Supply chain business planners are adding to the burden of the software developer in the IT department by overcomplicating the business’s view of the market, says the consultant at the centre of Fonterra’s IT integration.
Sydney-based John Gattorna, a supply chain specialist at Accenture and client partner to the dairy giant, says companies “mill around” trying to define different types of customer — retail, wholesale, big, small — and usually end up with incorrect and excessive numbers of categories. This makes more work for the developer in the initial implementation and yet more when they have to start rewriting systems to cater for market segments and individual customers that don’t fit.
There are usually no more than three or four basic types of customer, by their behaviour, which any one business will have to deal with. The key is in understanding buyer behaviour, rather than surface categories, he says.
“If you’re selling beer, it’s pointless dividing ‘clubs’ from ‘wholesalers’, since a large club behaves very much like a wholesaler. They buy regular big volumes, for which they get a lower price, and they share information among themselves.”
The opposite kind of customer buys in small mixed lots, of variable volume, and often has very specific delivery instructions. You might identify a third class, but there are only 16 basic types of buyer behaviour across the whole business universe, Gattorna says.
Cultural differences only affect the ratio of the types of buyer behaviour encountered. One customer may, of course, exhibit more than one kind of behaviour in dealings with the same business; someone using a courier may send a regular daily package to head office but occasionally have an unexpected need for super-fast service.
If there are three kinds of customer behaviour, then three separate supply chains could be appropriate, with the same products or types of service appearing in more than one chain. Once a business has this better alignment to the market, a better plan can be put forward for the IT staff to implement, Gattorna says.
There will always be exceptional customers falling outside the defined market categories, he concedes, and they will have to be specially dealt with. But there will be far fewer than if the market was wrongly defined in the first place. Some ERP vendors try to persuade businesses that it is better to alter the business to align with their “best practice”.
The Fonterra project, Gattorna says, “is the best piece of strategy we’ve done in years, globally”. Australia and New Zealand’s largest companies are on the shoulder of the supply chain sophistication curve, just behind leaders in the US. But a real “master” supply chain company can be as much as four times as productive as a second-ranker, he says.
Accenture last week announced that it was closing its New Zealand office, with the loss of 98 jobs.