Customer Focus and Demand

Customer Focus and Demand

• Businesses must manage supply and customer relationships to stay competitive
• Key concepts to consider include customer demand, supply and capacity management, customer focus, CRM strategies
• Additionally one must consider external factors affecting demand using PESTLE analysis
• Businesses require forecasting methods to anticipate market needs and make informed decisions

Learning Objectives

• Explain how demand influences business decisions and supply chain operations
• Recognize the role of quality, consistency, and pricing in customer choices
• Discuss the importance of balancing stock levels, capacity planning, and inventory management
• Understand how businesses build customer loyalty through CRM tools and strategies
• Evaluate how political, economic, social, technological, legal, and environmental factors impact demand
• Differentiate between qualitative, quantitative, and causal forecasting approaches and their applications in business decision-making

Understanding Demand

• Demand is at the core of every business decision
• Without customer demand, products and services would be purposeless, and supply chains nonexistent
• Demand indicates both what customers want and when they want it

Who Creates Demand?

• Demand starts with the end customer, who buys and uses the product
• Marketing and advertising do influence demand
• Marketing and advertising cannot guarantee long-term success if the product or service fails to satisfy customer needs

Example of Customer Satisfaction

• Two milk tea shops may have the same level of marketing but different success
• Customers prefer the shop that consistently delivers good quality, taste, ambiance, aesthetics and value

The 80% Rule of Customer Satisfaction

• Customers don’t expect perfection
• Customers prioritize consistency and reliability
• Customers are likely to remain loyal if a product or service meets at least 80% of their expectations

Why 80% Satisfaction and Not 100%?

• Perfection is unrealistic since no business can satisfy every customer all the time
• Minor flaws are acceptable if the core experience is positive
• Trying to meet 100% of expectations can be too expensive or inefficient
• If quality or service consistently falls below expectations, customers may stop buying, even without complaining

Example of Customer Considerations

• A Filipino commuter may tolerate occasional late arrivals from Grab, but with frequent delays, they might switch to JoyRide or Angkas
• Students might switch from Jollibee to McDonalds, KFC, or other fast food options if Jollibee is overcrowded

Managing Capacity to Meet Demand

• Companies must carefully balance supply and demand to avoid overproduction and underproduction
• Overproduction leads to wasted resources, increased storage costs, and potential losses
• Underproduction leads to missed sales, unhappy customers, and lost market share

Estimating Demand

Businesses must accurately estimate demand by considering:

• Sales trends over time
• Seasonal variations, for example, Christmas shopping rush
• Customer preferences, for example, new technology replacing old models
• Market conditions, for example, inflation

Example of Demand Estimation

• During Christmas season, demand surges for items like ham and queso de bola
• Supermarkets and local sellers must prepare weeks in advance to stock up
• Failure to stock up during peak demand will lead to loss of sales

Capacity and Resource Planning

Companies must have the right resources in place to meet demand effectively including:

• Materials: Ensuring raw materials are available for production
• Staff: Ensuring enough workers are available, especially during peak seasons
• Storage and Warehousing: Having the right facilities for inventory management
• Technology and Equipment: Ensuring machines and tools function efficiently

Customer Focus: Beyond Transactions

• Great companies aim to build relationships with customers, not just sell products
• A strong customer focus means consistently understanding and meeting customer needs

What Do Customers Expect?

• Product Availability: Items in stock when needed
• Timely Delivery: Minimizing frustration and business losses
• Customers expect next-day or same-day delivery through Lazada, Shopee, and TikTok Shop
• Fair Pricing: Competitive prices with sustained quality
• Reliability: Builds trust if a brand delivers on promises
• After-Sales Support: Easy returns, warranties, and customer service matter

Balancing Stock

• Supply chain management involves striking the right balance between stock levels and cost efficiency
• Advantages of having too much stock are readiness for customer orders and fewer missed sales
• Disadvantages of too much stock are high storage costs and risk of unsold goods
• Advantages of having too little stock are low storage costs and more efficient operations
• Disadvantages of too little stock are a risk of stockouts and lost sales

COVID-19 Pandemic Impact

• Many local pharmacies ran out of alcohol and face masks due to sudden panic buying
• Businesses with sufficient stock profited, while those that did not lost sales

Customer Needs at Different Supply Chain Levels

• Retailers want suppliers to provide products just in time, and don't want too much inventory
• Sari-sari store owners favor suppliers delivering small quantities frequently over bulk orders
• Wholesalers require flexible agreements with manufacturers to handle fluctuating demands
• Fast-food chains like Jollibee need steady supplies of ingredients to avoid shortages
• End Customers expect smooth shopping experiences, easy returns, and fast deliveries

Vendor-Managed Inventory (VMI)

• Some companies use VMI, where suppliers monitor and automatically replenish stock levels

CRM and Retention Strategies

• Building customer loyalty is crucial in competitive markets like the Philippines
• CRM involves strategies and technologies to manage and analyze customer interactions

Key Goals of CRM

• Improve customer satisfaction
• Increase sales and repeat purchases
• Reduce customer complaints
• Build strong brand loyalty

Use of Modern CRM Systems

• Companies can store customer purchase history
• Preferences and buying habits
• Feedback and complaints
• Communication history

Examples of CRM Use

• Jollibee, McDonald's, and Chowking use CRM to track customer orders and preferences through mobile apps and loyalty programs
• BDO and BPI use CRM to offer personalized financial products based on customer spending habits
• Globe and Smart use CRM to track customer usage and offer promos to retain customers

Benefits of Analyzing CRM Data

• Companies can predict customer needs and offer personalized experiences, improving long-term relationships

Demand Dynamics

• Customer needs and expectations are constantly changing
• Companies that were successful previously may struggle if they fail to keep up with changes in demand
• Customer needs in the Philippines keep evolving
• Businesses that fail to adapt risk losing customers

Supermalls vs. Online Shopping

• SM is a popular shopping destination for Filipinos because it offers convenience and variety
• With the expansion of Lazada, Shopee, and TikTok Shop, many Filipinos now prefer online shopping

Adapting to Change

• If SM fails to adapt by improving in-store experiences, offering exclusive discounts, or integrating online options, it may lose customers
• Filipino customers quickly shift to more convenient options
• Businesses must continually innovate to maintain competitiveness

PESTLE Analysis

• Factors that influence demand and customer behavior are Political, Economic, Social, Technological, Legal, and Environmental

Political Factors

• Government policies, tax laws, and trade restrictions can impact product pricing and availability
• TRAIN Law increased excise taxes on fuel and sugary drinks, with businesses like sari-sari stores and soft drink manufacturers affected

Economic Factors

• Inflation, unemployment and GDP growth can affect how customers can spend
• OFW remittances boost spending in malls, real estate, and businesses but during economic downturns, remittances drop

Social Factors

• Cultural trends and lifestyle changes influence what products people buy
• Example: the rise of Korean culture in the Philippines
• The popularity of K-dramas, K-pop, and Korean food has influenced Filipino spending habits
• This led to a boom in Korean beauty products, K-pop Merch, samgyupsal restaurants, and language learning centers

Technological Factors

• Advances in technology can create demand for new things while replacing outdated ones
• Mobile wallets like GCash and Maya have been quickly adopted by Filipinos, with cashless transactions becoming common even in palengkes and sari-sari stores
• Businesses that don't accept digital payments risk losing customers

Legal Factors

• Consumer protection laws and regulations shape product safety and advertising
• Examples include the Data Privacy Act and Online Businesses
• The Data Privacy Act of 2012 requires businesses to protect customer information
• Online sellers and e-commerce platforms must adhere to this act or face penalties

Environmental Factors

• Climate concerns and sustainability influence eco-friendly product demand
• Example: Plastic Ban
• Several cities in the Philippines have banned single-use plastics with fast food chains switching to paper or biodegradable containers

Forecasting

• Forecasting is the process of projecting the values of one or more variables into the future
• Forecasting allows businesses to make well informed decisions and plan ahead

Approaches to Forecasting

• Qualitative
• Quantitative
• Causal

Qualitative Forecasting

• Qualitative forecasting depends on judgement, past experience, use of existing past and present data
• Expert opinion and decision makers influence this

Common Methods of Qualitative Forecasting

• Expert opinion
• Market Surveys
• Life cycle analysis

Expert Opinion in Qualitative Forecasting

• Insights from industry specialists to estimate future outcomes
• Scenario Planning and the Delphi Method are examples of this

Market Surveys in Qualitative Forecasting

• Collecting data from the market at large
• Two approaches are structured and unstructured

Life Cycle Analysis in Qualitative Forecasting

• Examines each stages of a product’s life cycle to predict future demand and future performance

Quantitative Forecasting

• It uses a statistical and mathematical data sets based on past performance
• Time - Series Forecasting is under the Quantitative Forecast

Time - Series Forecasting

• It uses Mathematical analysis of past demand trends to forecast future demand
• Examples include past average, seasonal trends, and seasonal adjustments

Two Frequently Used Models for Time-Series Forecasting

• Moving Average
• Exponential Smoothing

Causal Forecasting

• Is a method of predicting future demand performance relationship between one or more variables

Regression Analysis

• Identifies and quantifies relationships between main variables

The Common Sense Approach

• Using the use of quantitative data and a qualitative approach, using knowledge and expertise

Factors Affecting Forecast Error

• Internal organization factors like historical sales performance, product marketing and promotion, and introduction to a new product
• Macroeconomic factors such as the political climate and government regulations, employment rates and industrial relations, interest rates, and inflation
• Market intelligence factors such as reputation for quality, market share and market saturation, and competitor's performance and strategy

Procurement and Supplier Focus

• Procurement and supplier focus is the third building block of supply chain management
• Procurement includes purchasing of raw materials, contracting out, hiring labour, and use of professional services

Procurement or Buying

• This is the act of purchasing goods and services in order to meet certain specifications by other departments
• Purchasing determines competitive advantage for an organization

The objective of Purchasing

• Supplying correct materials in manufacturing and processing to provide products to retail as needed is the basic objective

Chain Process of Procurement According to Lysons and Farrington

• The chain consists of receiving requisitions, receiving supplies, making payments, soliciting quotations, vendor selection ,negotiating with suppliers and placing orders
• The chain process includes setting specifications, inspection and quality assurance

Purchasing Perspective

• Building long term alliances with suppliers should be the goal of companies

The Role of Key Suppliers

• Suppliers will be able to provide advice on new technology and methods
• Suppliers will provide advice on new technology, methods and suggest alternative materials

Gerstner's Perspective

• Understanding customer needs and developing solutions is necessary

Requisition, Vendor Selection, Negotiation, Placing an Order

• After receiving the order bill, for repeatability and accuracy it is neccesary to check records
• In identifying possible suppliers gaining intelligence regarding the supplier's financial stability is necessary

Quotations and Negotiations

• Providing a shortlist of suppliers, details of specification, quantities and dates is helpful at the quotation stage
• With consumer goods re-orders will trigger automatically when stock levels drop

Reciept, Inspection and Quality Assurance

• Goods should be booked to avoid causing a lack of accountability
• In Just - In - Time (JIT) operations materials are delivered just as required
• There are steps to help ensure that goods and services will arrive

Quality Inspection And Control

• In the operations process control relies on supervisors to avoid making mistakes
• A basic approach is to follow and inspect goods inspection, and to investigate problems for re-occuring issues

Quality Assurance

• Quality Assurance(QA) follows a series of checks against the standard, including ISO checks
• The Purchaser and supplier must agree upon the QA manual in place

Purchasing Ethics, Fraud, and Environmental Issues

• In organizations today having a specific code of ethics is necessary for purchasing management

Purchasing Management Association of Canada

• Purchasing association with detailed code of ethics
• The ethics are honesty, professionalism, responsible management, serving public interest, and conforming to the laws
• Buyers should not be prejudice seeking to gain the maximum dollar of expenditure

Rules of Conduct

• In applying the rules of conduct members should follow honesty and integrity

Declaration of Interest

• Members should be impartial but declare if personal interests prevent them from doing so

Information

• Confidentiality of information in the course of duty must be respected, avoiding misleading information

Competition

• Competition should continue with suppliers, preventing operations that are not ethically friendly

Business, Gifts, and Hospitality

• It is not in good practice to accept high value gifts, or accept gifts that prevent an individual from having ethical integrity

Discrimination and Harrassment

• No members should willingly participate in unethical behavior with others

Environmental Issues

• Members should recognize responsibilities to issues related to the corporate climate

Fraud

• Organizations should be mindful of the possibility of purchasing fraud
• Fraud is intentional and includes deception

Signs of Possible Fraud

• Signs include employees not taking holidays
• Stock shortages, and employees suddenly in affluence

To Avoid Fraud

• The best protection against fraud is having a good support system

Environmental Purchasing

• Important step is the war to prevent pollution or safety hazards, reducing global warming

Make or Buy

• Strategy is to evaluate with sourcing, to see if one should "make or buy" product -Both Service and manufacturing organizations should take part in ethical practices

Manufacturing

• Many articles and books have been written on world class manufacturing
• Some people affiliate WCM with Japan's quality movements
• Some see it as sustaining to the highest global marketplace

WCM

• World Class Manufacturing(WCM) is applied to organizations who sustained in global competition

Implementation

• Improve electronic and communication systems will help sustain a future for companies

Project Brief

• A project team of about 10 people should be structured, including the heads of department

Useful Documents

• Capital Investment
• Annual operating plans
• Long term plans

Mission And Objectives

• It is necessary to define the mission statement in broad terms
• Low cost is a priority

Manufacturing Objectives

• Manufacturing objectives is to achieve as part of the annual operating plan

Strategic Factors

• Strategic factors are essential to longer-term implications such as customer references and future factors

Competitive Advantage

• To gain an edge a detailed competitive analysis will be necessary
• Analysis can be cost value, technology needed, and innovation

Information Needed

• Collection, and analysis of data

Stock Information

• Policy of materials
• Storage and distribution methods

Personnel Information

• Availablity of staff as well as their skills
• What amenities are required

Cost Information

• Costs of products to produce on site
• What are the distribution costs

Capacity Plans

• The organization's capacity, and how it will improve

Strategic Options

• Its helpful to reiterate on objectives for performance measures
• Strategic options refer to these objectives, it is ideal to have eight scenarios to be manageable for this strategy

Options Evaluation

• It should be efficient to have three main options available to see the best strategy for the future

Implementation Plan

• Success of strategy will depend on if changes are properly implemented
• An implementation plan describing the phasing, responsibility and prices is necessary

Business

• It is necessary to formally review progress being made, while formally being reviewed on an annual basis

Service Sector

• In order it is necessary to gain currency in outsourcing to improve the businesses performance
• Services include Information Technology, business operations and the management division itself of the organizations

Background of Outsourcing

• Business is exemplified by the Coca-Cola corporation, by producing and supplying products by maintaining standards of code

Rationale of Outsourcing

• Advantages of outsourcing
• Flexibility
• Key Release Management

Externalities

• Some external factors include the rapid technological advancement
• Globalization which enforces stronger competition and transparency

Outsourcers

• Outsourcers have a powerful proposition in relation to having excellent service level guarantee

Basu's Outsourcing matrix

• Uses a frame work of what is appropriate, as it correlates with the business' core strength

High Technology

• High volume will most likely be suitable in the current marketplace
• High technology will enable those of low to medium volume

Off-shoring

• Cost savings are a large benefit as there are time zone differences
• Risks might include damage to the infrastructure and an inadequate labor force

Insourcing

• Implies centralizing multiple operating units
• Main advantages of insourcing relates to the business maintaining control, it avoids third party margins, and is reversible

Service Level Agreements

• All service level must contain equal importance, and should be agreements

Agreements Example

• Forecasts should be done as well as shared, and there will be structure of incentives In e-procurement the various models are

E-procurement

• EDI or the Exchange Data Information networks will allow a means of communication
• Between departments information like B2E helps standardize operations like HR tools
• A website often open to various members help communicate or offer B2B business offers
• Web pages allow buying directly such as B2C

Other Expressions

• These items include online catalogues and reverse auctions