How Customers React To A Shipping Delay
Having a reliable supply of parts and components has become an important competitive edge in production business these days
. This is because many client-supplier relationships have switched to so called just-in-time logistics. Consequently, if an agreed delivery fails to materialise, within a couple of hours the clients manufacturing line stops and the customer is going to be contacting your sales team with a complaint. The results of a survey of 367 businesses in the capital goods industry shows how your clients could potentially react in this sort of a situation. This information ought to be handed to your sales team at their next sales training session.
Lean producers sometimes leave their suppliers, but not unpredictably. We retain all providers as long as we consider that they are seriously trying to improve their service. We only part company when we feel that they have given up trying to make any improvements. Stated the manager of the purchasing department of a sizable capital goods firm.
Roughly two thirds of all those asked reported that transport delays normally meant business losses for their own companies. In a 3rd of cases this amounted to over 3,500. In 2 thirds of the businesses affected by transport delays, this resulted in manufacturing stoppages; the typical costs of the delayed delivery was put at approximately 750.
Approximately 25% of the businesses asked changed supplier if there were transport difficulties with their existing supplier. 2 thirds returned to the previous provider after an emergency purchase, but one third stuck with the new supplier as a 2nd source of supply. This really is important information.
There's a 5% chance of losing a client completely with a single failure to deliver. In 5% of cases you can expect business losses through losing customers to competitors as a second provider.
Make sure you emphasise in your sales training sessions the importance of the sales team keeping in contact with the customer in these circumstances to improve the chance of your client returning to you.
As soon as there are delivery delays, the vast majority of companies (75%) try and acquire exactly the same product from a different supplier and 25% switch to an alternative product as far as this is possible. Roughly 3 quarters of organizations that have purchased an alternative product later return to the previous one.
There appears to be no correlation between the extent of the costs incurred by the delayed delivery and the inclination to change provider. Customers who incur high losses through delayed delivery do, however, tend to work in future with two providers instead of just the one.
A lot more critical than the costs incurred by a delayed delivery is not surprisingly the question of the frequency of shipping delays.
This is what the companies asked considered as unacceptable:
8% of people asked said that one failed delivery per calendar year was unacceptable. 48% of people asked said a couple of failed deliveries per year was unacceptable. 30% of those asked stated that 3 failed deliveries per year was unacceptable and 14% stated four failed deliveries per year was not acceptable.
Thus, just about half of those asked have already had enough if there are 2 failed deliveries a year and 78% of those asked don't excuse a third failed delivery.
What's fascinating is the question of whether clients would be prepared to pay a marginally higher fee to get a better degree of supply security. Only 3.5% of those asked answered yes to this question. Supply reliability is for that reason taken for granted and is separately rewarded by very few.
30% of those asked are supplied on a just-in-time basis by their suppliers. Surprisingly, these companies didn't document any larger costs incurred by failed deliveries than the other companies who are conventionally supplied. These organizations furthermore do not have a greater tendency to change supplier of product either. We are able to, therefore, conclude from this that a lot of just-in-time clients must hold unofficial stocks, so that they have a buffer when deliveries fail to materialise.
To sumarise, the careful management of clients who use just in time logistics and who've experienced a missed delivery by you is important. Careful briefing of your sales team on the consequences of not doing this should be regularly emphasised at your sales training sessions.
by: Richard Stone
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