Practitioners, consultants, and academics all agree that "customer value" is an important element of the supply chain. They might even agree that it is the most important element. After all, logic would argue that if "value" is not delivered to the consumer or end user, then the supply chain fails in its fundamental objective. This is an argument, or perhaps a set of propositions, worthy of page upon page of scholarly discussion.

But customer value does not lie solely in the scholarly or philosophical realm. It actually occurs at the loading dock, on the retail shelf, and in the thoughts and actions of customers. So while it appears that we can agree in principle on customer value, can we retain the same level of consensus as we move from the philosophical level to the operating level? We hear a variety of terms that describe value to the consumer as the end user. These include traditional phrases like "customer service," or the less-conventional "customer intimacy," among a host of others. (We even heard the value proposition described recently as "customer jubilation"!)

Do all of these terms mean the same thing, or are there shades of meaning or even different meanings? Do they represent a corporate vision or actual operating objectives that depend upon the execution of an effective supply chain strategy?

Your exact definition of customer value will elicit a series of questions that directly affect the strategic, tactical, and operating implementation of the supply chain. These include:

1. Is there a single value metric for each customer, class of customer, or industry segment?
2. Are the value metrics stable or dynamic? And what are the life cycles of the specific metrics?
3. How do value metrics relate to the strategic objectives of both the provider and receiver of the value?
4. How do Enterprise Resource Planning (ERP) applications affect the customer value proposition? How about Economic Value Added (EVA) applications?

In addressing these kinds of issues, it's important to understand the new dimensions that value has assumed in recent years.

First, the party setting the "value" metric has changed dramatically in many industries. Since the mid-1980s, there has been a significant shift in power downstream in the channel to the end user. As this occurs, the end-user—and not the shipper—increasingly sets the value rules. Prior to 1985, the manufacturer or the shipper determined the value metric in the channel. For example, the shipper decided how many packages would be put in a masterpack, how many cartons would be placed on a pallet, and what customer-service standards would be used (for example, 94 percent in stock and four-day delivery). Implicit—and, in some cases, explicit—rules also were set by the manufacturer or shipper in such areas as shipment quality, claims resolution, and information availability.

Today, the center of power has shifted in the United States and even globally. The Wal-Marts, Kmarts, Office Depots, Staples, and Circuit Citys of the world now are setting the rules. Notably, this is happening not only in consumer markets, but also in business-to-business sectors. For the shipper, third party, or other supplier, this can mean 20 different key accounts with 20 different ideas of value. The net result: 20 different supply chains. One might reasonably conclude that no longer does "one size fit all" and that the customer, not the seller, is setting the value metric. (One might also conclude that many companies have yet to figure this out.)

Second, value has become a more complex concept. In the "old days," one size did fit all and value was single-dimensional. Again, the rules have changed. The manufacturer, supplier, or shipper finds its firms and its value propositions being spliced into a customer's value model. The same holds true for third-party service providers. In many cases, all of the parties in the supply chain are evaluated on an EVA model or some other value metric applied by the customer. What this suggests is that the partners in the supply chain have found different techniques of measuring value and are applying these techniques to measure their business processes. Perhaps this may argue for a unified way of measuring value across the chain.

Third, the issue of stability, or perhaps volatility, has become an important factor in many supply chain relationships. Value, like continuous process improvement, is subject to constant pressure for change. It's no longer sufficient to fix it once and expect the value dimension to remain stable over time. The value objectives of your customers, and your customer's customer, will change. And as these value objectives change, the contributions expected from their suppliers and third parties are expected to change accordingly.

So what does it all mean? It certainly means that as the value proposition evolves we have to get closer to our supply chain partner and stay close. This calls for a new level of trust in sharing information and strategic plans. To bring value to the relationship, you need to understand the customer's business, invest in that business, and sometimes share the customer's risks associated with new-product introductions and other initiatives.

The net result of all of this change? We'll all sleep like babies at night—resting for an hour, and crying for an hour.