Turning Customer Demand into a More Predictable Supply Chain
How customer interviews challenged a same-day shipping strategy and revealed opportunities to buy to order.
The Business Challenge
An industrial parts distributor wanted to move from two-day to same-day shipping to gain a competitive advantage. A previous move from five-day to two-day shipping had increased inventory to just 1.2 turns. Delivery from a major supplier was unpredictable, ranging from one to six weeks, and management believed they were too small to influence supplier lead times.
What We Discovered
We questioned whether customers truly needed faster shipment for emergency repairs. If a failed part shut down an attraction or production line, a two-day delivery would still be too late. Yet customers had not requested rush orders or consignment stock. Interviews with the top 20 customers revealed that many could provide six to 12 months of advance notice. Extending the assessment showed that over 70% of demand could potentially be purchased to order.
How We Changed the Operating Model
The approach shifted from stocking more products for faster shipment to obtaining earlier demand signals from customers and sharing them with suppliers. When we asked the major supplier whether three months of advance notice would help, its operations leader welcomed the opportunity to reduce disruptive short production runs and offered a much more dependable expedited replenishment arrangement.
Business Results
The assessment identified the potential to purchase more than 70% of demand to order, backed by six to 12 months of customer visibility. Fifteen months later, the distributor acquired a competitor twice its size and was subsequently acquired by a larger international company.
Why It Matters
Same-day shipping would have treated the symptom by adding more inventory. It would also require a large investment in material-handling systems and warehouse layout. Understanding the customer operating needs made it possible to rethink demand planning, supplier coordination, and the basis of competitive advantage.