How to Gain a Valuable Outcome at the End of Your Supply Chain

Sam Klaidman July 5, 2023

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People from every walk of life have taken to being imprecise when using many words and terms.

For example, we “google” everything, yet Google is the name of a company. It's the same with Xerox™: it is such a common shorthand for photocopy that we don’t have to explain what’s meant when we use it.

Yet when it comes to the term “supply chain,” being imprecise makes a difference.

supply Chain + Distribution Channel + Aftermarket = Supply Chain

In the commercial world, the term “supply chain” has two meanings:

Each step in the process turns raw material into a product that a customer uses to create value.
Industry uses the steps to turn raw material into a product to create customer value before being put into a landfill or remanufactured. The distribution channel starts with selling and ends with support through end-of-life.

The Meaning of supply Chain

The supply chain includes these significant activities:

raw materials sourcing.
refining those materials into parts.
combining the pieces to create a product.

This is value in exchange — money for stuff.

The Meaning of Distribution Channel

The distribution channel includes these significant activities:

sales and order fulfillment.
product delivery.
installation, training, and acceptance testing.

This is value in use — money for availability.

The Meaning of Aftermarket

The aftermarket is all the activities that original equipment manufacturers (OEMs) and their dealer network perform to keep the customer's equipment working as designed and delivering the outcomes the customer purchased.

These activities include:

ongoing support.
providing parts and consumables.
performing return and repair services.
decommissioning or remanufacturing the product when it arrives at its end-of-life.

This is value in outcome — money for ongoing value creation.

The Importance of Supply Chain Specificity

Why is it important to specify which supply chain you are talking about?

Business is about responsibility and accountability. If you are talking about one type of supply chain and the listener is thinking about the other type, there is likely going to be massive confusion.

The supply chain that begins with a small “s” is one of the processes included in a manufacturing group. The person accountable for the process outcomes is usually a vice president of manufacturing, a plant manager, or a director of production.

The CEO or head of a manufacturing company or division owns the process that starts with a capital “S.” This person is responsible for the business's profit and loss statement (P&L) and balance sheet. This role is quite different from that of the VP of manufacturing.

Why Is the Aftermarket So Important?

The road to outcomes that create customer value includes aftermarket activities. Create bad experiences, and you create negative customer value, leading to customer churn and poor references.

If you create memorable positive experiences, you can create a customer for life.

But, if your business only does an adequate job, then customers are likely to talk with your competitors when they must purchase another item like the one they purchased from you.

In many industrial businesses, the senior team focuses the majority of its efforts on the pre-production supply chain and the core internal functions. These are the things that happen inside their business or that impact shipments and cash flow.

The remainder of their time and effort are focused on supporting sales, representing the company at industry events, and dealing with an advisory board or an actual board of directors. If after that they have any remaining time, they may think about the aftermarket.

This breakdown of time allocations is problematic in many ways. To grow, companies must be customer-centric, not product-centric.

Customer-Centricity

Customer-centricity is vital to short- and long-term growth.

Jennifer McGinn, senior director of product marketing at Informatic, wrote that customer-centricity goes beyond saying the customer is paramount: “It is about truly understanding the customer, so you can anticipate their wants, needs and communication preferences, create meaningful experiences, and build lasting relationships with them.”

Salesforce and Bloomberg Media developed a Customer Centricity Index to help CEOs determine how customer-centric their business is. The index looks at six key factors:

Anticipates customer needs.
Delivers exceptional customer service.
Cares about customers.
Offers relevant products and services.
Easy to do business with.
Honest with the public.

Likewise, Apple co-founder Steve Jobs, who understood the value of being customer-centric, said: "[Y]ou've got to start with the customer experience and work backward to the technology." He explained you do not start with, "'Let's sit down with the engineers and figure out what awesome technology we have.'"

Becoming customer-centric is hard for most business-to-business (B2B) companies but particularly for industrial and computer businesses that sell and service through independent dealers instead of internal employees.

Remember that each independent business has its own culture, policies, and procedures. If they represent more companies than yours, they will not want to change everything to accommodate you unless your business provides a large share of their income and profit.

Key Takeaways

Customer experiences in the aftermarket are critical to the business's long-term health.
The difficulty level is out-of-bounds if you sell and service customers by partnering with independent dealers.
Identifying and fixing problems in the aftermarket provides an excellent return on investment (ROI).