At AutoStore Arena US in Chicago, Patricio Hudson, Sr. Director of Automation at Crocs Inc., the global footwear brand, reframed how we should think about customer service in a single sentence:
"Make sure you are quantifying service and putting it into a budget, both from a benefit and a cost perspective."
Both sides. That is the part most operators miss.
The cost side, we handle well enough. We know that holding a product in stock and getting it to the customer quickly both carry a price: inventory tied up on the shelf, more throughput, a shorter click-to-ship, more labor, more space.
What we rarely put a number on is the benefit. Having the product available the moment a customer wants it, delivering it fast, making returns easy. We know these things matter, but they resist a clean figure, so they do not make it into the budget with the same rigor as the cost. That is the gap Patricio is pointing at, and it is wider than it looks.
The supply chain analysts at Zero100 write this out as an equation, and it is worth walking through, because it shows how much sits underneath the word "service."
They argue that the real goal of supply chain strategy is not lower cost or higher service for their own sake. It is free cash flow:
Free Cash Flow = f (Availability, Strength of Value Proposition)
Two levers drive the cash a business actually keeps. The first is availability: can you get the product to the customer at all? The second is the value proposition: is the experience of getting it worth what it costs you to provide? Both break down further.
Availability is itself two things:
Availability = f (Supply, Ability to Deliver)
Ability to deliver is the part that sounds obvious: you have to be able to move the product to the customer. Supply is where anyone who has run a retail or consumer-goods operation knows it gets harder, because it is not about having enough. Make or stock too little and you stock out, losing the sale and sometimes the customer. Make or stock too much and you flood the market with product that does not sell, then discount it to clear. Those markdowns do not just cost margin. They train customers to wait for the next sale, chipping away at the brand you spent years building. Supply done well is not a warehouse full of everything. It is replenishment matched to real demand: the right product, in the right quantity, adjusted as conditions move.
And the value proposition is the trade Patricio was describing:
Value Proposition = f (Cost, Customer Benefit)
Customer benefit is broader than it first looks. It is not a single fast delivery or an easy return. It is the whole brand experience, and over time, brand equity itself. A customer who can reliably get the product they want, when they want it, in the way they expect, trusts the brand a little more each time. That trust is what lets a brand hold its price and keep its customers, and the supply chain is one of its most underrated inputs. The catch is that this kind of benefit builds slowly and shows up everywhere at once, so it is genuinely hard to put a number on. That is why it gets left out of the budget, and also why it is the part that matters most.
Laid out this way, "service" stops being one nebulous thing. It is availability and value proposition, and underneath those, four levers you can actually manage: supply, ability to deliver, cost, and benefit. And they are not independent: overproduce or overstock on the supply side and you do not just carry the cost, you erode the benefit through the discounting that follows. A move on one lever pulls the others, which is why you cannot judge any of them on cost alone, or benefit alone. You have to hold both in view at once.
That discipline is exactly what separates a smart resilience bet from an expensive one. Patricio reached for Amazon to make the point, and it is the right example.
Part of Amazon's bet was regional fulfillment: smaller hubs, placed close to demand, capable of delivering in twenty-four hours. It is a deliberate move that lifts both sides of the equation at once, better availability because the product sits closer to the customer, a stronger value proposition because it arrives fast, with the cost counted going in. When COVID hit, Amazon read the moment early and committed billions, betting that the value proposition of shopping without leaving home would pay off. It did. Amazon is now the largest company in the world by sales.
Contrast that with the reflex most operators fell into over the same period. When demand was booming, the safe play was to push stock onto every channel and hold capacity everywhere, a just-in-case obsession. It worked, because the benefit side filled itself. Sales were a given, so loading the cost side did not hurt.
That era is over. In a market where demand is no longer guaranteed, extra safety stock and standby capacity mean more cost without more sales, and when that cost gets passed into price, demand weakens further. This is how resilience gets oversimplified: into buffering, early warning systems, and quick response tactics. Piling on stock is loading one side of the equation and hoping the other fills itself. It no longer does.
As our CEO Mats Hovland Vikse has argued, the next era of resilience will be won on decision speed, not buffer size. Holding buffer is not resilience. What protects an operation now is the quality of the decision behind each move, and you can only stand behind it when you have counted what it costs and what it earns.
Which is where Patricio started: "Make sure you are quantifying service and putting it into a budget, both from a benefit and a cost perspective." Both sides. Every time.