Stephen Covey, author of “The 7 Habits of Highly Effective People,” once wrote about the concept of the “Emotional Bank Account.” It’s the idea that everything you say or do to someone either adds or subtracts from your relationship with that person. His ideas also apply to maintaining customer relationships. Today, Contract Manufacturing Organizations (CMOs) are judged by their customers on their Delivery in-Full On-Time (DIFOT) performance. Unfortunately, we hear more and more about companies struggling to meet customer terms – in full, on-time or both.
Struggling with DIFOT Performance
DIFOT underperformance can prove detrimental to customer satisfaction and loyalty. Today, clients have higher expectations and more complex demands than ever. McKinsey research found that complexity, as defined by SKUs per packaging line, had increased by more than 50 percent from 2008-2013. This complexity can make meeting DIFOT requirements all the more challenging.
Missing deadlines and requirements can have an adverse effect on your customer satisfaction and relationships. Behavioral psychology suggests that the stakes are high. Negativity bias is the human tendency to weigh negative experiences more heavily than positive ones in decision making. That said, it only takes a couple of missed deadlines to take a big bite out of your “Emotional Bank Account” with customers. This can have a lasting downward effect on revenue.
The Added Challenge of Quality Tests
Adding to the DIFOT problem is the extensive array of required quality tests conducted in the pharmaceutical manufacturing process. Since CMOs are viewed as an extension of their sponsor organization, they need to follow strict quality control (QC) procedures as well. The procedures may range from performing simple chemical experiments to more complex requirements of pharmacopoeia standards. You may end up with finished goods inventory parked in a warehouse, awaiting QC final release.
Lack of organizational visibility compounds issues. Without visibility, you can’t take steps toward continuous improvement. Losing your battle to gain line of sight can end in massive losses. Unfortunately, in an industry facing a rise in M&A activity, visibility within organizations has diminished. Global companies find their measurement abilities further impaired by financial and regulatory differences from region to region.
DIFOT is imperative to manufacturer success and growth, and DIFOT underperformance should not be ignored. Contract manufacturers need deep supply chain visibility and accurate forecasting to achieve positive DIFOT metrics.
Staying on top of DIFOT ensures customer satisfaction, trust and loyalty to you as a supplier by keeping that “Emotional Bank Account” in the black. Learn more about challenges that CMO’s face by checking out this Infographic.