A savvy sports analyst possesses the wonderful ability to finesse and frame the data generated during a season into statistics that highlight a player’s and a team’s most nuanced behavior, leading to new understandings of how to win. The same can be said for an organization’s supply chain analysts tasked with manipulating transactional supply chain data – which can also be finessed and framed to provide actionable insights into customer behaviors, leading to improved company revenue and profit. For this to be accomplished, the supply chain data must be enriched with data from other departments. It remains fairly common for the different departments within an organization to keep their data compartmentalized. A typical view is that marketing creates opportunities to sell, sales engages and closes on those opportunities, and supply chain fulfills customer orders. Typically, each area relies solely on its own data to establish and improve the processes that work best for their departments. Unfortunately, siloed data – like siloed departments – miss the benefits of shared perspectives and insights, ultimately leading to a multitude of missed opportunities.
Using supply chain analytics to go further
When discussing supply chain analytics, many people focus on the descriptive statistics (i.e., what happened?) surrounding distribution, demand variability, product velocity, transportation procurement, inventory placement, handling, etc. These are all necessary areas of investigation and improvement, but companies often miss opportunities when they fail to incorporate these beneficial measurements beyond internal operations. In reality, transactional history reveals how a customer behaves, which can determine how you should market to a specific customer in addition to the operational strategy that should be implemented to best serve those customers. By examining customer order history (e.g., frequency, size, mix, geography, payment history) and enriching it with some marketing attributes of the customer (e.g., size, reach, spend), new insights can be generated for customers, allowing the marketing and sales teams to develop groups or corporate “personas” that can be extended to the development of new engagement strategies for increased revenue and profit. Traditional marketing data such as surveys, questionnaires and market studies all have their place and can help provide insights into what customers want. However, supply chain data can be the information that shows how customers behave and react to your product offerings. The identification and implementation of customer grouping can help identify underserved customers and markets that can be encapsulated for revenue growth. Additionally, margin analysis, or operational finance, is another area that can benefit significantly from this approach. As customer transaction history is developed into personas, it is beneficial to understand the total cost to serve those personas and how each on contributes to overall corporate profitability. While this concept it is not new, it is often overlooked, especially if expanding your customer base is a leadership focus. A cost to serve analysis adds an additional dimension to the persona and provides a deeper insight into ways to change behaviors or adjust offerings to more profitably engage these customers.
Segmentation creates stronger alignment between departments
Customer segmentation traditionally begins in marketing. Unfortunately, most departments do not recognize how enriching an organization’s marketing data with transactional data leads to enhanced customer behavior insights. The transactional volume, frequency, quantities, mix, and geography provide the behavioral attributes that can be associated with the “demographic” marketing data. The insights emerging from the study can be used to bring marketing, sales and supply chain closer together, with the marketing team developing the strategies around customer offerings, and sales and supply chain developing the necessary method to support the offering with strategies for engagement and execution. This collaborative process is depicted in the following diagram. While marketing, sales, and supply chain departments have performed segmentation studies in the past, they can leave value on the table by being siloed. For example, supply chain organizations are typically focused on serving the larger, often most voluminous or frequent clients where the bulk of their business lies. “Studies” of this nature fail to take advantage of the synergies that can be developed when the data and expertise from key departments are brought together.
Start with marketing
To ensure you’re getting the most out of your segmentation assessment and cost to serve evaluation, help the marketing and sales teams incorporate supply chain data in their own analytical processes. Working with them to facilitate the integration, manipulation, and visualization of the data will lead to new market offerings and sales approaches. And the results will be better alignment between departments, a refreshed view of the customer base, and new ideas to grow revenue and profit.
Hugh Walters is a Sr. Manager in Chainalytics’ Integrated Demand and Supply Planning practice. He is an expert in applying Six Sigma and Lean principles to supply chain planning improvement initiatives.