CUSTOMER SATISFACTION AND SUCCESS The strategy of using logistics competency to gain competitive advantage is based on a broad corn

fitment to customer - focused marketing. The fundamental idea is that a firms long - term ability to expand market share faster than leanly industry growth depends on attracting and holding an industry's most successful customers. The notion of customer - focused marketing is to concentrate resources on selected key accounts that place a high priority on a suppliers logistical competency. The ideal arrangement would involve predetermined agreement to achieve profitable growth of a customer's business. The idea is basic: as customers succeed, so will their preferred suppliers. The potential benefit of close working relationships is best understood for contrasting basic customer service with the highly popularized concept of customer satisfaction and with the more advanced notion of customer success. In terms of customer impact, the fundamental concept is basic service. As noted earlier, basic service is typically viewed in terms of availability, operational performance and reliability'. The traditional wisdom behind providing these basic service attributes has been that suppliers should try to be good -hut not too good. In other words, the long-standing paradigm has been that extremely high levels of service are prohibitively expensive to offer across the hoard to all customers. Most recently the paradigm has somewhat shifted among progressive firms. The more current belief is that providing availability and timely delivery of products to customers is not an extraordinary commitment. Therefore, the basic level of overall service has escalated to higher levels of day in and day out performance. However. the typical commitment still falls short of the perfect order. The notion of customer satisfaction propels commitment beyond basic service. It involves a combination of highly selective value-added service arrangements and, as appropriate, the commitment of perfect order performance. Customer satisfaction is a total enterprise commitment that has recently been popularized by authors such as Peters and Austin, Zemke and Schaefer, and Schlesinger and Hackett, who emphasize the importance of delighting selected customers by providing whatever services are necessary and expanding extraordinary effort to ensure fail-safe performance.'8 The so-called immaculate recovery involves actions discussed earlier that require extraordinary efforts - such as flying products from around the globe - to be sure that key customers' requirements are satisfied. The idea of exceeding expectations or

delighting customers has intrinsic appeal. However, most proponents agree that such extra performance must be strategically focused on customers that have high profit potential if associated cost is to be justified. The most demanding service commitment is to focus on facilitating customer success. By definition, a success program and its related commitments focus on long-term business relationships that have growth potential and offer high probability of achieving the desired results. To ensure that a customer is successful may require. a supplier to help reinvent the way a product is sold or distributed. A classical example is the transformation of IKEA from a relatively small Swedish mail - order furniture operation to a global retailer of home furnishings. The fundamental transformation required a deep commitment to meeting customer requirements in a creative mariner and was achieved only by exacting support of suppliers. A similar approach to working with customers to achieve success is used by Baxter Healthcare Corporation to support hospitals. The creation of such long- term success programs requires careful planning and can involve several steps to ultimately create new joint market opportunities. The following discussion of Bergen Brunswig's model of how to stimulate change is a comprehensive example of how a firm can focus on customer success. Bergen Brunswig used a four-stage process to enhance the business success of its retail drugstore customers: costeffectiveness, market access, market extension, and market creation. The long-term process is illustrated in Figure 3-3. The Bergen Brunswig model illustrates the fusion of information technology required to develop cross-organizational success. Bergen Brunswig developed a creative logistics-based program to exchange information and become operationally involved with drug retailers. Retailer alliances initiated by Bergen Brunswig and other selected drug wholesalers have revolutionized the independent pharmacy segment of the retail drug industry. Whereas ten years ago drugstores were serviced by well over 200 wholesalers, today wholesale firms dominate total industry sales. The wholesale sector has emerged from the brink of collapse to logistically support approximately 70 percent of all retail drugstore distribution.2' Industry efficiency improvements have been significant. Tailoring services to specific customers has served to establish incentives for maintaining long-term alliances. The nature of Bergen Brunswig's customer service initiative is reviewed to illusi.rate how logistical competency- can be used to gain competitive superiority.

Cost-effectiveness The first and most fundamental step was to gain cost-effectiveness. It was essential that the process and necessary related controls he in place to ensure that basic services could he provided at a consistently high level of performance and in a cost-effective manner. From a managerial perspective, it is prerequisite that a find he able to efficiently perform the basic logistic services required by customers. Most Finns that are serious about quality argue there is little room for basic operational error. Unless a firm is able to deliver quality service at reasonable cost, there is no reason for customers to commit additional business and there is limited possibility of moving forward toward a more exacting relationship. Market Access The market access stage consisted of higher-level commitments to customers that expressed a willingness to cooperate in efforts to achieve joint objectives, in other words, market access consists of buyers and sellers working together and sharing basic information to facilitate smooth joint operations. It is important o stress that no real level of customer selectivity was involved in market access. For example, Bergen Brunswig needed to establish a basic service commitment to all druggists who were willing to utilize them as a wholesale supplier. The only differential in the timing or level of service during the access stage was determined by the customer's purchase quantity. Once Bergen Brunswig offered retailers a specific service program, it became a principle of fundamental business fairness and legality that each druggist who purchased required volumes would receive equal basic services. For Bergen Brunswig, this commitment meant daily replenishment of exact inventory requirements within a consistent delivery schedule. Market Extension Market extension intensifies a business arrangement. Extension is based on moving toward zero defects and introducing value-added services in an effort to solidify and expand the business relationship. At this point the relationship became highly selective since the number of customers that were willing or able to participate was limited. In Bergen Brunswig's strategy. such valueadded alliances consisted of a variety of programs to improve the competitiveness of selected customers that were willing to commit to Bergen Brunswig as almost a sole-source supplier. Typical of such value-added innovations were sophisticated bar coding, computer terminals for

phonic checkout counters, point-of-sale encoding. shelf plan-griming, immediate price change administration, profitability, and inventory turn reports. These innovations were designed to increase operating efficiency and extend overall competitiveness. Such value-added services were offered only to customers that committed to an extended business relationship. Strategies for Success As customers become increasingly sophisticated in their purchasing decisions and environmental laws take root, many retailers will seek new ways to develop or enhance their return systems. Some companies have turned their networks into a competitive advantage by taking an active position that increases value for customers and builds loyalty. Companies such as Eastman Kodak and Hewlett-Packard have implemented successful reuse and recycling programs. These initiatives reduce the amount of waste fed into the supply chain and the landfills, while lowering operating costs. The companies have been able to recover their costs from areas such as raw material and packaging procurement, manufacturing, waste disposal and regulatory compliance. Another reason consumers return items is because of faulty or difficultto-read instruction manuals. Many companies realize the value in revising instructions to make them user friendly. The system works best when retailers, vendors and logistics companies work together to reduce the percentage of returned merchandise and improve the return system flow. Logistics companies assist retailers with vendors that have unusually high-return rates, especially on high-dollar items. To improve the return flow, logistics companies perform an audit for retailers before the freight is released from the warehouse. As part of the audit, a retail representative meets the shipment at delivery to make sure the inventory is accurate before it is unloaded. Conducting spot audits on both ends of the shipment can reduce discrepancies and greatly reduce claims. REFERENCES
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