Make good connections and watch profits rise

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Manufacturers can be up to 70% more profitable by connecting with all their trading partners through the Internet, says a report by Deloitte Research. According to the study of 850 manufacturing executives in 35 countries, manufacturers tend to focus on integrating only with suppliers.

“Today’s manufacturers were raised in a product-centric era in which competitive advantage was achieved through branding, quality and cost,” said Jim Kilpatrick of Deloitte. “Those companies that are able to integrate their supply chain and their customer strategies will achieve breakthrough performance.”

“Auto manufacturers such as DaimlerChrysler, Ford and General Motors are in the forefront of this movement, streamlining their supply chains through Internet trading exchanges, such as the Covisint exchange, and investing heavily in customer relationship technologies,” said Kilpatrick. “This will enable them to differentiate offerings to customers according to their value.”

The study, Digital Loyalty Networks: e-Differentiated Supply Chain and Customer Management, supports this assertion. Only one in 10 companies have established digital loyalty networks. Companies concentrating exclusively on improving the supply chain or customer relationships are faring well, and the few that integrate both enjoy much greater shareholder value – 54% and 19% higher, respectively. Linking supply and demand in online marketplaces can reduce cost of purchases by five per cent or more. This can amount to $2.5 billion for large manufacturers such as Boeing. Such savings could have a dramatic impact on the company’s earnings.

Without strong links between suppliers and customers, manufacturers will face serious threats as globalization and deregulation alter protected markets. Digital loyalty networks allow companies to prioritize customers so that the most valuable ones are served first.

“Over the past five years, many companies have invested heavily in getting their CRM, ERP and supply chain houses in order. This investment is yielding unprecedented enterprise-wide access to information about customers’ requirements, profitability and cost to serve.

“Digital Loyalty Networks are the next frontier of competitive excellence,” said Steve Pratt of Deloitte Consulting’s CRM practice.

The Deloitte Consulting study outlines some concepts integrating suppliers and customers:
• abandon the supply chain that offers similar service to all customers.
• give priority to the best customers.
• focus on the most profitable orders from the most loyal customers.

Deloitte Consulting is part of Deloitte Touche Tohmatsu, which provides assurance and advisory, tax, and consulting services through more than 90,000 people in over 130 countries. Deloitte Touche Tohmatsu serves nearly one-fifth of the world’s largest companies as well as large national enterprises, public institutions, and fast-growing companies

Deloitte Consulting

Deloitte Research

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