Those of us who read supply chain magazines and books have read a lot about the wonder of “A” customers who supply the bulk of the companies’ profits and how to focus your supply chain to serve them efficiently. A strong argument can be made that where an organization should spend a significant effort and band width on “A” customers..
As almost in any manufacturing setting, workers in the field will tell you, the so called “B” customers will be the customers that keep the company sustainable. The whys of this are below. The “B” customers are significant larger number than “A” customers in most cases. From a supply chain perspective, your transportation providers are likely to know these customers on a one to one basis and handle the more nuance needs of the “B” customers.
Coincidently to writing this blog, TranzAct’s Mike Reagan, sent an email this week to his email audience telling about Sidney Yoshida. TranzAct is a supply chain firm which does supply chain consulting, LTL/TL sourcing and freight bill auditing.
In 1989, Sidney Yoshida essay entitled: “The Iceberg of Ignorance”. which said:
- Top Management knows 4% about the issues of the company.
- Next level of managers know 9% about the issues of the company
- Team Leaders know 74% of the issues of the company
- Front line worker know 100% of the issues of the company.
So this statement is a little bit over the top, but certainly true that many top-level managers just do not know (or sometimes cases care) about the details on how the market and customers really work. I have certainly seen disconnects from the knowledge in the field about customer needs and top management perceptions. The best run supply chains knows about the gap in information from the field and work diligently to obtain its inputs. Here is why significant time and resources should also be spent on “B” customers.
“B” customers are important to keep a company in business and sustainable. The usually large number of “B” customers are what covers the fix costs of the business. Since they are profitable customers the organization size is built around the demand needs of “A” and “B” customers. I have never seen a study of this, but without the “B” customers the “A” customers would not likely be profitable as fix costs will not be covered. While some “B” customers will come and go, many will be regular buyers of the company’s products. Their business is critical to the firm’s success. Many of these customers are on a first name basis with sales, customer service and sometimes even with production workers. They are source of demand information. When they complain, it is probably a good thing to listen to, heading off bigger problems and lose profitable business.
A lot and time and effort goes into designing a firm’s supply chain. Demand and supply planning, data management and automation take up time and money in most supply chains. In some cases, there is a disconnect supply chain suppliers, including trucking, and outsourcing partners. For the supply chain function well, this information disconnects must be factored in. I have time and time again found the field work outside the supply chain process to get necessary work done. Many times in practice, this information is put into the comment section of the order, so the work around can occur,
I am bit chagrined by the lack of discussion on “B” customers in supply chain literature. It is like they don’t exist. This is an area where there can be some improved processes.