Customer service in the supply chain may not be the first thing that comes to mind when thinking about logistics, but it plays a vital role in ensuring the success of any business. Over the years, I’ve worked with hundreds of companies, and many still overlook the importance of customer service within their supply chain operations. Here are seven essential truths about customer service in the supply chain that every business should consider.

1. Most Companies Don’t Truly Understand Their Customers’ Service Needs

Many businesses believe they know what their customers want in terms of service, but in reality, they often lack a deep understanding. This misunderstanding often stems from inadequate customer interaction, a lack of surveys, and limited performance measurement. Even with decades of experience, I still see this issue persisting in many organizations. Companies need to regularly engage with their customers and gather feedback to truly understand their service expectations.

2. Customer Segmentation by Service Needs is Often Overlooked

Not all customers have the same service expectations. Some may require fast, 2-hour delivery, while others are satisfied with next-day service or even longer delivery windows. Segmenting customers based on their unique service needs is crucial because it helps businesses align their supply chain costs with the levels of service required. This segmentation can lead to more efficient and cost-effective service, as companies can tailor their offerings without over-delivering in areas that don’t need it.

3. Some Customers Are Satisfied with What You Might Consider “Poor” Service

The definition of “good” service varies between customers. For example, not everyone needs or expects same-day or next-day delivery. A personal example I often reference is ordering garden compost—timing wasn’t a critical factor for me, as long as the delivery was reasonably prompt. Understanding that different customers have different expectations is key. Setting clear delivery timeframes and aligning those expectations with what customers truly value is essential for optimizing service.

4. Over-Servicing Leads to Unnecessary Supply Chain Costs

While it’s tempting to aim for high service levels across the board, over-servicing can significantly increase supply chain costs. Too often, businesses fail to recognize that not every customer requires expedited delivery or premium services. By managing customer expectations and focusing on what really matters to them, companies can save money and improve overall efficiency. This requires visibility into supply chain costs and a deeper understanding of what customers are willing to pay for.

5. Limited Visibility Into Supply Chain Costs Leads to Underperformance

Many businesses don’t have sufficient visibility into their supply chain costs and performance, particularly when it comes to delivery. Without proper data and transparency, it becomes impossible to effectively manage the supply chain. Companies need real-time insights into their operations to identify inefficiencies and make data-driven decisions. Clear cost visibility is crucial to prevent underperformance and ensure that resources are being allocated where they are most needed.

6. Unhappy Customers Might Not Provide Direct Feedback

While happy customers may tell a few people about their positive experiences, unhappy customers tend to share their frustrations with many more people—often around 10 times as many. Additionally, many unhappy customers leave without giving any feedback at all, which can make it difficult to address issues. Social media platforms provide an opportunity to respond publicly to complaints, turning a negative experience into an opportunity for problem-solving and customer recovery. Engaging with customers in this way can enhance your reputation and improve service moving forward.

7. Every Business Has Non-Profitable Customers and Products

It’s important to acknowledge that not every customer or order is profitable. On average, around 10% of customers and orders are loss-making, and in some cases, this can rise to as much as 30% or even 80%. Conducting a cost-to-serve analysis helps identify these loss-making customers and products. By understanding where profitability is low, businesses can make data-informed decisions about which customers to retain, which products to discontinue, and how to better align their resources with profitable opportunities.

In some cases, sales teams may be aware of these unprofitable products or customers, but they continue to be maintained for strategic reasons, like acting as “loss leaders” to drive traffic or sales in other areas. The key is to make these decisions based on solid data and visibility into both costs and revenues.

Conclusion

Customer service in the supply chain is more than just about meeting delivery expectations—it’s about understanding and aligning with the true needs of customers while optimizing costs. By considering these seven key truths, businesses can improve efficiency, reduce unnecessary costs, and ultimately provide better service to customers. Effective supply chain management requires clear communication, accurate data, and a strategic approach to aligning service levels with customer expectations.