1. Quality in Customer- Supplier Relationships
Quality & Performance Excellence, 8th Edition
Chapter 6
Quality in Customer- Supplier Relationships

2. Outline Demonstrate the importance of customer-supplier relationships
Identify the principles and practices of quality customer- supplier relationships
Give examples of effective partnerships between customers and suppliers
Compare a quality-focused approach to customers and suppliers to conventional organizational theories

3. The Value of Customers “Without customers, you don’t have a business.”
– Don Peppers and Martha Rogers

4. Supply Chain Purgamentum init, exit purgamentum
Materials and other inputs from suppliers
Use in production
Distribution and service to customers

5. Supply Chain
“We have a hard time understanding North American business practices. But the 3 defective parts per 10,000 have been included and are wrapped separately. Hope this pleases.”

6. Deming’s Emphasis on Customers

7. Customer-Supplier Chain

8. Business Case for Customer Focus
“Satisfaction is an attitude; loyalty is a behavior”
Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with.
It costs five times more to find a new customer than to keep an existing one happy.
Dissatisfied customers tell at least twice as many friends about bad experiences than they tell about good ones

9. Customer Engagement
Customer engagement – customers’ investment in or commitment to a brand and product offerings
Characteristics
customer retention and loyalty
Customers’ willingness to make an effort to do business with the organization
Customers’ willingness to actively advocate for and recommend the brand and product offerings
“We build customer loyalty by telling our customers the truth, whether it is good or bad news.”

10. The Importance of Suppliers
Quality of the supply chain affects the quality that customers receive
“Superior quality, consistent service, and competitive pricing are just the price of entry to get into the game.”
Suppliers must continually improve and align their operations with customer needs.

11. Principles for Customer-Supplier Relationships
Recognition of the strategic importance of customers and suppliers
Development of win-win relationships between customers and suppliers
Establishing relationships based on trust

12. Practices for Dealing With Customers
Collect information constantly on customer expectations
Disseminate this information widely within the organization
Use this information to design, produce, and deliver the organization’s products and services.
Measure customers’ perceptions of satisfactions of satisfaction and levels of loyalty and engagement
Exploit CRM technology
Don’t ignore internal customers

13. Collect Customer Information
Comment cards and formal surveys
Focus groups
Direct customer contact
Field intelligence
Complaint analysis
Internet and social media monitoring

14. Disseminate Customer Information
Share information with employees
Provide data to product designers and service managers

15. Use Customer Information

16. Measure Customer Satisfaction, Loyalty, and Engagement
Customer satisfaction measures may include product attributes such as product quality, performance, usability, and maintainability; service attributes such as attitude, service time, on-time delivery, exception handling, accountability, and technical support; image attributes such as reliability and price; and overall satisfaction measures.

17. Measure Customer Satisfaction, Loyalty, and Engagement
Commonly used factors to measure customer loyalty and engagement are:
Overall satisfaction
Likelihood of a first-time purchaser to repurchase
Likelihood to recommend
Likelihood to continue purchasing the same products or services
Likelihood to purchase different products or services
Likelihood to increase frequency of purchasing
Likelihood to switch to a different provider

18. Net Promoter Score
NPS is claimed to correlate strongly with market and revenue growth. The metric is based on one simple question, “ What is the likelihood that you would recommend us?” evaluated on a scale from 0 to 10.
Scores of 9 or 10 are usually associated with loyal customers who will typically be repeat customers (“promoters”)
Scores of 7 or 8 are associated with customers who are satisfied but may switch to competitors (“passives”); and
Scores of 6 or below represent unhappy customers who may spread negative comments (“detractors”).
NPS is the difference in the percentage of promoters and detractors.

19. Manage Customer Relationships
Develop close relationships and understand moments of truth - every instance in which a customer comes in contact with an employee of the company
Train customer contact employees
Develop good service standards
Deal with complaints

20. Service Standards
Service standards are measurable performance levels or expectations that define the quality of customer contact. Service standards might include technical standards such as response time (answering the telephone within two rings) or behavioral standards (using a customer’s name whenever possible).

21. Exploit Customer Relationship Management Technology
Segmenting markets based on demographic and behavioral characteristics.
Tracking sales trends and advertising effectiveness by customer and market segment.
Identifying and eliminated non-value-adding products that would waste resources as well as those products that better meet customers’ needs and provide increased value.
Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates.

22. Exploit CRM Technology
Forecasting customer retention (and defection) rates and providing feedback as to why customers leave a company.
Studying which goods and services are purchased together, leading to good ways to bundle them.
Studying and predicting which Web characteristics are most attractive to customers and how the Web site might be improved.
Streamlining processes around customers rather than traditional functions, resulting in improved flow of information and cycle times.

23. Guiding Principles in Supplier Relationships
Recognizing the strategic importance of suppliers in accomplishing business objectives, particularly minimizing the total cost of ownership,
Developing win-win relationships through partnerships rather than as adversaries, and
Establishing trust through openness and honesty, thus leading to mutual advantages.

24. Practices for Dealing With Suppliers
Base purchasing decisions on quality as well as cost
Reduce the number of suppliers
Establish long-term contracts
Measure and certify supplier performance
Develop cooperative relationships and strategic alliances

25. Quality Customer-Supplier Relationships in Action
MESA
Unique Online Furniture
EMC Corporation

26. Relationships to Organization Theory
Roles of customers
Resource
Worker (or coworker)
Buyer
Beneficiary (or user)
Outcome or product of value-creating transformation activities
Resource dependence perspective
Integrative bargaining
Agency theory

27. Outline Demonstrate the importance of customer-supplier relationships
Identify the principles and practices of quality customer- supplier relationships
Give examples of effective partnerships between customers and suppliers
Compare a quality-focused approach to customers and suppliers to conventional organizational theories

28. Homework
Case Study, pp
Bishop’s Seafood