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12.2 Introduction Evolution of quality definition from internal measures to customer value Promotes a broader look at a company’s offerings and its customers. Questions/Issues: Why customers purchase? Why customers continue to purchase? Why customers defect from a company? What are their preferences and needs and how can they be satisfied? Which customers are profitable? Does the customer value low prices more than superior customer support services? Does the customer prefer next day delivery or lower prices? Does the customer prefer to purchase the item in a store that specializes in this type of item or from a large mega-store that provides one-stop shopping opportunities? Role of SCM Ability to respond to customer requirements one of the basic premises for SCM Relates to customer specific aspects such as delivery status or production status SCM also impact prices by reducing costs Dell, Wal-Mart EDLP strategies Customer Value Defines the SCM SCM strategy determined by: type of products or services it offers value of various elements of this offering to the customer. Examples: If customers value one-stop shopping = carry a large number of products and options Personal customization of products = flexible supply chain Supply chain needs to be considered in any product and sales strategy SCM strategy could provide competitive advantages leading to increased customer value 12.2 The Dimensions of Customer Value Conformance to requirements. Product selection. Price and brand. Value-added services. Relationships and experiences. Conformance to Requirements Market Mediation: Ability to offer what the customer wants and needs Costs associated with the market mediation occur when there are differences between supply and demand. Supplydemand = inventory costs throughout the supply chain DemandSupply= lost sales and possibly market share. Functional Items Product demand is predictable Market mediation not a major issue. Fashion items or other high-variability items N