Chapter 3 : “Customer Accommodation Part One. Customer Service: Where Logistics and Marketing Meet Customer service objectives dictate logistics design.

Chapter 3 : “Customer Accommodation Part One

Customer Service: Where Logistics and Marketing Meet Customer service objectives dictate logistics design. Customer service: a process for providing significant value-added benefits to the supply chain in a cost-effective way.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Stock and Lambert “Strategic Logistics Management” (2001) Note: the reference to the text is regarding a previous book in this class.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written policy Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written Policy --Based on customer needs.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written Policy --Based on customer needs. --Define Standards.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written Policy --Based on customer needs. --Define Standards. --Determine measure- ment.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written Policy --Based on customer needs. --Define Standards. --Determine measure- ment. County of Nottinghamshire, United Kingdom

We are committed to providing a high standard of customer service to all residents of Nottinghamshire. We have a Customer Service Code of Practice and Standards for our staff which gives a promise to you on what you can expect when you make contact with us. We aim to answer your telephone call within four rings. We aim to respond to written correspondence within ten working days If we feel that your query requires more detailed research or translation we will acknowledge your letter within five working days and respond fully to you within 20 working days When you visit us, we will not keep you waiting for more than 20 minutes. County of Nottinghamshire, United Kingdom

We are committed to providing a high standard of customer service to all residents of Nottinghamshire. We have a Customer Service Code of Practice and Standards for our staff which gives a promise to you on what you can expect when you make contact with us. We aim to answer your telephone call within four rings. We aim to respond to written correspondence within ten working days. If we feel that your query requires more detailed research or translation we will acknowledge your letter within five working days and respond fully to you within 20 working days When you visit us, we will not keep you waiting for more than 20 minutes. County of Nottinghamshire, United Kingdom

We are committed to providing a high standard of customer service to all residents of Nottinghamshire. We have a Customer Service Code of Practice and Standards for our staff which gives a promise to you on what you can expect when you make contact with us. We aim to answer your telephone call within four rings. We aim to respond to written correspondence within ten working days If we feel that your query requires more detailed research or translation we will acknowledge your letter within five working days and respond fully to you within 20 working days. When you visit us, we will not keep you waiting for more than 20 minutes. County of Nottinghamshire, United Kingdom

We are committed to providing a high standard of customer service to all residents of Nottinghamshire. We have a Customer Service Code of Practice and Standards for our staff which gives a promise to you on what you can expect when you make contact with us. We aim to answer your telephone call within four rings. We aim to respond to written correspondence within ten working days If we feel that your query requires more detailed research or translation we will acknowledge your letter within five working days and respond fully to you within 20 working days When you visit us, we will not keep you waiting for more than 20 minutes. County of Nottinghamshire, United Kingdom

When dealing with us: You can expect us to be welcoming, courteous, fair and respectful. We will always be helpful and responsive, keep you informed and communicate clearly with you at all times We will let you know what we can provide, who to contact and how to get in touch We will aim to provide good quality information that is suited to your individual needs. County of Nottinghamshire, United Kingdom

In return, we ask you to help us achieve our standards by being courteous and respectful towards us and help us to help you by providing the information we need. County of Nottinghamshire, United Kingdom

Timeliness. We will provide an official grain inspection and weighing certificate within one full business day after completing your inspection. In our regulatory role, we will respond to your concerns and work to ensure fairness and equity in the marketplace. Grain Inspection, Packers and Stockyards Administration (GIPSA) of USDA

We aim to: Answer all telephone calls within 4 rings (10 seconds) New Standard for 2002/2003 Our target for 2002/200385% Tameside, United Kingdom

Respond to all service requests within three working days Our target for 2001/2002 80% Our success rate was79% Our target for 2002/200385% Tameside, United Kingdom

Provide trained staff who are polite and courteous Our target for 2001/2002 40% Staff Customer Care Training Our success rate was41% (70 Staff) Our target for 2002/2003100% (170 Staff) Tameside, United Kingdom

“Customer Accommodation” End of Part One. Go to Part Two.

Chapter 3 : “Customer Accommodation Part Two

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written Policy --Based on customer needs. --Define Standards. --Determine measure- ment.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Written Policy --Based on customer needs. --Define Standards. --Determine measure- ment. --Implement.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Customer told policy. Organization Structure. System flexibility. Management Services. Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Stockout Level Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Stockout level tradeoff: customer service versus inventory carrying costs.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Customer service: Having the product when the customer wants it.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Inventory carrying costs:

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Inventory carrying costs: Capital costs on inventory investment. Inventory service costs. Storage space costs. Inventory risk costs.

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution In most cases inventory carrying costs prevent us from providing the demanded product 100% of time.

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability Stock and Lambert “Strategic Logistics Management” (2001) Note: the reference to the text is regarding a previous book in this class..

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability Increasing in-stock availability from 90% to 100%. Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability Increasing in-stock availability from 95% to 100%. Doubles inventory investment. Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Increasing in-stock availability from 95% to 100%. Percentage in-stock availability Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability Increasing in-stock availability from 95% to 100%. Increases inventory investment by 50%! Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability What level of customer will provide competitive customer at reasonable cost? Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability What level of customer will provide competitive customer at reasonable cost? 95%? Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability What level of customer will provide competitive customer at reasonable cost? When there is a stockout… Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability What level of customer will provide competitive customer at reasonable cost? When there is a stockout… If the customer is NOT a consumer (customer is a wholesaler or retailer)… Stock and Lambert “Strategic Logistics Management” (2001)

Relationship Between Customer Service and Inventory Investment Inventory investment in $ thousands. Percentage in-stock availability What level of customer will provide competitive customer at reasonable cost? When there is a stockout… If the customer is NOT a consumer (customer is a wholesaler or retailer), the customer may have inventory/safety stock that allows them to service their customers. Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service Tradeoff Minimizing logistical costs while meeting predetermined levels of customer service.

Model of Consumer Reaction to a Repeated Stockout Source: Clyde K. Walter, “An Empirical Analysis of Two Stockout Models,” unpublished Ph. D. Dissertation, Ohio State University, 1971. Customer 3 Lower 4 Other size 2 Same 1 Higher Another store 6 Ask here again 5 Special order Switch stores ? Substitute ? Switch brand ? Substitute ? Switch price ? No Yes No

Model of Consumer Reaction to a Repeated Stockout Source: Clyde K. Walter, “An Empirical Analysis of Two Stockout Models,” unpublished Ph. D. Dissertation, Ohio State University, 1971. Customer 3 Lower 4 Other size 2 Same 1 Higher Another store 6 Ask here again 5 Special order Switch stores ? Substitute ? Switch brand ? Substitute ? Switch price ? No Yes No Substitute may be a way to overcome stockout problem without increasing inventory.

Model of Consumer Reaction to a Repeated Stockout Source: Clyde K. Walter, “An Empirical Analysis of Two Stockout Models,” unpublished Ph. D. Dissertation, Ohio State University, 1971. Customer 3 Lower 4 Other size 2 Same 1 Higher Another store 6 Ask here again 5 Special order Switch stores ? Substitute ? Switch brand ? Substitute ? Switch price ? No Yes No

“Customer Accommodation” End of Part Two. Go to Part Three.

Chapter 3 : “Customer Accommodation Part Three

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Order Information Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Order Information Give customers good information about their order and your inventory Give customers good information about their order and your inventory Order Information Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Installation, warranty, alterations, repairs, parts Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Installation, warranty, alterations, repairs, parts Some aspects of reverse logistics Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Some aspects of reverse logistics Stock and Lambert “Strategic Logistics Management” (2001)

Customer Service PretransactionTransactionPosttransaction Written policyStockout levelInstallation, warranty, alterations, repairs, parts Customer told policyOrder informationProduct tracing Organization structureOrder cycleCustomer claims, complaints, returns System flexibilityExpedited shipmentsTemporary replacement of products Mgt. Services.Transshipment System accuracy Order convenience Product substitution Order Information Give customers good information about their order and your inventory Stock and Lambert “Strategic Logistics Management” (2001)

Measuring and Controlling Customer Service Performance Establish quantitative standards of performance for each service element. Measure actual performance for each service element. Analyze variance between actual service provided and standard. Take corrective action as needed to bring actual performance into line. 3-13

Customer Service Standards Reflect the customer’s point of view. Provide an operational and objective measure of service performance. Provide management with cues for corrective action. 3-14

Gap Theory Manager has customer service concept

Gap Theory Manager has customer service concept Employee learns manager’s customer service concept.

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Inaccurately

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Inaccurately There is now a gap between manager’s idea and employee’s idea.

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Inaccurately Customer has a concept of what they want in service.

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Inaccurately Customer has a concept of what they want in service. Customer’s idea of service is not the same as employee’s. There is a gap between them.

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Inaccurately Customer has a concept of what they want in service. There may also be a gap between customer’s idea of service and manager’s idea of service.

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Customer has a concept of what they want in service. Manager must determine customer’s idea of service…

Gap Theory Manager has customer service concept Employee learns manager’s Customer service concept Customer has a concept of what they want in service. Manager must determine customer’s idea of service and communicate it to employee who provides it for customer.

End of Part Three. Go to Part Four.

Chapter Three “Customer Accommodation” Part Four “Forecasting” You will need to manually advance from slide-to-slide on this presentation.

To follow are explanations of certain quantitative forecasting techniques used to predict future sales.

Quantitative Methods Continuity extrapolation: incremental dollar or percentage increase is carried forward to the next year.

Quantitative Methods Continuity extrapolation: incremental dollar or percentage increase is carried forward to the next year. Growth Maturity Decline Introduction Product Life Cycle

Quantitative Methods (continued) Time series analysis Sales = T x C x S x I Where: T = trends or long-run changes C = cyclical changes S = seasonal variations I = irregular or unexpected factors.

Gasoline demand Time Series Analysis Time --Johnson, Kurtz, Scheuing 1994 “Sales Management”

Gasoline demand Time Series Analysis Time Cyclical changes Cyclical changes (economy) Cyclical changes Seasonal variation (summer, winter) Irregular or unexpected factors (political crisis) --Johnson, Kurtz, Scheuing 1994 “Sales Management”

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200----

Quantitative Methods (continued) Moving average YearSales2-year4-year forecastforecast 1 4200---- 24410---- 3 4305--

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305--

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 4 4366--

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366--

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366-- 54214

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366-- 542144260

Quantitative Methods (continued) Exponential smoothing: (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Alpha is any number between 0 and 1. The higher the alpha, the more weight to recent sales.

Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200- 24410---- 34322 4305-- 44106 4366-- 542144260 …higher alpha means later data has more influence or weight All data contribute to forecast, but….

(alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

YearSalesAlphaAlphaAlpha =.2.5.8 1 4200 ------

(alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha =.2.5.8 14200 ------ 2 420042004200

(alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha =.2.5.8 14200------ 24410420042004200

(alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha.2.5.8 14200 ------ 24410420042004200 (.2)(4410) + (.8)(4200) = 4242 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

YearSalesAlphaAlphaAlpha.2.5.8 14200------ 24410420042004200 (.5)(4410) + (.5)(4200) = 4305 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

YearSalesAlphaAlphaAlpha.2.5.8 14200------ 24410420042004200 (.8)(4410) + (.2)(4200) = 4368 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

YearSalesAlphaAlphaAlpha.2.5.8 14200------ 24410420042004200 34322424243054368 (.2)(4322) + (.8)(4242) = 4258

(alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha =.2.5.8 14200------ 24410420042004200 34322424243054368 44106425843144322 54311422842104157

End of Program.

Chapter 3 : “Customer Accommodation Part One. Customer Service: Where Logistics and Marketing Meet Customer service objectives dictate logistics design.

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Chapter 3 : “Customer Accommodation Part One. Customer Service: Where Logistics and Marketing Meet Customer service objectives dictate logistics design.

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