Supply Chain Networks And Customer Retention

Running head: SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 1

Supply chain networks and customer retention

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SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 2

Question 1

The Supply chain management (SCM) is an essential aspect of the business that acts as

the centre of suppliers and customers since it involves the integration of the essential business

processes from the suppliers that distribute goods and services to the customers that buy the

goods and services for various reasons such as consumption purpose. Therefore, many industries

have to accept the Supply chain management in their business operations since the aspect helps

in the integration of the relationships between customer and suppliers (Chan & Qi, 2003).

We can only talk of the SCM only if there is a proactive and integrated relationship

between a supplier and a customer, and the integration of the relationship is across the whole

supply chain process. The relationship should not be considered between the supplier and

supplier or customer and customer because the supply chain will not be achieved. Therefore, the

supply chain is considered a focal point in the network of suppliers and customers (Misra et al.

2010). Basing on the ideology of Vollmann et al. (2005), a SCM is an essential aspect of the

suppliers and customers network because the involved activities are integrated and improved to

accomplish a sustainable competitive advantage.

For lots of firms, it has become obvious that SCM allows the flow of materials and

information, thus being an important tool. The Supplier Relationship Management (SRM) and

the Customer Relationship Management (CRM) offer a crucial connection throughout the supply

chain. For each supplier in the supply chain, the definitive measure of achievement for the CRM

procedure is the change in the productivity of segment customers. For each customer, the most

inclusive measure of achievement for the SRM process is the impact escalation of the joint

profitability by creating and developing the relationship. The functioning of the supply chain is

best achieved by the activities carried out by the suppliers and customers (Lambert, 2008).

Wal-Mart is an example of an organization that adopted the Supply chain management in

creating a competitive advantage for the company. According to Lu (2014), when you pass by

Wal-Mart store, you will witness one greatest history of operational and logical success.

According to the Supply Chin Digest, the Wal-Mart retail giant stocks products and services

made in more than seventy countries across the world, and at any provided time, the retail

organization operates in more than 27 countries with more than 11, 000 stores across the world

managing an average inventory of about $32 billion in a year. With this statistics, having an

efficient Supply chain management is vital for the success of the organization. The whole

organization is dedicated to the business model of driving out the costs of the supply chains, thus

allowing their customers to live better and saving money (Lu, 2014).

Over the past years, the firm has become the powerful and largest retailers recording the

escalated sales per square foot, operating profit, and inventory turnover. The Wal-Mart retail

firm has become synonymous with the idea of triumphs Supply chain management in its

changeover from a local retailer store to a comprehensive power store. According to the

executive of the Supply chain management Research Center (SCMRC) at the Walton College of

Business (WCB), he does not believe that there is a university, college, or any other learning

institutions in the United States that do not talk about the relationship between Wal-Mart and the

supply chain (Lu, 2014).

SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 3

Wal-Mart retail organization began its operation with an objective of providing

customers with the goods and services they needed irrespective of the time and place of

delivering the goods and services. Wal-Mart retail store was determined in delivering goods at

any place and at any time customers wanted the goods. The retail firm concentrated much on

developing and improving cost structures, thus allowing it to provide goods at a reduced cost

compared to other retail stores across the world. This was achieved by at first concentrating on

developing and improving a highly structured Supply chain management (SCM) strategy that

could help in exploiting and enhancing its competitive advantage.

Even in the early years of the firm, the firm’s Supply chain management played an

essential role in the company’s success. The founder of the Wal-Mart, Sam Walton, had different

Ben Franklin Franchise retail businesses before establishing the first Wal-Mart store in Rogers.

Walton selectively bought bulk products and transported to the established stores. The store’s

supply chain started with the removal of a few chain links (Lu, 2014). Wal-Mart started

operating directly with manufacturers and suppliers to cut down costs of the products and more

professionally managing the supply chain.

Walton came up with a supply chain initiative for the store, and the initiative was called

Vendor Managed Inventory. Suppliers became accountable for managing their goods in the Wal-

Mart’s warehouses. The organization embarked on the tactical sourcing to get goods at the

friendly prices from their suppliers, thus ensuring that demand is met due to the friendly prices of

goods for their customers. Also, the organization streamlined its SCM by contracting networks

and communication with suppliers in improving the flow of materials with a reduction in the

inventories. The network of the retail stores, warehouses, and global suppliers has been depicted

to behave almost like a single organization.

Cross docking is another inventory strategy adopted by the Wal-Mart firm for its success.

Wal-Mart suppliers are delivering goods to the organization’s allocation hubs where the good is

cross docked and thereafter distributed to the Wal-Mart stores. The element of Cross-docking is

an essential strategy for the firm since it keeps haulage and supply costs down, thus helping in

the reduction of the haulage time and elimination of the ineffectiveness.

Additionally, technology plays an essential role in the reduction of prices of goods, thus

benefiting the customers. Wal-Mart Organization adopted technology with the reason of

becoming an inventor in an approach in stores carry out tracking of the inventories and

restocking their shelves, thus allowing the firm to cut down costs of various goods. Besides, the

technology embraced by the firm plays a vital role for the firm’s supply chain since it serves as

the basis of their supply chain.

Therefore, Supply chain management can be accepted as an essential aspect for the

success of many organizations as seen from the Wal-Mart’s stores. The aspect helps in providing

a network of the suppliers and customers. The firm has benefited from the SCM because there is

a creation of a competitive advantage due to the reduced prices of goods and services. This was

achieved by adoption of variously discussed strategies such as innovative technology that is

allowing the company in forecasting the demand for goods and services.

SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 4

Question 2

Supply chain management (SCM) plays an indispensable function in the service quality

and retention of the customers. There are various strategies that are used by the SCM with the

intention of retaining customers. It is important to provide precise deliveries of goods and

services or for the services promised at the right time and place. For example, when the demand

of the customer ranges from a single pack to a complex integration service, a fulfilling agreement

is considered by the SCM with the reason of remaining reliable to its customers, thus

encouraging a repeat business with the customers (Shankar, 2011).

Besides, SCM is an essential aspect of the retention of the customers because of its ability

to reduce the touch points and escalating the stream of data to their clients. In the supply chain,

reduction of the touch points not only allows information to flow rapidly but also provides a

boost in the internal productivity of an organization. Besides, reduction of the touch points helps

an organization in building supply chain proficiency around precision and speed of data and

transaction. Through this strategy, real-time and transparent information is provided, thus

helping in receiving a quicker response from the manufacturers or suppliers due to the demand

for the goods and services that are required by the customers. Customers are satisfied with the

speed of delivery of goods. Therefore, it is vital to precisely fulfill the commitments of the

customers and operate in reducing touch points with the reason of getting information to the

customers (Castiglia, 2015).

It is the role of the SCM to ensure that information is precisely and promptly delivered to

the customers. Faster delivery of the information to the customer will help the customer in

identifying the quality of services offered by the organization, thus retaining them in the

organization. The speed of delivery of the goods and services is a key factor considered by

various customers when deciding to stick with an organization. Therefore, it is the role of the

organization to establish a reliable Supply chain management that can ensure quick delivery of

services to the customers. Having a supply chain visibility in an organization is also important in

the identification of the location of the products within the supply chain of an organization in a

real-time.

Also, a well-established supply chain helps in ensuring that there are not only simple but

also instantaneous transactions within the organization. Most of the customers will recommend a

simple and fast transaction than an over delayed transaction. A company will remain its

customers by ensuring that transactions are carried out within a short time, thus helping in the

retention of the customers (Lam & Ip, 2011).

Amazon is a good example of an organization that has a well-established SCM that plays

an essential position in the retention and service quality for their customers. Amazon is an

American Company with its headquarters located in Seattle, Washington. The company is best

known for its cloud computing, electronic commerce, kitchen products, stationeries, and many

more goods and services. The company realized the need for a supply chain, thus making it to

progress with a high percentage of customer retention. The established supply chain assists the

firm in ensuring that services are of high quality so that the customers can get satisfied with the

goods and services provided by the firm. Satisfaction of a customer is an essential aspect that

helps in the determination of whether the customer will remain in the firm or opt to go for

another organization (Aneesh, 2014).

SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 5

Amazon Inc. has a SCM that helps in the provision of progress updates of the company.

This helps the customers to access whole information of the company. Besides, after a customer

has placed an order on the Amazon website, the customer can get the same order by clicking on

the hyperlink “where’s my stuff” on their profile to understand if the order was shipped or not

shipped (Bacheldor, 2004). Also, the ideology behind the link is to understand the duration the

product will reach at the destination in case there will be no interference or confusion on the

way. The essence of proactive attribute by the supply chain helps the Amazon’s customers feel

confident, thus making them continue shopping in the Amazon website.

Additionally, Amazon Company established a reliable supply chain that is generous with

refunds in case the item, good, or product developed an issue during the shipment period. Other

issues that can lead to the refund include wrong color, size, and weight. The ability of the

Amazon in refunding money back to the customers or changing the item has enabled it to retain

many customers because many customers developed a trust with the organization through its

reliable supply chain (Booz & Company, 2012).

Moreover, the company has an established supply chain that plays an essential role in

cutting down their profits in exchange of customer retention. The company is considered an

expert in low-margin sales because of its strategy of undercutting the prices of other retailers as

much as 60% to 70% with its willing to provide its products away at a reduce cost. This has

attracted many customers to buy various products from the company with many customers

remaining in the company. Currently, the Amazon firm initiated a lending program that could

allow Kindle customers to borrow stationeries such as books from any public libraries. This

strategy has attracted many customers with its norm of proving high-quality services for their

customers. The company reduced the prices of their products, thus making the customers rely on

the products being provided by the organization. Although the strategy will lead to small profits

for the organization, it will help in gaining large and loyal customers in the long run. This will

after sometimes lead the realization of huge profits by the company.

Amazon Company will still be the leading company regarding the number of customers

due to the various strategies adopted by the supply chain within the organization. The retention

rate of the customers in the organization is high because of the reduce prices of products with a

reliable SCM that helps in a timely delivery of goods and services to their loyal customers across

the world. The flexibility of the supply chain in an organization plays a necessary function in the

retention of the customers hence a gain of profits for the company (Ibrahim, 2012).

SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 6

References

Aneesh, P. (2014). Case Study on Amazon.com’s Supply chain management Practices.

http://www.slideshare.net/aneeshp1/case-study-on-amazoncoms-supply-chain-

management-practices

Bacheldor, B. (2004). From Scratch: Amazon Keeps Supply Chain Close to Home.

InformationWeek, Business Innovation Powered by Technology.

http://www.executivemanagementskills.com/pdf/amazon.pdf

Booz & Company. (2012). The Mandate for Multichannel Retail: Evacuating Supply Chain

Models. Strategy & Formerly Booz & Company.

http://www.strategyand.pwc.com/media/file/Strategyand_The-Mandate-for-

Multichannel-Retail.pdf

Castiglia, F. (2015). 4 Ways to Increase Customer Satisfaction with Supply Chain Performance.

Web. 19 May 2016. < https://www.linkedin.com/pulse/4-ways-increase-customer-

satisfaction-supply-chain-frank-castiglia>

Chan F. T. & Qi, J. H. (2003). An Innovative Performance Measurement Method for Supply

chain management . An International Journal, Vol. 8.

Ibrahim, O. (2012). The impact of Strategic Supply Chain Flexibility on customer retention in

the B2B segment. Master of Operational Excellence and Supply chain management .

Erasmus University Rotterdam.

Lam, C. Y. & Ip, H. W. (2011). A Customer Satisfaction Model for Supply Chain Integration.

An Expert System with Applications. Department of Industrial and Systems Engineering,

The Hong Kong Polytechnic University, Hong Kong.

https://pdfs.semanticscholar.org/bef0/158295f5e7cd749c35e66d370d4c035cc968.pdf

Misra, V., Khan, I. M., & Singh, U. K. (2010). Supply chain management Systems:

Architecture, Design, and Vision. Journal of Strategic Innovation and Sustainability Vo.

6(4). http://www.na-businesspress.com/JSIS/MisraWeb.pdf

Lu, C. (2014). Incredibly Successful Supply chain management : How Does Wal-Mart do it?

Case Studies, Insights & Analysis. https://www.tradegecko.com/blog/incredibly-

successful-supply-chain-management-walmart

Lambert, D. M. (2008). Supply chain management : Processes, Partnerships, and Performance.

Business Logistics. Supply chain management Inst.

Shankar, V. (2011). Integrating Demand and Supply chain management . Supply chain

management Review.

http://www.pearsoned.ca/highered/divisions/text/cyr/readings/ShankarT3P2R3.pdf

SUPPLY CHAIN NETWORKS AND CUSTOMER RETENTION 7

Vollmann, Jacobs, R., Whybark, C.D., & Berry (2005). Manufacturing Planning and Control for

Supply chain management . Business & Economics. Bookman Companhia.1

Ed.

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