Manufacturers Can Increase Profits By Shifting Priorities

Compiled By Traci Purdum A global study says that manufacturers can be up to 70% more profitable by connecting with all trading partners through the Internet. According to Deloitte Research, the thought leadership arm of Deloitte Consulting and Deloitte & Touche, manufacturers typically focus on supplier integration alone, which is resulting in an enormous amount of value destruction. "Today's manufacturing executives were raised in a product-centric era in which competitive advantage was achieved through product branding, quality, and cost," says Jim Kilpatrick, global head of Deloitte Consulting's supply-chain practice. "Improving supply-chain performance with a focus on the supplier is more natural for them because that is what they know. However, in this Internet era, the power has shifted dramatically to the customer, and those companies that are able to integrate their supply chain and their customer strategies will achieve breakthrough performance." The study, Digital Loyalty Networks: e-Differentiated Supply Chain and Customer Management, surveyed 850 manufacturing executives in 35 countries. It found that only about 10% of the companies have established Digital Loyalty Networks, which involve integrating efficient supply-chain processes with effective customer-relationship management by leveraging new technologies to differentiate in real time the response to individual customers and segments. According to Deloitte Consulting, a well-implemented digital loyalty network enables companies to differentiate between customers and prioritize to ensure that the most valuable customers are being served first. The Deloitte Consulting study outlines some basic concepts for manufacturers to effectively integrate suppliers and customers:

  • Differentiate -- Abandon the traditional one-size-fits-all supply chain that yields similar lead-time and service levels for all customers.
  • Prioritize capacity -- Commit resources on a priority basis for the best customers.
  • Prioritize orders -- Fulfill orders on a priority basis. Not all sales are necessarily valuable sales; focus on the most profitable orders from the most loyal customers.
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