Customers are kings. Companies exist because customers want them to. These were the mantras in the 1990s for businesses across the globe and still are.

In an age where customers are more like partners than buyers, supply chain management or SCM has a key role in ensuring `customer delight’. The ET SCM Survey 2004 covered 90 companies across ten sectors and uncovered many examples of improvements at the customer’s end of SCM.

Continuous replenishment is a practice that involves a vendor replenishing just in time his customer’s inventory on shelf, or on the shop floor. This transfers the onus of logistics, cost, time, filling the order and maintenance to the vendor himself. In effect, it is `push’ rather than a `pull’ system.

The findings of the survey were balanced. A large 32% of the companies surveyed declared that they did not have any continuous replenishment programme. Within the ten sectors, FMCG lagged the most. 63% companies in this sector did not adopt this practice; a reflection perhaps of the large distribution networks they deal with and the bargaining power they enjoy with trade.

However, of the 34% that had adopted continuous replenishment, 52% found it to be extremely effective in their business. Not surprisingly, the auto and auto ancillaries sectors have adopted the practice the most and with the greatest effectiveness.

In a related best practice, 30% of all polled companies said they managed inventory at their customer’s site, and of these, 56% said they found this practice to be extremely effective in business. Interestingly, only 25% of the FMCG companies polled agreed they employed this practice, but over half of those that had, found it very effective. This may be due to the evolution of modern trade. FMCG companies are required to fill shelves.

Involving customers in your new product development (NPD) is also the current buzzword in Indian SCM. An early involvement buys in commitment, passion and cuts out expensive rework later on. Here again, 38% of the companies polled said they had adopted this practice widely, and 59% of these found it extremely effective in their business.

Even the above 38% who had just started adopting it were finding it effective. This is one practice that brings in the money only when the engagement is honest and complete between the parties. Again, given the auto industry’s history in taking the lead in SCM, 73% of auto OEMs (original equipment manufacturers) and 88% of auto ancillaries had used NPD extensively.

The interesting fact, however, is that while 90% of the OEMs who had adopted it found it very useful, only 63% of the ancillaries companies found it to be so; in other words, OEMs seem to be deriving greater gains from NPD than their vendors.

Do companies listen to customers? It seems India Inc. does. Only 14% of the companies polled did not use customer satisfaction surveys. 52% said they really put their ears to the ground, and of these companies, 45% found it effective while taking business decisions. 33% said they listened sometimes.

50% of the FMCG companies polled used customer satisfaction surveys widely. Again, 91% of the auto OEMs – J D Power and so on – used these surveys widely to model their plans, and 82% of these found such a practice to be very effective. Other industries which have adopted customer surveys to a large extent are the paint (67% of paint companies), petrochemical (67%) and cement industries (100%).

Forecasting has always been the bane of any industry. But it can be considerably smoothened if vendors and suppliers know what their customers are planning or doing, preferably before they do it. Since this involves sharing competition-sensitive data beforehand, this practice hasn’t taken off 38% of the companies are not using it.

However, 33% (more than double the ‘02 figure of 14%) have used forecasting and just about half of them have found it effective. If one probes deeper into why this figure is low, it appears that forecasting of customers themselves is uncertain, fluid and based on incomplete understanding of trends and patterns, which, in turn, passes on the complexity to the vendors

50% of the polled companies in the auto, auto ancillaries, electronics and cement sectors were using the collaborative forecast practice widely. It may be observed that the customer base in these industries is not as diverse or massive as in FMCG or pharma, which have many lakhs of shops and dealers to ask data from. This may be one of the reasons why consumer-oriented industries do not use collaborative forecasting to a greater degree.

But perhaps one practice that has the greatest potential to help in all the above practices is also the least adopted – 57% of the polled companies are not getting or using real-time demand data from customers. Reasons cited for the same range from long, complex supply chains, to lack of data and IT integration, and lack of funds to go in for automation. Noteworthy, however, is that in ‘02, only 9% of the polled companies used this practice. 23% use it now as a result of greater investments in IT, field force automation and cheaper software.

An interesting cross-reference is that 33% of the MNCs polled used real-time data sharing, and nearly all found it extremely effective. In contrast, among the 23% Indian-owned firms, 56% found it effective. Clearly, Indian companies have still some way to go.

- Compiled by SANCHIT