The Four Major Demands of All Customers
Freight management plays a large role in the customer experience, and as you probably know, customer satisfaction is more important than ever. Some companies and e-retailers dedicate their entire business plan to the customer experience. End consumers are now demanding such a high level of service that the whole supply chain environment is changing to accommodate them. The customer is and always will be a priority, but now customers of B2C and B2B businesses are demanding very similar things.
Freight management is important to the customer experience because product delivery is where your company actually makes contact with a customer. Delivery reflects your organization’s reputation and competency. A late or poorly timed delivery will turn away future business. Not only is freight management important for the customer experience, but it is also a place where many companies can cut costs. For any company, good freight management will significantly increase efficiency, which cuts costs, and improve service levels, boosting customer satisfaction.
CUSTOMER EXPECTATIONS ARE EVOLVING
Providing customers with a good experience is more important than ever and this trend will continue. In a few years, 89% of companies will compete almost entirely on customer experience. Consumers are demanding, more informed and, in turn, more selective about what they purchase. Catering to every customer desire puts a huge pressure on companies and proves to be very difficult for most businesses. However, the benefits of providing a good customer experience are undeniable.
Customer satisfaction is all about the experience vs. the expectation; for a customer to be satisfied, a business must provide a superior experience that exceeds or at least meets expectations. Customer expectations are similar in B2B and B2C business models. End consumers are demanding such high service levels that retailers and other B2C companies must make strict demands to suppliers, sending the need for great service up the supply chain. The way consumers engage, and buy is also similar, both B2B and B2C customers conduct thorough research prior to purchase, are plugged into the omni-channel environment, and expect a simple, customized buying process.
B2B companies are focused on improving the overall customer experience. While B2C companies have been measuring, analyzing and optimizing their supply chain to improve the customer experience for years, B2B companies are relatively inexperienced in this area. Given the higher financial value involved in B2B transactions, most companies can realize significant ROI by striving to improve the customer experience.
If you’re ready to start working on improving your company’s customer experience, freight management is a good place to start. Most businesses perform poorly in this area, either from a lack of funds or a culture where transportation is not viewed as a strategic part of the customer experience. Either way, freight management is critical to your company’s reputation, and ultimately, the customer experience.
“There are four major demands that all customers have, whether they’re b2b or b2c customers. there is a direct solution for each of these demands through freight management.”
THE FOUR MAJOR DEMANDS OF ALL CUSTOMERS
Shipping is a considerable part of the customer’s journey, it’s typically the first, most direct interaction between the customer and the company. Customer expectations are difficult to meet because many companies don’t have the capabilities to effectively manage their transportation, so monitoring performance and inventory can be difficult. Managing freight transportation will help you meet and exceed customer expectations and improve operations. Let’s take a look at how each customer demand can be addressed through freight management.
DEMAND #1: FAST DELIVERY
Goal: Move a shipment as fast as possible to exceed the customer’s expectations for quick delivery.
Roadblock: Logistics organizations often move slowly, trucks can only go so fast, and paying for faster delivery can be expensive.
Solution: The solution here can include two practices. One is the implementation of a logistics strategy. Making quick, informed decisions can save a company up to 40% on logistics costs. The supply chain is always changing so it’s important to keep analyzing performance. Developing and implementing a formal logistics strategy will add flexibility to the decision-making process and increase error-response time. A good strategy will let you predict service disruptions and know how and when to respond to them, so service levels don’t drop.
With a good strategy in place, not only will you see faster decision-making and increased error-response time, but you will benefit from faster cycle times. Then, you can focus on transportation; trying to optimize freight management without first optimizing the logistics organization will be difficult.
The second practice is to make expedited shipping a part of your regular transportation strategy. With faster shipping, your cycle times decrease, your products are safer, and you have the ability to hold less inventory. Expedited is the best way to ensure speed of shipments and guarantee on-time delivery, as long as your logistics strategy can make up for the extra costs accumulated in this method of transportation.
For every business, there are different logistics needs and different strategies. A static logistics strategy will cause serious harm to the customer experience and the bottom line. Slow delivery will do the same. Implementing a formal logistics strategy or using expedited shipping are the best ways to meet customer demands for fast delivery, but when working together, they can save you money too.
Expedited Strategy Example: To effectively use expedited shipping as a regular part of a transportation strategy, it is not necessary to send every shipment this way. In the automotive industry, the success of the government’s Cash for Clunkers program caused companies difficulty in getting the right cars to the right dealerships on time. They used regular expedited shipping to fix this problem and, generally, were able to get cars where they needed to be; even after the program ended, and inventory was depleted, car companies were able to utilize expedited shipping to replenish inventories. This ensured a high level of service was maintained and their customers continued to be satisfied.
DEMAND #2: CHEAP/FREE DELIVERY
Goal: Providing value to the customer by eliminating or significantly reducing the cost of shipping.
Roadblock: Transportation costs are hard to control without the proper people and software, which can be expensive.
Solution: Even though speed is a common demand, 67% of people prefer cheap or free shipping to fast shipping. One area where your company can reduce freight costs is through inbound freight management. It’s one of the most overlooked aspects in logistics, which is unfortunate because on average, a company can potentially save between 20 – 58% on inbound freight spend. Most companies aren’t ready to handle inbound freight because it is extremely complicated. In fact, 90% of shippers say they are not prepared to manage inbound freight. You may not have the capability to fully manage inbound freight, but you can start seeing savings by managing some parts of the inbound supply chain.
One simple step you can take is to move from a Freight Paid to Freight Collect payment method. In Freight Paid, the cost of shipping is paid by the shipper, but in Freight Collect, the cost of shipping is paid by the consignee. Be mindful that the one who immediately pays for shipping is not the one who’s ultimately responsible for the cost of transportation.
By controlling inbound freight, you decide how it’s shipped. Often the true cost of transportation is hidden in the price of a product, usually between 4 – 7% of the total cost, and some companies use shipping as a source of profit. Once you control your inbound freight, you better manage the transportation decisions, choose the right carriers, optimize their lanes and realize cost savings that can be passed on to your customer.
You’ll also find cost savings from inbound vendor compliance programs (VCP). VCPs are more difficult to implement because it requires a large investment of time to collaborate so thoroughly with vendors, but many times it is necessary. A VCP is a plan, agreed upon by supplier and consignee, for the supplier to meet certain benchmarks for success in order to provide as much value as possible to the end consumer.
These programs are usually successful, as long as you collaborate to solve problems and improve service, rather than fight over requirements or charge fees for bad service. Today, VCPs take a strategic approach, focusing on flow and efficiency, using advanced cloud-based software to predict compliance issues before they occur. When executed properly, a VCP will significantly improve the service of your suppliers and further reduce costs of your inbound freight.
To effectively manage inbound freight, you need full organizational commitment and leadership support. The main reasons inbound freight is almost universally inefficient are:
- It’s not a high priority
- It’s too difficult
- There’s no visibility into processes
- There are organizational silos
- A vendor doesn’t want you to manage inbound freight
These obstacles can be overcome with full organizational commitment, especially leadership support. With help from C-level executives, you can plan, organize and implement a strategy that will utilize the entire organization’s skillsets to reach your service goals.
By finding success in inbound freight management, you will see significant cost savings and offer more reliable service. These cost savings can help you meet customers’ demands for free or reduced shipping costs.
Vendor Compliance Program Example: To increase vendor compliance levels, a specialty retailer started focusing on collaboration. They simply distributed a PDF outlining all of their compliance guides and met with their vendors to discuss compliance issues. They stopped charging for service issues out of the vendor’s control, such as weather or traffic. The company soon achieved compliance rates between 95 and 100 percent, significantly reducing the overall costs of inbound freight. This cost savings was then able to be passed on to their customers.
DEMAND #3: EASY RETURNS
Goal: Provide a convenient experience for your customer.
Roadblock: Returns are unpredictable, difficult to manage and expensive.
Solution: Reverse logistics is a type of freight management that most companies are losing money on. Returns have a significant impact on the bottom line, so a good reverse logistics program generates maximum value from each item returned. An average retailer’s reverse logistics costs for consumer goods are equal to 8.1% of total sales. In some industries, such as book publishing, catalog retailing and greeting cards, over 20% of all products sold are eventually returned to the vendor.
For B2B companies, such as manufacturers, returned goods may also need to be refurbished and redistributed, which significantly increases supply chain costs and slows down cycle times.
Reverse logistics is an expensive, complex challenge and many companies avoid managing it. It requires an efficient, sustainable approach to resolve each individual item-level issue and also requires full support from senior management, which is rarely provided. But reverse logistics must be part of the freight management strategy to better the customer experience. 69% of customers think of great customer service as the quick resolution of problems.
For example, consumers who order clothes online typically order several different sizes and colors of the same item. Then, they’ll send back the products that don’t fit or aren’t the right color. If this process is difficult, they won’t order from you again. To ensure this process is easy, and the customer’s demands are exceeded:
- The shipper should take responsibility for the items being returned
- Credits to customers’ accounts must happen quickly
- There should be no-hassle return and exchange policies in place
- Operations should be streamlined with visibility into inefficiencies
Managing returns can provide other benefits too: less environmental waste, better inventory management, and more value gained from returns. However, the main benefit of focusing on reverse logistics is providing a customer experience that is quick and convenient from start to finish.
Reverse Logistics Example: A premier retailer was dealing with large fluctuations in returns volume, especially during peak seasons. Their returned items went to a distribution center but were scanned into the system at the store level. Processes for dealing with returns at the central return’s facility were manual and inconsistent. Eventually, all processes were automated through TMS-WMS integration and returns were received and processed at the same central return’s facility. This improved transit time, staffing, warehouse operations, reduced overall cycle time, streamlined operations and provided visibility into reverse logistics processes. With these improvements, the retailer was able to credit customers’ accounts faster, improving service, and get dispositioned items back to the store faster, adding value to each item, all while saving costs on transportation.
DEMAND #4: CONSISTENCY (TRUST)
Goal: You want customers to trust that you’ll meet all their expectations.
Problem: The supply chain is always changing and prone to disruptions that can sometimes be long lasting. Items can get lost or stolen or mixed up. Carriers aren’t always dependable. There are many variables in freight management.
Solution: A sound, technologically advanced transportation management system (TMS) is absolutely necessary for any logistics operation in order to meet all of the demands listed above. This software will measure, and report detailed shipping records for inbound and outbound freight, monitor vendor and carrier performance, optimize routing and mode choice, and most importantly, help give you end-to-end visibility of freight movement. Not to mention, a TMS can reduce overall transportation costs by 30%. If implemented and used properly, a TMS is invaluable to your logistics objectives.
Visibility into logistics functions is by far the biggest advantage of using a TMS. It allows you to identify opportunities and challenges to adapt logistics management and make better decisions. If you didn’t know what was wrong with your process, how would you change it? You need to have visibility into existing processes before you can even develop a transportation and logistics strategy. Having visibility is the basis of optimization. It’s what allows you to plan, monitor and implement any and all changes within your logistics operations.
Supply chain visibility from TMS software will allow you to track carrier and vendor performance. Once you collect and analyze this information, you are able to choose the carriers who provide the best value for you, not just the lowest costs. You can optimize for mode and lanes, too, and track any important key performance indicators (KPIs).
A TMS will also help you predict, or at least mitigate, supply chain disruptions. Predictive analytics based on past data will show potential disruptions to delivery, so, you can prevent disruptions before they happen or respond to them more quickly when they do happen.
Using a TMS will provide you with visibility into inbound and outbound transportation processes. With this data, you can begin to optimize your logistics operations to confirm that your service levels stay at a high level and your customer is consistently pleased with the service they receive.
TMS Visibility Example: A medium-sized shipper was moving products relatively short distances across the northeastern part of the U.S. using dry vans. They assumed the most cost-effective transportation mode was to ship full truckloads that split into LTL shipments at terminals near their final destination. After implementing a TMS and analyzing historical shipping data, they realized this was wrong. It turned out it was much faster and more cost-effective to use LTL carriers for the entire journey instead of just the last leg. In this way, the shipper was able to pass on time and cost savings to their customers.
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A focus on these four customer demands will help your business boost customer loyalty significantly. You can build a consistent customer base and focus on future business, create a good reputation and gain new customers all while saving money and improving overall service.
Transportation management is difficult and internal management of freight is just not realistic for some organizations. To maintain a high level of customer satisfaction, many outsource transportation management to a 3PL that has scalable freight solutions. Partnering with a 3PL allows you to focus on your core business, instead of wasting time on transportation. 3PLs can help you implement and manage TMS systems, customizing them for your specific needs. They will utilize their internal teams of experts and buying power to help you meet the ever-changing demands of your customers.