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Ask Art: Is “We are customer-driven” a good lean strategy?

by Art Byrne
February 2, 2017

Ask Art: Is “We are customer-driven” a good lean strategy?

by Art Byrne
February 2, 2017 | Comments (5)

Lean companies, and the people working in them, always focus on the customer. Every person’s daily work seeks to eliminate waste in order to deliver more value to the customer. This is not a cost reduction program, but a value increasing one. As waste is removed, for example, lead times can go from 6 weeks down to 1-2 days, all of which delights your customer. For the traditional batch company however, this approach is simply not possible. Because they know the customer is important, they say “we are customer driven” and train everyone to do whatever the customer says—even when doing so is bad for the customer and terrible for them.

The problems start on the phone when a customer asks: “How many Blue ones do you have?” Customer service rep replies: “We have 800 in stock.”

Ouch, now we are in trouble. Customer says, “Oh, that’s too bad, I need 1,000 Blue ones. So ship me the 800 now and let me know when I can get the rest.” Because we are “customer driven” we ship him the 800, which they can’t possibly use all in one day, and then back order the next 150 customers, who want 5-20 Blue ones as part of much larger orders for other products.

Next, we allow customer service reps to allocate inventory for future orders because we are “customer driven” and must assure the customer that they could get 700 Red ones shipped three weeks from now. The fact that we only had 750 on hand and that we sell on average 100 per day means that we will now back order almost every customer until we get Red ones back in stock even though we have 700 perfectly good Red ones on the shelf. Once they were “allocated” they were removed from inventory. The batch company with its six week lead time will struggle to get these items back in stock while the lean company with a two day lead time will not.

Or what about when the customer orders 300 bases and 800 covers? The “We are customer driven” company will just process the order because the “customer is always right.” Three weeks later the customer will want to return 500 covers and not have to pay the product return fee. The same holds true for large “excess” orders. The sales force is incented to sell big batch orders. When the orders come in, however, they cause massive disruptions in operations that can tie up equipment on long runs forcing back orders on other customers. The fact that we offer volume discounts into stock to get these orders just compounds the problem as these discounts almost always find their way back into the marketplace. This just cheapens the price for your product so it is bad for both you and the customer.

Then of course there is the question of who is the customer in the first place. For example, if you sell through distribution, is it the distributor, the distributors salesman demanding delivery by a certain date to make his/her monthly quota, or is it ultimate end user? Obviously if you are going to do the “We are customer driven” thing and aren’t sure who the real customer is you are going to make a lot of mistakes. This of course is compounded by the fact that most batch companies completely separate the people making the product from those that are buying it. The factory is told, “shut up and make the forecast” even when the forecast is always wrong.

The lean company, on the other hand, avoids all of these issues by focusing on the customer all the time. The waste is removed so that the customer can be connected directly to the shop floor making the product. Lead times are drastically reduced and customer service is much improved. In fact, you are more likely to see the lean company going to their customers and asking them to change the way they order so that they can deliver even more value to them. The “We are customer driven” boys would never even consider this but it is a very logical step in a lean turnaround.

So, the bottom line is that while “We are customer driven” may sound very logical it is often just a cover up for the long lead times created by the batch state and can cause more problems than it is worth. Go lean young man!

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
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Paul Cary February 03, 2017

Art, Thanks for the article. The internal customer supplier relationship for materials and information is as critcal to providing increased value by the identifying and eliminating of waste. I have always introduce folks to their internal customers and internal suppliers. If solks don't master the internal customer supplier relationship the external customer will ultimatly suffer.



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art byrne February 03, 2017
1 Person AGREES with this reply

Paul, thanks for your comment. You are right of course the internal customer relationship is extremely important in order to deliver value to the ultimate external customer. The traditional batch company struggles with this due in large part to its functional structure. The lean, value stream, flow company has built in advantages here but still must pay close attention to make sure the pull of the internal customer is answered right away with 100% quality.



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Justice February 19, 2017

Art, Thank you for the article.  I work in a process industry, so the customer/sales dynamics are not always so transparent.  The needs of the ultimate customer must be transmitted through the whole value chain.  Otherwise though improvement to delivery to internal customers may be improved (which is often a big opportunity Paul points out), you could still end up missing the larger objective if the local mandate is just to "make the numbers" for the next internal customer, not deliver value for your value chain's ultimate customer.



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art byrne February 19, 2017
1 Person AGREES with this reply

Justice, thanks for your reply. I'm glad you liked the article. Your right that process industries can be a little different. Even so the ultimate goal is to deliver value to the end customer. It is the pull of the end customer that should set everything in motion. This in turn will help highlight the waste and tell you where to focus.



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Justice March 03, 2017

Thanks Art.  I have found reflecting on this question to be very valuable.  What has been fascinating is discovering that leaders have different views of who the customer is and what they want!  Not surprising, I suppose but just goes to show how valuable asking the question is.



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