Uncertain times: be the one your customers run to

Last post we looked at 4 steps to start your supply chain risk evaluation. This post we’ll examine how you can be the one your customers and people not yet your customers turn to in times of uncertainty.

Knowing your customer’s greatest risks and being prepared to handle them provides you with an opportunity to protect your own revenue stream. If you’re looking at entering a new market, you can use the approach below as well.

Let’s take a look at what needs to happen.

1. Change your point of viewYou need to know unequivocally what your current and future customers will be experiencing and how it will affect their businesses. Not via assumption, but with solid data and direct customer discussion concerning what makes them nervous. You will need to also analyze risks that they don’t even know are coming their way.

   The change in viewpoint is critical. I’ve worked with companies that skip the data collection and the work in obtaining the voice of the customer since they feel they already know the customer, the customer’s concerns, and the market. While this may be true in part, often what is missing is the nuance. And if you don’t get the nuance correct, you can’t be the solution provider.

2. Conduct a SWOT analysis on your major customers or customer setsMake sure this is data based and not just conjecture or opinion. You’ll be evaluating gaps later and determining if you have or need to develop products/services to support expected change to help customers manage risk. Good data is crucial since you’ll be spending scarce resources to develop new support systems that need to be aligned correctly.
3. List the concerns/risks, how they may affect your customers, and their probabilities of occurringIdentify and clearly state what the underlying risk is. The wording must be clearly understood by anyone who reads the risk plan. The risk listed may be different than the customer’s wording of the concern. Your job is to uncover the root cause of the problem so that you can be confident that your solution sets that will eliminate the concern/problem while mitigating the risk.

   An easy tool to use is an Ishikawa diagram, also known as a fishbone diagram or a cause and effect diagram. While the six major “bones” are usually denoted by the 6 M’s (machine, manpower, milieu, measurement, method, and materials), change them to better aid your problem analysis. The “head” is the problem to be solved, which is usually the symptom that occurs and not the root cause. You need to get to the root cause.

   For the “bones”, since the environment (political, physical, regulatory, etc.) and the economy are the major sources of uncertainty, I would expand these. Let’s say that you are in an industry that may experience drawback of environmental regulations and that you currently manufacture your final product outside the U.S. The problem at the “head of the fish” may be loss of revenue. You now need to uncover everything that contributes to this, even if it runs

   counter to your opinion, belief, or hope. The future of your business relies on being able to supply product/services others will use to eliminate their pain. You need to uncover all the factors that may contribute to the problem statement listed at the “head” of the diagram. This is best done with a cross-functional team of experts.

   To uncover the factors that may contribute to your customer’s problem/concern/risk, your major “bones” may be: Money, Environmental Regulation, Political Climate, Regulatory Environment, Manpower, and Processes (more or fewer “bones” can be used as your situation requires).

   Depending on the contributing factors, you may find that more than one Ishikawa diagram is needed to understand which factors contribute how to the problem based on specific things happening or not happening.

   For example, if environmental regulations are removed, the exact regulation in question would be listed on the environmental bone. The factors outlining where processes may no longer work, or only sort-of work, would be listed on the process bone, potential factors in skill set elements and potential training voids would be listed on the process bone, and the factors in public opinion from different stakeholder’s points of view about the client’s product/service with the environmental regulations removed would be listed on the money and political climate bones.

   Reshoring of final assembly may be a major category with many factors listed on multiple bones.

   If the environmental regulation changed but wasn’t removed, or didn’t change at all, the problem may still exist, but the factors contributing to it may change. Options like this may call for multiple Ishikawa diagrams based on removal of environmental regulations, no change in environmental regulations, and the most likely change in environmental regulations.

   Use the 5 Why’s to go through the factors you feel are most significant and the largest risk to get to the underlying root cause.

   Your understanding of the marketplace, industry, and customer set now comes into play as you evaluate the factors and their combinations. The analysis will allow you to compare what your customers will need given specific circumstances to what you have to offer.

   Based on your available skill sets, or the skill sets in a nearby university, you may be able to take the factor set and have advanced testing run on them to uncover their importance. There are various statistical models and even the Design of Experiments may provide information that you can then use for insight. The results will lead to discussions and decisions on what you need to have ready or how you need to be ready for your customers under specific circumstances.

4. Perform gap analysesFrom your customer analysis, what would relieve the customer’s pain?

   Do you have an answer ready or do you need to develop or modify products and/or services?

   What gaps exist in your infrastructure to handle the potential new realities your customers will live in?

   What gaps are present in the way you market and sell based on the pain points that will surface under specific circumstances?

   Is your supply chain capable of handling required changes efficiently and effectively?

   Do you have early warning signals in place so that you can get your changes in position quickly?

   How will the relationship between you and your customer change in the new reality and are you both prepared for those changes?

5. Prioritize and executeKnowing isn’t enough. You have to act. If you don’t, someone else will.

   Create a prioritized list of changes to make in your organization.

   There are a lot of things you can do. What should you do?

   Create a strategic execution plan and put it into action.

With solid analysis, strategic discussion, and good planning, your business offerings will solve your customer’s pain and will also strengthen your competitive advantage whether the risk occurs or not.

Next time, we’ll look at risk in terms of uncertainty and our supply chains.

Key words and concepts: supply chain management, SCM, metrics, strategy, performance, Ishikawa, SWOT, alignment, results, revenue, alignment, processes, performance, data, analysis, risk, risk analysis, risk mitigation, competitive advantage, uncertainty, customer value

About the author: Cynthia Kalina-Kaminsky with Process & Strategy consults with and provides training for organizations eager to increase their competitive value by helping enable growth, align performance, make and move product (even when the product is electrons).