Market-Driven Customer-Focused Supply Chains

Chain Reaction

What does it mean to be Market-Driven?

In the industrial age it seemed that building capacity to manufacture at scale and developing capabilities to innovate and build better goods than a competitor would be enough. However, one little detail is overlooked which is we have no mention of customers or the market. This is what came to be known as the ‘inside-out’ view of an organization that is a resource-based view. The alternative ‘outside-in’ perspective seeks to look at the organization from the customer’s vantage point. What does the customer experience tell you? To be market driven you need to know what your customers want. You have to identify your customers: who they are, where they are and what they want and are prepared to pay for. This is a market oriented viewpoint. Organizations that do this are said to be market-driven.

What is customer focus and why is it necessary?

Peter Drucker famously said “It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for services”. He went further to say “it is what customers determine as value,” that is important. In an age of production recognising that the customer is at the centre of everything the organization does may have seemed presumptuous. Many businesses focused on innovation, engineering and management science searching for wealth. These different foci are of course necessary but not sufficient because it is the customer who pays and determines value. “It is the customer who determines what the business is, what it produces and whether it will prosper” according to Drucker.

So why Market-driven, Customer-focused Supply Chains?
Well putting the two together it is necessary for the whole organization to be market oriented and have an outside in view of itself from the market. If you want to produce what the market wants you have to understand the signals to meet demand. In aggregate terms the market consists of buyers and sellers of which the organization is just one amongst many for the latter category. Many customers gathered in the market determine production by signalling what they want to buy at any given price. As a supplier it is necessary to know what customers want to meet demand. Demand determines what is supplied in the short, medium and long-term. Profit and return on investment ensures continuity of the business. Focusing on customer needs is essential.

Customers exert enormous pressure within and beyond the market. Recent societal movements to combat climate change, enact sustainable practices and conduct ethical trading have strongly influenced organization behaviour and supply chain practices i

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About Tony Hines and the Chain Reaction Podcast – All About Supply Chain Advantage

I have been researching and writing about supply chains for over 25 years. I wrote my first book on supply chain strategies in the early 2000s. The latest edition is published in 2024 available from Routledge, Amazon and all good book stores. Each week we have special episodes on particular topics relating to supply chains. We have a weekly news round up every Saturday at 12 noon. All things impacting global supply chains in that week, so come and join us on the Chain Reaction podcast. I look forward to seeing you there.
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