For many years I have worked in the high tech industry. Recently my experiences have been in the pharmaceutical industry and I have discovered an interesting insight. There is no question that employees in a pharmaceutical company know why they are there. It is all about the customer. The customers are patients and often the pharmaceutical companies are producing drugs that are saving people’s lives. Employees certainly have a sense of purpose in their jobs and there is no doubt that the customer is #1. It is intrinsic. Everyone from the person making the bulk formula to the shipping clerk to the CEO understand what it means not to deliver on time.
In other organizations the customer is not always #1 or at least certain parts of the organization are detached from the customer. Should that be the case? I don’t think so. Understanding the customer is just as important in high tech or aerospace or consumer packaged goods. It is more difficult to create a culture of ‘customer is always #1’ in some organizations. However everyone gains a greater sense of purpose in their jobs if the company operates this way. How many buyers are expediting or cancelling parts orders and don’t know who they are affecting?
I am not suggesting that other metrics, like revenue or profit are ignored but customer value, customer satisfaction, and customer responsiveness are differentiators for companies. Is this difficult to measure? Certainly. Your CFO cannot objectively measure customer satisfaction as he or she can measure inventory turns or revenue. One has to consider the opportunity for increased market share and separating your company from your competition.
An excellent post by Colleen Crum that spans a number of topics touches on poor customer service inevitably being the result of poor decisions and poorly designed processes that lack integration.
‘Advances in communicating information across a supply chain aid in better decision making and collaboration’
This confirms that there are a number of opportunities to improve your focus on the customer.
a) Continuously communicate the value of the customer to all employees
b) Identify key objectives linked to customer value for all employees
c) Ensure that processes are integrated such that individual contributors at all levels understand their impact on the customer
d) Ensure that the appropriate tools are in place that identify the customer impact of your actions. This may be the buyer expediting a part or a production scheduler adjusting a production plan.
The end result of having the appropriate people, processes and tools is a leaner, more efficient workforce rewarded by providing customer value which results in positive impact to other key metrics such as revenue, margin and shareholder value.
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Tags: A&D supply chain, Customer service, Demand driven, Operations performance, Supply chain management
Posted in Best practices, Supply chain management
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Fully agree on the premise that the author is trying to convey.
Question: Is the biggest obstacle to customer focus, for public traded companies, shareholders?
In other words is there an inordinate amount of resources spent on the shareholders, who for many organizations are financial institutions?
I don’t fully agree. I think nowadays this principle goes too deep. However, I do share the opinion that you go to work for your customer but as we all are entrepreneurs the main goal is to make money and not make people happy. This may be a second goal.
Don’t get me wrong because I do share the opinion that a lot of companies don’t think about the customers at all.
I agree with much of what was said in the article, and am a firm believer that the “customer is #1″ approach is sorely lacking from the cultures of many organizatons. However, profit and revenue is critical to an organization’s existence. Even the most customer oriented companies will go under if they’re not profitable.
I do have to disagree with the author’s statement that pharmaceutical companies are all about the customer. The cost of prescription medications is at a ridiculous level in this country, and seem to keep going higher. Something is definitely wrong when so many people must choose between eating and their medications, or must take half-doses so their medication lasts twice as long. Reform is definitely needed.
great comments. Companies have very conflicting objectives and it can be a a fine balance between customer value and the bottom line.
If you truly believe in the free market system, then profit is the measure of customer satisfaction. If customers perceive the product as valuable, they are quite willing to pay the requisite price. Customer valuation of the product at hand includes all of it’s characteristics, including quality, timeliness, suitability to solve the problem, etc.
Customer satisfaction is measured by the price the customer is willing to pay and the volume they are willing to purchase. If customers are not satisfied, they don’t purchase from you. The purchase of product is the best measure in existence. Any corporate executive can understand that signal. The key lies with not allowing individuals to make excuses for why customer’s aren’t buying. Lack of sales means the customers are not satisfied.
Apple Computer would be a great example of what you just described John….
Well, there are 4 pilars of which is important for a customer:
price, quality, availability, service.
You have to find a balance between these because when 1 pilar tends to go up, others tend to go down.
I agree with Response #5 but only if both long term and short term customer satisfaction is taken into account.
Yes, we wanted SUV’s, big cars and trucks and yes, in the short term, we were willing to pay for them.
However it may be argued that too much focus on short term shareholder results has put our auto industry in grave danger.
Q: What part of the free market system allows us to justify bonus structures for senior executives in organizations that are losing market share and/or profits? Shouldn’t bonus structures be related to the ongoing success of the organization using objective performance metrics that are measurable for periods that are one year, or preferably, longer?
I fully agree with the topic that customer should be #1 but in reality, have we lost our way?
Ted:
The part of the free market system that justify’s bonus payments for poor results is SUPPOSED to be the failure of the firm that does so. It is government intervention in the free market that keeps poorly run businesses in place. If firms pay excess salaries and bonuses while failing to achieve financial returns, the stock value of the firm falls. GM became almost worthless. GM should have been driven into bankruptcy and the assets purchased by those who could do a better job. The executives who ran the firm into the ground should have a hard time ever finding a company that would put them in charge of a chicken coop.
Robert: A customer should be concerned with the profitability of it’s supplier unless the customer is very short term focused as well. If the supplier isn’t making money, they won’t be around for long. Neither will warranties, service, parts, etc.
Hi Carol, thanks for posting this information.
It is so refreshing (but rare) to find a company, CSR, or sales person that has adapted such principles.
Furthermore, I believe these principles are core values that – whether present or absent – leak into all aspects of society.
In a corporate setting an individual who does not abide by a a customer-centered philosophy and is focused on short-term goals/gain, can lead teams, businesses, corporations, to decisions that send customers the message that they are disposable/dispensable. Beyond that, not only do these choices have a negative impact on the long-term “health” of the organization — but once “off the clock” what motivation is there for that individual to be responsible and accountable with natural resources, personal finances, and social responsibilities?
The value of the client is often taken for granted, but the impact that each of our decisions can bear on the health and prosperity of our future as well.
Becoming an individual or a business with a good balance of social, moral and corporate responsibility must be intentional and takes a lot of work. It goes “against the current” of a culture that seeks to be served rather than to be of service.
In a year like this one with so many examples of what the consequences can be, and what impact it can have on society — I hope we’ll be inspired to seek more opportunities like this one to enrich our thinking and improve our focus / perspective.
…And in the end, to increase the value we give our clients, peers, human and natural resources, and all that make up our personal and professional lives–one decision at a time.
well written Aurora! thanks for your response.