SUPPLY CHAIN SERVICE STRATEGY

40 | R i g h t S e r v e ™ RightTerms™ | Service Terms Optimization I have heard it said, “Either manage customers or they will manage you.” The supply chain service policy is the first step in proactive customer and demand management. The supply chain service policy is like a contract between the supply chain organization and the customers and business it serves. It defines the service targets for each supply chain channel and customer/SKU strata. It sets the service requirements for each supply chain activity including inventory management, sourcing, transportation, and warehousing. As such, the supply chain service policy is the foundation for supply chain planning. Nonetheless, the vast majority of organizations operate without a supply chain service policy. Supply chain service policies typically reflect the culture and supply chain sophistication of an organization. We characterize supply chain service policies four ways. There is the “ad-hoc” approach where there practically is no service policy. The typical service policy stated in those organizations goes something like, “We just do whatever the customer wants.” Next is what we call “well-defined exuberance” where the service policy is stated but not quantified. A typical service quote in those organizations might be, “Our service rolls our customers’ socks down.” Another approach is “one-size-fits-all”, where there is a stated and quantified policy but no segmentation. There you might hear, “We will provide 100% availability for 100% of our SKUs for 100% of our customers 100% of the time and make our