By Mark Symonds

As companies strive to reduce costs, streamline the supply chain, increase efficiency, lower inventory, and undertake other improvement efforts, it is important that they keep a keen eye on customer service. Several high-profile retailers and e-tailers have taken a big hit in sales, profit, public image, and stock price recently because they seem to have forgotten that important point of focus.

Best Buy is a prime example. With margins squeezed by online competitors that have lower cost structures, Best Buy decided that the way to compete was to lower its costs so it could reduce prices and maintain margins. The company made a number of changes aimed at accomplishing that objective, changes that resulted in a severe decline in in-store customer service. Best Buy also failed to integrate its online and retail inventory and information management, something that would have provided a seamless experience for customers. Finally, operational missteps (probably caused by reduced staff as well as inventory-reduction decisions) resulted in failures to fulfill customer orders during the holiday season. To make matters worse, Best Buy failed to notify those customers until just a few days before Christmas.

In the simplest terms, Best Buy tried to fight Amazon and other e-tailers on their home turf rather than improving on its own existing advantage. The reason e-tailers have a cost advantage is because they don’t have brick-and-mortar stores, and they have lower staff and distribution costs. But those facilities are Best Buy’s potential competitive advantage, a platform for providing a superior buying experience, which the company used to do. Best Buy, however, severely damaged that customer experience through cost-cutting actions and ended up providing much worse customer service at higher cost as compared with e-tailers.

Of course, this is a greatly oversimplified analysis of where Best Buy went wrong. But it can serve as a wake-up call for any manufacturer, distributor, or supplier that is focused on cutting costs. Cost control is important in today’s highly competitive markets, but low cost alone is not a viable business strategy. You have to provide value to the customer at that low cost. If cost cutting negatively affects that value, customers will go elsewhere. And you can’t maintain the bottom line if the top line is sinking.

Mark Symonds is president and CEO of Plex Systems, and a Manufacturing Leadership Council member.