to obtain and often requires significant investments in technology and data analysis.

Digitalization: Customers expect real-time visibility and tracking of shipments and access to information about product availability, delivery times, and rate management. Investment in technology and digital systems that gather and analyze data about customers and the marketplace, such as artificial intelligence and machine learning algorithms, is necessary to meet these requirements.

Cost: Costs are also a major challenge in upgrading to a customer-driven supply chain. Implementing a customer-driven supply chain typically requires significant investments in technology, data analysis, visibility, and logistics infrastructure.

Be ready to incur extra costs to meet their customers' changing needs and demands, such as: increased inventory management and flexible logistics operations.

Internal resistance: Be prepared to overcome internal resistance to change. Employees may be resistant to new technology and systems, or they may be reluctant to change established processes and procedures.

To overcome this resistance, provide clear and compelling reasons for the changes and training and support to help employees adapt.

To summarize:

  • Invest in technology
  • Embrace flexibility
  • Focus on customer experience
  • Consider costs

While adapting to a customer-driven supply chain can be challenging, the benefits are significant. Freight-forwarders and other logistics operators that adapt to a customer-driven supply chain can improve customer satisfaction, build trust, and drive long-term success.

Continue reading on the topic of supply chains with our article about the implications of lack of supply chain visibility.

Lovisa Andersson
Logistics writer
March 23, 2023
Digitalisation and TechnologySustainable LogisticsSupply Chainrouvia Updates