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How Supply Chain Can Improve Customer Service

Executive Summary

What does your supply chain have to do with customer service? Everything. A strong supply chain can be the key to helping you provide the customer service your company needs to succeed.

  • Improving customer service is vital if you want to retain and grow your customer base.
  • Partnering with a reliable supply chain can not only increase revenue, but it can also help you meet customer demand while improving customer loyalty.
  • Stand out from the crowd by developing a unique and cost-effective service model that can’t be easily replicated and is in tune with your customer’s needs.

What do companies such as Amazon, Chick-fil-A, Apple, Marriott, Starbucks, and American Express have in common? They are all known for excellent customer service. Customers tend to be loyal to businesses that have great customer service, and many are willing to provide referrals to their friends, family, and colleagues. Consumers will blindly purchase from these companies despite the fact that some of their prices are higher than the competition’s. It is the belief that if the customers are not happy with the product or service, the company will do everything it can to rectify the problem quickly; customers will not have to wait in line for an hour to get the problem fixed.

Customer service is not only important for consumer-oriented businesses but also for businesses that service other large corporations. Companies embrace customer service as a way to stand out from the competition when product differentiation is low or customers are fickle.


Below are key questions that every company, from a small-scale business to a global corporation, needs to ask about its customer service:

  • How do you measure customer service?

Companies measure customer service through surveys that measure satisfaction with the service provided to customers. Improving customer service has been shown to retain and increase customer base. It is a powerful tool if you are in a highly competitive market or when customers are fickle. A better way to measure customer service is by focusing on the loyalty of the customer base, that is, money spent by existing customers or renewal of membership.

  • Are you focusing on customer-facing employees or underlying operations to improve customer service?

Most companies assume that modifying scripts or providing more training or adding more staff to customer-facing organizations will enhance customer service. They are sadly mistaken. It requires improving underlying operations to meet or exceed customer requirements and doing this in a cost-effective fashion.

  • Are you able to improve service in a cost-effective manner?

When challenged to improve customer service, most companies do it with increasing costs, which impacts profitability. They soon find it hard to sustain the higher levels of service. They tend to offer one service standard to all customers, thereby underservicing critical segments and overservicing less critical segments. This approach results in increased cost and loss of satisfaction among customers who are essential for growth and profitability. Also, most companies fail to get customers to pay for the increased service despite the customers’ willingness to do so.

  • Is your service model unique and difficult for competitors to copy?

To win in customer service, companies have to develop a unique service model that competitors find difficult to copy. Otherwise, the advantage will be short lived and become industry standard, thereby increasing the cost for everyone. Developing a unique service model requires a deep understanding of customer requirements and the in-house operations that would be required.

  • What’s the best way to improve customer service?

To improve customer service, companies should segment customers, define and map service levels by segments, create a service model that is hard for the competition to match, and then convince customers to pay for the increased service. Supply chain organizations are involved in the delivery and can help in defining unique service models and estimating cost.

  • Do you include supply chain organization in customer service discussions?

Improving customer service is a team sport that requires participation and coordination among different functional groups. Unfortunately, supply chain organizations are typically kept out of service-level discussions. Most CEOs consider the supply chain as a support organization that is responsible for delivering services that the sales team promised to customers.

Not involving the supply chain has created a significant problem for some companies. For example, at a high tech company, the sales team promised to deliver hardware to a customer with remote locations in Europe within two days of being ordered. The customer included a severe penalty clause in the contract to ensure that the services were performed as promised. The high-tech company’s supply chain organization was not geared up to service all the locations across Europe. Its distributors were not able to deliver the hardware within the required two days to all of the remote locations. This created a lot of complaints from different locations as the sales representatives showed up without hardware. The high-tech company had to fly service representatives to remote locations. It was a mess. The company ended up paying a lot of money to the customer as a penalty.

It undoubtedly helps for supply chain organizations not just to be involved but to lead the service discussion. Though the sales and marketing team can help in classifying customers, the supply chain organization can point to different service models that can be offered to the client. They can also estimate the cost and effort associated with delivering the service. The sales team then can negotiate the price with the customer.

In addition to improving customer service, companies can boost revenue by bringing innovation quickly to market and being responsive to market demand. In the next chapter, we will review how supply chain can improve delivery of innovation by making customization, global sourcing, and market-driven planning a reality.

Excerpted with permission from The Supply Chain Revolution: Innovative Sourcing and Logistics for a Fiercely Competitive World by Suman Sarkar, copyright Suman Sarkar.

Bring It Home

Amazon’s customer service has spoiled millions of us rotten. Their lightning-fast fulfillment, friendly voices, and willingness to fix any issue is now the standard by which many of us subconsciously measure every other company. But, in truth, a lot of companies don’t have a supply chain in place that would allow them to provide the level of customer service we desire. In turn, this lack-luster customer service prevents them from building the die-hard customer fan base that companies like Amazon, Chick-fil-A, and Starbucks enjoy.

Has your company tried to utilize a supply chain to improve your customer service?

  • If so, how did your customers respond?
  • If not, what approach or model has your company adopted to ensure your customers come back?

Join the conversation below! ~ HarperCollins Leadership Essentials

Suman Sarkar

Suman is a Partner with Three S Consulting. With more than 20 years of international consulting experience, Suman has a proven track record delivering an innovative and strategic approach to the supply chain and sourcing practice with outstanding results.

Want to read more? Get the book!

When CEOs think about the supply chain, it's usually to cut costs. But the smartest leaders see supply chain and sourcing for what they can be: hidden tools for outperforming the competition. Steve Jobs, upon returning to Apple in 1997, focused on transforming the supply chain. He hired Tim Cook - and the company sped up the development of new products, getting them into consumers' hands faster. The rest is history.

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