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Learning Objectives
Customer Service
◦ Cost versus customer service
◦ Availability / Perfect order
◦ Operational Performance / Service reliability
Customer Satisfaction
◦ Customer expectation
Customer Success
◦ Achieving customer success
◦ Value-added services
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Customer Services
Customer services (CS) represents logistics’ role in
fulfilling marketing objectives
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Cost Versus
Customer Service
Reducing inventories, manufacturing cost and
transportation cost typically comes at the expense of
customer services
Centralized
Warehouse
Cost / Inventory Customer
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Service
Attributes of Basic Customer
Services
1. Availability
◦ Capacity to have inventory when it is required by customer
◦ To ensure availability, organizations have stocked products
◦ Goal is to achieve high availability levels while keeping low investments
◦ Performance measures of availability are:
Stockout Frequency
Fill Rate
Orders Shipped Complete
a) Stockout Frequency
Term usually refers when firm has no product available to fulfill demand
Approx 8% of items at super markets are out of stocks when they are
planned to be on shelves
Products wise inventory availability must be critically reviewed
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Attributes of Basic Customer
Services
1. Availability
b) Fill Rate
Fill rate measures the magnitude or impact of stockouts over time
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Attributes of Basic Customer
Services
1. Availability
b) Fill Rate (Example)
100 products order by customer Critical for customer 97% of fill rate
results in a situation of stockout…
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Attributes of Basic Customer
Services
1. Availability
c) Orders Shipped Complete
The most precise measure of performance in product availability
is Order Shipped Complete
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Attributes of Basic Customer
Services
1. Availability
The 3 measures of availability combine to establish the extent to
which a firm's inventory strategy is accommodating customer demand
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Attributes of Basic Customer
Services
2. Operational Performance
Operational performance deals with the time required to deliver a
customer's order.
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Attributes of Basic Customer
Services
2. Operational Performance
a) Speed
Time elapsed from customer order placement until the product is
delivered & is ready to use
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Attributes of Basic Customer
Services
2. Operational Performance
b) Consistency
Order cycle consistency is measured by the number of times
that actual cycles meet the time planned for completion
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Attributes of Basic Customer
Services
2. Operational Performance
c) Flexibility
A firm's ability to accommodate special situations and unusual or unexpected
customer requests.
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Attributes of Basic Customer
Services
2. Operational Performance
d) Malfunction Recovery
Malfunction occurs in any firm’s fin-tuned logistical system, as continuous
performance on a day-in, day-out basis is a difficult task.
For example,
If a stockout of an essential item occurs at a distribution facility that normally
services a customer, the item may be obtained from an alternative facility
utilizing some form of expedited transportation.
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Customer Satisfaction
If customer expectations are met or exceeded by the
supplier, the customer will be Satisfied. When building a
customer service platform in logistics, the following
must be considered:
1. Customer Expectations
2. Customer Success
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Customer Satisfaction
1. Customer Expectations
One important way that many firms have responded to the challenge
of customer success is through the development of value-added
services.
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Customer Satisfaction
Customer Success
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Value-added Services
Value-added services refer to unique or specific activities that
firms can jointly develop to enhance their efficiency and/or
effectiveness.
IBM's ability to produce and deliver customized personal computers
and networks to individual customers is one example of adding
value to a rather standard product.
Unique product packages, Customized unit loads, Unique
information services, VMI, Special shipping arrangements, etc.
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Sources: Supply Chain Logistics Management – Cooper et al
APICS – CSCP 13th Edition
Supply Chain Council
Logistics & Distribution Management – 3rd Edition (CILT)
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