Posts Tagged "Customer Satisfaction"

Seven Reasons to Shorten the Sale to the Customer

Posted by on Apr 12, 2013 in Uncategorized | 0 comments

American Manufacturers must turn the clock back 180 years, before the start of the Industrial Revolution. Consumers purchased their goods and materials directly from the people that made them. There was no question as to the identity of the maker. If a custom was required, it was not a problem. If the the item broke prematurely, it was easy to return for repairs/replacement.

blacksmith

Businesses are returning to their roots.  It is now very easy for businesses to design, market, and sell products directly to consumers. Manufacturing can be internal or contracted out, advertised and sold directly over the internet, and shipped via UPS, FedEx, or the U.S. Post Office. Avoiding traditional sales, marketing, and distribution channels provides several benefits. Many small companies do this, as do the likes of Apple, American Airlines, Proctor & Gamble, Dell, etc.

 

American Manufacturers gain several benefits from the reduction of size and complexity of their supply chain to the end user. Manufacturers historically have been very interested in profitability inside their factory walls. By considering the flow of their goods when they leave the factory walls, they are finding new benefits through the reduction in the size of their supply chain to the end consumer. The structure of the modern Internet has allowed for ease of advertising, contact, communication, and payment. The modern American logistics market allows for fast and inexpensive delivery of goods directly to customers.

delivery truck

Here are seven benefits for OEM manufacturers that shorten their supply chain:

 

  1. Customer Satisfaction

Customers that are able to communicate easily with the manufacturer of their goods tend to have more positive experiences. Consumer preferences can be accommodated when they can be easily voiced by the consumer and fulfilled by the manufacturer.

 

  1. Quality Control

Reduced inventory in the supply chain is easier to control should there be a quality problem. Smaller supply chains result in fewer warehouses holding goods that would require inspection should a quality problem occur. Customers who receive their goods faster help to identify quality control problems sooner. Manufacturing problems that leave the factory are recognized in a faster manner.

 

  1. Market Response

Shorter supply chains allow for the market to interact with the product sooner and provide feedback on its attributes. The introduction of new products to the market is faster and easier with more direct access to end users. Quick feedback can allow for faster adaptation to market conditions.

 

  1. Customization Opportunities

Shorter supply chains coupled with greater interaction with the end users allow for more opportunities to provide customization to the customers. This may include product attributes, quantities, product mix, etc.

 

  1. Faster Payment

Cash flow cycles from the customer back to the manufacturer are shortened along with the supply chain. The reduced number of entities owning the products along the supply chain will translate into a reduced number of entities to buy and sell the item on terms before the cash reaches back to the manufacturer.

 

  1. Competitive Advantages

Lower inventory levels and more efficient distribution networks provide financial advantages as compared to other products/manufacturers in the same market.

 

  1. Product sell price

The ability to keep a stronger hold on the distribution network reduces competition among resellers that can work to drive down product sell prices. Resellers may also offer the same product from multiple manufacturers and compete them against each other.

 

The above are 7 reasons for OEM Manufacturers to work towards closer relationships with their customers.

 

The How:

 

–One piece flow: Allows for fast manufacturing of customizable products. Not waiting on batches of similar goods.

 

–Flexible production: Value Streams that are adaptable and flexible to compensate for the various operations that are required for special features and benefits.

 

–Design for Manufacturing: Designed so products can be manufactured in a cost effective manner.

 

–Disposable Packaging for Direct Delivery: Depending on outside logistics companies doesnt allow for returnable packaging. Packaging needs to be presentable to the customer.

 

–Lean Accounting: Traditional accounting encourages batch production, high inventory levels. Very counterproductive. Instead, consider lean accounting. The important things to measure include Inventory Turns, Machine Downtime, First Pass Quality, Dock-to-Dock times, etc.

 

American manufacturers must turn the clock back 180 years, before the start of the industrial revolution. Consumers purchased their goods and materials directly from the people that made them. There was no question as to the identity of the maker. If a custom item was required, it was not a problem. If the the item broke prematurely, it was easy to return for repairs/replacement.

 

American manufacturers gain several benefits from the reduction of size/complexity of their supply chain to the end user. Manufacturers historically have been very interested in profitability inside their factory walls. By considering the flow of their goods when they leave the factory walls, they are finding new benefits through the reduction in the size of their supply chain to the end consumer. The structure of the modern Internet has allowed for ease of advertising, contact, communication, and payment. The modern American logistics market allows for fast and inexpensive delivery of goods directly to customers.

 

Read More

Direct Sale of Automobiles

Posted by on Feb 23, 2013 in Uncategorized | 0 comments

A report written by the United States Department of Justice considers the advantages of shortening the distribution system for automobiles as a way for the manufacturers to improve profitability.

The report, “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers” by Gerald R. Bodisch* EAG 09-1 CA May 2009 can be found here.

The auto manufacturers are currently prohibited by law from selling their products direct to consumers.  If the laws were changed, there would be huge economic benefit to the profitability of the manufacturers.

From the report:

Perhaps the most obvious benefit from direct manufacturer sales would be greater customer satisfaction, as auto producers better match production with consumer preferences ranging from basic attributes on standard models to meeting individual specifications for customized cars. With better information about consumer demand, optimal inventory levels should fall, even short of full build-to-order capability by auto manufacturers. To the extent that there are cost savings from leaner inventories, a portion could be passed on to consumers as lower prices. The total value of new car inventory held by the 20,700 franchised new car dealerships in the United States near the end of 2008 was about $100 billion and the annual carrying cost of that inventory was estimated as $890 million.(9) These figures may provide an order-of-magnitude perspective of the savings potential from a reduction in inventories that might derive from direct manufacturer sales of autos.

The most comprehensive estimate of the savings in the vehicle order-to-delivery cycle from build-to-order, direct manufacturer sales is set out in a 2000 report by a Goldman Sachs analyst.(10) Based on an average vehicle price of $26,000, total cost savings in the order-to-delivery cycle were estimated as $2,225 or about 8.6%.(11) The components of those savings were as follows: $832 from improvement in matching supply with consumer demand; $575 from lower inventory; $387 from fewer dealerships; $381 from lower sales commissions and $50 from lower overall shipping costs, since fewer dealerships would reduce the number of distribution points. The Goldman Sachs report identified other possible build-to-order savings of about $1,000 per vehicle in product development, manufacturing flexibility and procurement and supply but the lion’s share of the benefits were attributed to improvements in the order-to-delivery cycle. In a nutshell, the current auto industry make-to-stock sales model takes a lot of money, much of it tied up in inventories and devoted to discounting to clear lots of less popular vehicles, to try to sell cars that can come up short of what customers would really prefer.

While the Goldman Sachs report provides estimates of potential cost savings, a real-world example of the benefits of a build-to-order, direct manufacturer sales model is GM do Brasil’s experience with production and sale of the Chevrolet Celta economy car at its modern Blue Macaw plant in Gravatai.(12) Since 2000, customers in Brazil can order the Celta over the internet from a site that links them with GM’s assembly plant and 470 dealers nationwide. By 2006, 700,000 Celtas had been produced and the car continues to be one of Brazil’s best sellers.(13) Consumers have 20 “build-combinations” from which to configure a model of their choice, including colors and accessories, and can view each change as it is being made. GM built five distribution centers throughout Brazil to reduce transportation time from its assembly plant and buyers can track location of their car online on its way to delivery at a dealer of their choice. The time from configuration at the factory to delivery is only about a week, in contrast to the several week wait that can be common in ordering a car in the United States.

Automobiles are expensive purchases that require maintenance and warranty work, so there is still a valuable service that would need to be filled by local dealers.  Human, face-to-face interaction would still be a valuable part of the customer experience for problem resolution after the sale.

Read More

Nine Reasons to Sell Direct to Consumers

Posted by on Oct 31, 2012 in Uncategorized | 0 comments

Basic civilizations in history have been organized into communities where goods were made locally and sold or traded directly to the end consumer.  The American Industrial Revolution pushed the business world into complex supply chains that create many problems for the people in the world that actually do the producing.  Consumers have become distant from the producers and have generally lost touch.

The customers of your business spend money on your goods to solve a perceived problem.  In general for the last 80 years, American consumers make these purchases at some form of retail store.  The retail store buys it from a wholesaler who buys it from a manufacturer.  Several additional steps may be involved.  Each step requires time, transport, and money to exchange hands, along with earning that entity a profit.  The actual product manufacturers become distant from the end consumer that will use their product.

As a manufacturer, why would you not shorten the cycle and sell directly to the end consumer?

There are several reasons that this strategy would make good sense.

 

1. NO Middleman/Middlemen.

  • Remove distributors that do not understand your products and service.
  • Allow end customer to get the same pricing regardless of their geographical location

2. More profit.

  • Stop losing profit margin to distributors, wholesalers, retail outlets, etc.
  • Lower costs due to extra shipping, handling, paperwork, etc.

3. Less redundancy in customer service.

  • Manufacturers already provide customer service to wholesalers/distributors.  Instead, provide it directly to end users thereby streamlining the system required for consumers to get help for their problems.
  • Improvement in customer satisfaction.

4. Simplicity.

  • Fewer intermediaries between the manufacturer and the consumer.  Long periods of human history required the makers to work directly for their customers.  For example,
    • i.      Sawmills sold their lumber directly to people building homes and barns.
      ii.      Blacksmiths formed horseshoes directly for horse owners.
      iii.      Farmers took food to the market to sell to the hungry masses.
  • The shorter value stream will have fewer steps, simpler logistics, and lower inventory in the system.
  • Lower Supply Chain inventory reduces cost should there be quality control problems.

5. Faster payment.

  • Shorter supply chains require fewer entities through which to pass money.
  • Many distributors only pay the manufacturer when they get paid.   As products get to the end consumer in a faster manner and the payment is collected sooner, the cashflow cycle is much shorter.

6. Competition.

  • Distributors will not be selling your product directly alongside your competitor’s product.

7. Everybody else is doing it.

 

8. Technology allows it.

  • We are in the 21st century.  Computers and the internet have made the world smaller.  Online marketing can quickly direct customers to your website, answer their questions, and provide a method for them to place an order and satisfy payment.
  • Quote requests for custom products and orders for off the shelf items can be submitted 24 hours a day, 7 days per week, collected in one location, and be answered in a timely fashion.
  • Modern and efficient shipping methods allow for goods to be moved long distances in a fast manner and delivered directly to the best point for goods transfer to the end customer, usually their front door.

9. Faster response to market changes.

  • End consumers communicating directly with the manufacturer can quickly provide feedback for changes and improvements.  Low supply chain inventory allows for product update cycles to occur quickly and efficiently.

Wholesalers, retailers, distributors, etc all play important roles in a supply chain to the customer.  They can be removed, but their function must be replaced.  Things like marketing, advertising, collecting payment, shipping, etc. must all be handled in order to provide a positive customer experience.

Industrial Revolution changes pushed the business world into complex supply chains that create many problems for the businesses in the world that actually do the producing.  Consumers became distant from the producers and many times have lost touch.  Modern technology has advanced to create a world where mass producers can again sell directly to consumers around the world and be successful.  Companies large and small are doing it, shouldn’t you?

Read More