What do customers really say about your omnichannel supply chain performance?

One of the biggest challenges in omnichannel retailing, and for any other industry where selling and delivering occurs through multiple channels, is measuring customer satisfaction. Customers have expectations based upon the company’s brand and they expect it to be consistent across all of the company’s delivery channels. Too often, companies measure customer service performance using internally focused supply chain metrics that mean little to the customer. If you offer omnichannel choices to your customers, this makes understanding the impact that the supply chain has on customer performance harder to grasp, because customers often don’t rate the buying and delivery experiences separately, but rather as a bundled experience. Leading companies are trying to simplify the issue by analyzing their supply chain performance based upon what the customer really says. 

The following are two examples of retailers using customer-focused metrics.

The first retailer is considered a leader in omnichannel retailing with a good mix of online and in-store sales. They use just about every customer delivery channel possible: stores; click and collect; home delivery; and drop-shipping. They also use Net Promoter Score (NPS) to measure overall customer satisfaction and as a critical supply chain metric.

Recent customer analysis conducted by the retailer showed that they had better NPS results from customers who only shopped in single channels rather than across channels. As you can guess, this was quite alarming because they were fully committed to an omnichannel strategy. When they dug deeper into the issue, they found that delivery performance was inconsistent across all delivery channels and not in line with customers’ expectations of their high service brand. This doesn’t mean that customers were expecting the same performance (e.g., next-day delivery) across all of the channels, but rather that the customer experience was not uniform (e.g., delivery visibility and in-home service quality differed for similar products delivered through different channels).

The second retailer is enhancing its omnichannel strategy through more advanced home delivery capabilities, and was struggling with assessing its performance. Their traditional “all-day window” had a higher on-time delivery rating than the newly introduced 2- and 4-hour delivery windows. The retailer’s immediate thought was that they needed to focus on improving their on-time performance before moving forward. However, when they asked customers for feedback on delivery performance, their customer-focused metrics showed that the scores were higher for tighter time windows even though they weren’t as well executed as the all-day window. In the customer’s mind, they were happier sacrificing a little reliability to not have to wait at home all day for a delivery.

As you can see, it’s pretty easy to get caught up with traditional internally focused metrics and not understand what really matters to the customer. We can find ourselves wasting time on things that are insignificant to the customer or completely miss what is significant. This is why I am a big believer in the concept of the Customer Facing Supply Chain and what it takes to create one. These lessons apply to more than just the retail industry. How is your company using customer-focused metrics as part of your supply chain strategy? Let me know.

Geography Drives Home Delivery Strategy

It seems to me that many companies implementing home delivery strategies are trying to ignore the impact that geography has on cost and customer service. The fear of not offering, same day, next day or even a uniform home delivery service across a broad market or nationwide is driving these companies to make poor delivery strategy choices. It’s time to reassess the impact of geography and whether a uniform service and delivery strategy is best for your customers or company.  

For example, a company in the process of implementing a nationwide home delivery service was evaluating the delivery performance in 2 of its markets. One market (a region) was performing well in terms of cost and service. The other was struggling to meet customer service targets and keep costs down. When I looked at the geography of the 2 markets, it was immediately apparent that one was conducive to short lead-times, tight delivery windows and more reliable delivery and the other one was not. The better performing market was not only dense, it was compact and there were not a lot of physical limitations to moving easily throughout the market. The poorly performing market was much wider spread, with a few pockets of density and a lot of physical limitations such as bridges and lakes that constricted easy movement. All things considered equal, one market was destined to be a winner and the other one would struggle to adequately serve customers and cost more doing it.

While it would be great to offer all customers the same home delivery service levels, it may not be practical or cost effective and could possibly damage your customer relationships. Companies with divergent geographies in the markets they serve should consider multiple service strategies to best serve individual markets and minimize the cost to serve. For example, the geographically ideal markets should get the same/next day and one hour delivery window offerings. In the case of the less than ideal markets, the home delivery service offerings should be more limited (e.g. next day and four hour delivery windows) to help ensure that deliveries can be made as promised and deliveries costs are properly managed. My experience says that home delivery service policy can be localized and customers value delivery execution as promised more than they do making more aggressive promises and not consistently keeping them.

Another way to offer greater services and minimize costs in geographically diverse markets is to use multiple transportation modes in a home delivery strategy. For example, private or dedicated fleets might be highly effective in a dense part of a market, but not adequate for widely dispersed customer bases or specific regions. In addition, the ability to be more reactive to customers is a function of being able to service an area on a frequent basis. Commercial carriers can leverage their transportation density in particular lanes to offer faster service to specific customer geographies, and most likely more effectively too. The challenge in a blended home delivery transportation mode strategy is to ensure that the modes deliver a similar “door step” level of service and provide the electronic tracking and proof-of-delivery information critical to the customer’s home delivery experience expectation.

Home delivery is experiencing a renaissance of invention and there are many new delivery models being developed that are dramatically improving the customer experience. However, geography is a “natural law” that cannot be ignored in last-mile logistics strategies. How is your company adapting its home delivery strategy to address geographic diversity? Let me know.