Contrary to common wisdom, quick response and standardization aren’t always the most important factors when it comes to improving the bottom line from a supply chain perspective.
What matters most is differentiating between customers’ varying needs, and accommodating those differences, according to David Peng, associate professor of Decision & Information Sciences.
Consistency is more likely to yield re-orders for Original Equipment Manufacturers (OEM), who tend to buy in bulk, while the extra costs associated with quick delivery are more easily absorbed by distributors and re-sellers, Peng and a co-author determine in research published in 2017.
“Distributors might have more random orders from customers,” Peng says. “When someone orders something they don’t have in the warehouse, they want it very rapidly. The speed of delivery creates more value for re-sellers, as opposed to OEM customers, who tend to be more geared toward basic order fulfilment.”
By looking closely at customer characteristics, companies can tailor their operations for the best financial outcome.
Peng, an associate editor for several leading business journals, conducts research in the supply chain field, with a focus on how the use of technology can enhance financial performance for manufacturing and service organizations.
Source: “Exploring the Impact of Delivery Performance on Customer Transaction Volume and Unit Price: Evidence from an Assembly Manufacturing Supply Chain,” Production and Operations Management.