Logistics
LOGISTICS MANAGEMENT Customer Service
“Logistics is no longer the ‘last frontier of cost
reduction,’ it’s the new frontier of demand generation”
Customer Service
in Planning Triangle
Inventory Strategy
• Forecasting Transport Strategy
• Inventory decisions • Transport fundamentals
• Purchasing and supply • Transport decisions
Customer
scheduling decisions
service goals
• Storage fundamentals
ORGANIZING
• The product
CONTROLLING
• Storage decisions
PLANNING
Logistics service
• Logistics service
• Ord . proc. & info. sys.
Location Strategy
• Location decisions
• The network planning process
4-3
Customer Service Defined
• Customer service is generally presumed to be a means by which
companies attempt to differentiate their product, keep customers
loyal, increase sales, and improve profits.
• Its elements are:
- Price
- Product quality
- Service
• It is an integral part of the marketing mix of:
- Price
- Product Customer service here
- Promotion
- Physical Distribution
• Relative importance of service elements
- Physical distribution variables dominate price, product, and
promotional considerations as customer service considerations
- Product availability and order cycle time are dominant physical
distribution variables
Customer Service Elements
Customer service
Pre-transaction elements Transaction elements Post-transaction elements
• Written statement of policy • Stockout level • Installation, warranty
• Statement in hands of • Ability to back order alterations, repairs, parts
customer • Elements of order cycle • Product tracking
• Develop contingency plans • Time • Customer claims, complaints
• Organizational structure • Transship • Product packaging
• System flexibility • System accuracy • Temporary replacement of
• Technical services • Order conveniences product during repairs
The process of introducing
• Product substitution
Plans for after-sales services
the customer to the expected Elements resulting directly and returns and how to handle
quality of service from supplying the product to them
the customer.
Common Customer Service Complaints
31%
Product or quality
mistakes
12% Damaged
goods
7%
Other
6%
Frequently cut
items
44%
Late delivery
Most Important Customer
Service Elements
•On-time delivery
•Order fill rate
•Product condition
•Accurate documentation
Appraise This Measure
of Logistics Customer Service
Percent of customer orders shipped by
customer request date
Parker-Hannifin Corp.
Order Cycle Time
• Order cycle time contains the basic elements of customer service
where logistics customer service is defined as:
the time elapsed between when a customer order, purchase order, or
service request is placed by a customer and when it is received by that
customer.
• Order cycle elements
- Transport time
- Order transmittal time
- Order processing and assembly time
- Production time
- Stock availability
• Order cycle time is expressed as a bimodal frequency distribution
• Constraints on order cycle time
- Order processing priorities
- Order condition standards (e.g., damage and filling accuracy)
- Order constraints (e.g., size minimum and placement schedule)
Components of a Customer Order Cycle
WAREHOUSE
Order processing
Customer and assembly
order
transmittal Transmittal of
backorder items
CUSTOMER
Retail outlet Order
delivery
FACTORY
Express order Order processing,
delivery assembly from stock, or
production if no stock
Importance of Logistics Customer Service
• Service affects sales
- From a GTE/Sylvania study:
...distribution, when it provides the proper
levels of service to meet customer needs, can
lead directly to increased sales, increased
market share, and ultimately to increased profit
contribution and growth.
- Service differences have been shown to
account for 5 to 6% variation in supplier sales
• Service affects customer patronage
- Service plays a critical role in maintaining the
customer base:
On the average it is approximately 6 times
more expensive to develop a new customer
than it is to keep a current one.