Value Delivery System

Value Delivery System

In its search for competitive advantage, the firm needs to look beyond its own value chain, into the value chains of its suppliers, distributors and, ultimately, customers. More companies today are 'partnering' with the other members of the supply chain to improve the performance of the customer value deHvery system.

customer value delivery

For example:

system

The system made up of Campbell Soup operates a qualified supplier programme, in which it sets

the value chains of the high standards for suppliers and chooses only the few suppliers that are

company and its willing to meet its demanding requirements for quality, on­time delivery

suppliers, distributors and continuous improvement. Campbell then assigns its own experts to

mid ultimately customers, who work

work with suppliers to improve constantly their joint performance. together co deliver vahic Marks & Spencer places its staff at its suppliers' sites to maintain quality

to customers. standards and improve the speed and reduce the costs of supplying to

Marks & Spencer stores.

482 • Chapter 11 Building Customer Relationships: Customer Satisfaction, Quality, Value and Servian

An excellent value delivery system connects jeans maker Levi­Strauss with its suppliers and distributors. One of Levi's biggest retailers is Sears. Every night, Levi's learns the sixes and styles of its blue jeans that sold through Bears and other large outlets. Levi's then electronically orders more fabric from the Milliken Company, its fabric supplier. In turn, Milliken relays an order for more fibre to DuPont. the fibre supplier. In this way, the partners in the supply chain use the most current sales information to manufacture what is selling, rather than to manufacture based on potentially inaccurate sales forecasts. This is known as a quick response system, in which goods are pulled by demand, rather than pushed by supply.

As companies struggle to become more competitive, they are turning, ironi­ cally, to greater co­operation. Companies used to view their suppliers and distribu­ tors as cost centres and, in some cases, as adversaries. Today, however, they are selecting partners carefully and working out mutually profitable strategies. Increasingly in today's marketplace, competition no longer takes place between individual competitors. Rather, it takes plaee between the entire value delivery systems created by these competitors. Thus, if Levi­Strauss has built a more potent value delivery system than Wrangler or another competitor, it will win more market share and profit.

Therefore, marketing can no longer be thought of as only a selling depart­ ment. That view of marketing would give it responsibility only for formulating! promotion­oriented marketing mix, without much to say about product features, costs and other important elements. Under the new view, marketing is respon­ sible for designing and managing a superior ­value delivery system to reach target customer segments. Today's marketing managers must think not only about selling today's products, but also about how to stimulate the development of improved products, how to work actively with other departments in managing core business processes and how to build better external partnerships. 11

Retaining Customers

Beyond building stronger relations with their partners in the supply chain, companies today must work to develop stronger bonds and loyalty with their ulti­ mate eustomers. In the past, many companies took their eustomers for granted,

Customers often did not have many alternative suppliers, or the other suppliers were just as poor in quality and service, or the market was growing so fast that the

company did not worry about fully satisfying its customers. A company could lose 100 customers a week, but gain another 100 customers and consider its sales to

he satisfactory. Such a company, operating on a 'leaky bucket' theory of business, believes that there will always be enough customers to replace the defecting ones. However, this high customer churn involves higher costs than if a company retained all 100 customers and acquired no new ones.