First I'll propose that,"the customer is not always right". I will provide a couple of examples, but most importantly, how do you communicate that fact to important customers?

ERP Gone Wild. We had been making good progress with a global strategic customer that measured our company on many metrics, which included a very tight On-Time Delivery (OTD) schedule, and customer service (CS). We had received and loaded a blanket PO and their ERP system provided releases against that PO once a month. To meet their OTD we had to 'stage' finished goods about two weeks in advance. Our OTD and CS scores were initially at the top of the ranking. Somebody in their IT department decided that sending PO's each week would be better than sending them once a month, and the problems began. At the next Quarterly Business Review (QBR) our OTD and CS had dropped a little, but we didn't see it as alarming, or a continuing trend. Two months later it was evident we were looking at a train wreck and the upcoming QBR was going to be a disaster. What happened? I scheduled meetings with manufacturing and the CS groups to get their feedback, opinions and suggestions. Manufacturing lamented that the 'blanket PO' had scheduled deliveries on the 1st and 15th of each month, which was a typical default schedule. But we had to many customers using those default dates, and with the OTD demands from this strategic customer, it was causing major problems. The CS group pointed out that we had no charges associated with these additional 'change orders', which was typical for standard customers, and therefore there was no financial impact to them for sending them so frequently. They also thought that the additional 'change orders' were really just creating churn, and at the end of the month really made no significant contribution to the schedule. I thought that was probably the most compelling piece of information and asked that the CS group actually make the comparison for the last two months to see if it was accurate.

I learned from the CS group that the actual schedule didn't change in any measurable way. The pull-ins and push-outs were canceling each other. However, it was costing us about $65 to process each 'change order', or $195 a month in additional cost with no value-add. It was also costing our customer about the same amount to submit the 'change orders'. And, I knew that there was nothing magic about deliveries on the 1st and 15th of the month, they just wanted deliveries twice a month. Armed with this data I arranged a pre-meeting just before the upcoming QBR and shared our data with the customer. They were surprised and reluctant to belive that sending 'change orders' more frequently wasn't providing a better schedule.

By the time of the QBR they had analyzed our data and agreed with our findings - more frequent 'change orders' were not resulting in a better schedule, only adding unnecessary cost for both companies. And, that we could change ship dates to the first and third Friday of each month. Within a year we improved our Supplier Rating from eighth place to second place.

The Perfect Storm. Creating an accurate forecast is not an easy thing to do, and a critical piece of data used to create a forecast is the input from your customers. It's always exciting to have your customer demand grow, but what happens when that customer demand explodes, at the same time their forecast to you is significantly off? We got a black eye, for not being able to make every ship schedule, and we did have some of our own internal bottlenecks. It was made more complicated because, we got shipments scheduled from their contract manufacturer (CM), but the forecast from the customer.

Once we got our own bottlenecks corrected I resolved to use the next Quarterly Business Review (QBR) with this customer to share the data we had collected on their forecast vs actual shipments scheduled by their CM. Myself and the VP Operations crunched the data and were able to provide charts and graphs that showed these forecast differences aligned with problem delivery periods. We were pleasantly surprised, because our customer was thankful we had provided the data. It turns out that they had been experiencing difficulties managing the inventory, pipeline, and shipments with their CM, and one other supplier had just recently brought this to their attention too. We contributed to being a part of the solution. By engaging in a Vendor Managed Inventory (VMI) program with the CM, it allowed real-time: demand, inventory and forecast information to be shared between the three parties.

It's important to resolve problems with customers. Make sure of your data, accept responsibility, suggest how each party can make changes, and what benefits could be attained.