Мoving from cost-driven supply chain optimization to customer-driven

8:08 PM |

A supply chain strategy is the system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer (Wikipedia, 2008). Thus, supply chain management constitutes a complex system controlling the flows of raw materials, energy, purchased and manufactured components, information, and finances through entire network of suppliers, vendors, assembling and manufacturing facilities, distributors, and customers located around the world (Daniels, Radebaugh, & Sullivan, 2001).

In general, a company’s global supply chain strategy includes the following ten elements (Daniels, Radebaugh, & Sullivan, 2001):
1.      Customer service requirements.
2.      Plant and distribution center network design.
3.      Inventory management.
4.      Outsourcing and third-party logistics relationships.
5.      Key customer and supplier relationship.
6.      Business processes.
7.      Information systems.
8.      Organizational design and training requirements.
9.      Performance metrics.
10.  Performance goals.

The traditional cost-driven supply chain strategy is naturally focused on the technical supply chain efficiency improvement through optimization of all elements, involved in the system functioning. Modern advanced strategic approach to the supply chain strategy is putting the customer, and his needs fulfillment, on the top of the operational priorities. In a customer driven supply chain, end-user demand drives all activities among trading partners.

Customer driven supply chain is focusing on establishing process providing customers with real value, which drives their satisfaction level and create impact on the initial and recurring purchasing decision-making and competitive advantage on the market. The customer-driven approach can be characterized by the following action items:
§  Facilitating and improvement suppliers’ cooperation.
§  Establishing effective control of the received goods, components, and raw materials.
§  Improving speed and accuracy of all supply chain transactions.
§  Ensuring real-time information exchange between the chain units.
§  Increasing manufacturing, operations, and transportation effectiveness and process reliability.
§  Arranging quick and easy access to inventory for sales and service.
§  Establishing automated inventory data transfers between stores and warehouses.
§  Improving customer support: shortening customer inquiries response time, enhancing the quality and professionalism, and developing smart system of decision-making in case of the conflict and questionable situations.
§  Adopting modern communication and electronic commerce technologies to optimize the information and product flow.
§  Monitoring constantly the customers’ and employees’ perception on the supply chain efficiency, and using the feedback for the process improvement.   


Daniels, J.D., Radebaugh, L.H., & Sullivan, D.P. (2001). Globalization and Business. New York: Prentice Hall. Ch. 7, pp. 159-174.

Wikipedia (2008). Customer-driven supply chain. Retrieved August 22, 2008, from http://en.wikipedia.org/wiki/Customer_Driven_Supply_Chain

Wikipedia (2008). Supply chain. Retrieved August 21, 2008, from http://en.wikipedia.org/wiki/Supply_chain

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