SUPPLY CHAIN SERVICE STRATEGY

E d w a r d H . F r a z e l l e , P h . D .

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Customer Strategic Value Sales organizations are rarely initially fond of our valuations, rankings, and stratifications. Since their compensation is typically based on commission, any threat to potential service levels is met with strong cynical resistance. When our rankings highlight customers they are losing money serving, the typical push-back reaction is to claim that those are “strategic” customers. That may be true for some small subset of the unprofitable customers, but via our strategic valuation (Figure 3.11) we have a means for comparing the strategic AND business value of a customer. “Strategic” is a business buzzword that is often left undefined and available for loose and vague interpretation. As a part of assisting our clients in developing a formal evaluation of their customers, we consider a variety of factors in determining the strategic value of each customer. Those factors include but are not limited to (1) purchasing potential, (2) growth potential, (3) number of channels, (4) reputation, (5) innovation, (6) marketplace importance, and (7) off-season activity. An example customer strategic value evaluation for a large plastics company follows (Figure 3.12).

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