New Customer-Centric Supply Chain Metrics

I spend 20 to 25 percent of my work year on the road. I hear a lot of speeches. And when supply chain folks speak about recent projects, they usually end up talking about a variety of financial, operational, and customer metrics to prove the success of the project.

The supply chain customer metrics I am used to hearing discussed are often contributors to the perfect order metric – orders shipped complete, on time, etc. Other common customer-centric metrics include things like backorders as a percent of sales or lost sales (percent of SKUs stocked out when new order lines come in).

It is a common place of supply chain management that we should build our supply chains backwards from the customer. So customer-centric metrics are critical. So it is with great interest when I attended the American Supply Chain & Logistics Summit last week, and heard two different speakers, from two different organizations, mention a customer-centric metric I had never heard of – the Net Promoter Score.

The Net Promoter Score (NPS) is based on the premise that a company’s customers can be divided into three categories: Promoters, Passives, and Detractors.

“By asking one simple question — How likely is it that you would recommend [your company] to a friend or colleague? — you can track these groups and get a clear measure of your company’s performance through your customers’ eyes. Customers respond on a 0-to-10 point rating scale.”

Promoters, who score a 9 or a 10, are loyal enthusiasts who will keep buying and are believed to be most likely to refer others, fueling growth.

Passives, who score 7 or 8 are satisfied but unenthusiastic customers, but they are thought to be vulnerable to competitive offerings.

Detractors, who score between 0-6, are unhappy customers that can impede growth through negative word-of-mouth.

“To calculate your company’s NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors.”

Benji Green, the Director of Global Sales, Operations, Supply and Inventory Planning at Avaya, a global provider of data and voice solutions, was one of the speakers that mentioned NPS.

Avaya’s vision is “to exceed customer and employee expectations while fueling profitable growth.”  Avaya implemented a rapid response collaborative planning solution from Kinaxis which helped allow them to move up from on-time shipments of 86 percent to 94 percent, and to reduce their past due dollar shipments from $42 million to $9 million.  These are traditional supply chain customer-facing metrics.

But interestingly they did not assume that these traditional metrics fully measured their customers’ satisfaction.  They used NPS to determine whether they were moving in the right direction.  They are.  Their Net Promoter Score went from 27 to 44.

I’m guessing NPS was traditionally largely used by marketing departments.  But it strikes me as an entirely logical thing for a supply chain organization to measure in determining whether their fulfillment efforts are really satisfying clients.

Incidentally, Avaya’s mission is also to exceed employee’s expectations.  They also had an interesting metric here – top performer attrition.  In an era when more and more organizations are talking about the difficulty of attracting and retaining supply chain talent, this is also a brilliant metric to track.  The talent gap was a key ongoing theme at the Summit.

I’m about to go on my holiday break. I’ll be back with more columns in the New Year.  Happy Holidays!