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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Most Valuable Customer Based on those myriad business, strategic, and cost-to-serve factors, our methodology computes a Most Valuable Customer ranking. We use that ranking to stratify customers into A, B, C, and D strata for means of optimizing supply chain service. An example MVC ranking and subsequent stratification follows in Figure 3.16. The notion that some customers may be less valuable than others nearly always meets with resistance. Some of the resistance is denial and false hope — denying there is a difference and falsely hoping everything works out in the end. Some of the resistance is sentimental. However, this evaluation is not a judgement of human worth, but an assessment of how each customer interacts with our business. Some of the resistance is inertial. Most customers have never been evaluated, and doing so requires energy. Optimizing service based on facts requires even more energy. Avoiding an evaluation is equivalent to making an evaluation that all the customers are of equal value and should be allocated equal service resources. When I make this point in a seminar, the popular retort is that every customer should be treated like an A customer. That typically translates to A customers being under-served and C customers being over served. Another question I get is, “What if a C customer finds out they are a C customer?” First, we do not have to let anyone know

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