Procurement- Lecture 3 Customer service and logistics ABDIKARIM MOHAIDIN AHMED muhudiin@gmail.com

Concepts of Logistics and Distribution INTRODUCTION The vast majority of companies consider customer service to be an important aspect of their business. Customer service is inextricably linked to the process of distribution and logistics. there are many influences that may be relevant to customer service including ordering, stock availability and delivery reliability. Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE why is it so important? There are many different answers to this question, ranging from the growth in competition to the raising of customers' expectations to the similarity of the basic products that are offered. One way of considering customer service is to differentiate between the core product itself and the service elements related to the product. Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. The core product concerns the item itself: the technical content, the product features, the ease of use, the style and the quality. The service elements, which can be called the 'product surround', represent the availability of the product, the ease of ordering, the speed of delivery, and after-sales support. Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. Figure 3.1 Core product versus product 'surround', illustrating the importance of the logistics-related elements Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. It is recognized by the marketing departments of many companies that the product surround elements are very important in determining the final demand for a product. True to the Pareto 80/20 rule, it is estimated that product surround or logistics elements represent about 80 per cent of the impact of the product but only represent 20 per cent of the cost. Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. Thus, no matter how attractive the product may be, it is essential that the customer service elements are satisfactory and, as we shall see, logistics plays a crucial role in providing good customer service. One of the definitions of logistics that was provided in the first chapter referred to 'the positioning of resource at the right time, in the right place, at the right cost, at the right quality'. Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. This definition can be expanded into what might be considered as the seven 'rights' of customer service. These are the right quantity, cost, product, customer, time, place and condition. All of these different aspects can be key requisites of a good customer service. each of them may be essential to ensure that a product achieves its expected sales in the various markets where it is made available. Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. Figure 3.2 The seven 'rights' of customer service, showing the main service classifications Concepts of Logistics and Distribution

THE IMPORTANCE OF CUSTOMER SERVICE Cont…. It is notable that all of these elements are affected by the standard and quality of the logistics operations that are an integral part of getting a product to market. Thus, these elements can provide the basis for identifying the different aspects of logistics that should form a part of any customer service offering. Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE The logistics components of customer service can be classified in different ways. They may be seen as transaction-related elements, where the emphasis is on the specific service provided or they may be seen as functional attributes that are related to overall aspects of order fulfillment. Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… Transaction elements are usually divided into three categories. These reflect the nature and timing of the particular service requirements (before, during and after delivery of the product): Pre-transaction elements: these are customer service factors that arise prior to the actual transaction taking place. They include: Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… written customer service policy; accessibility of order personnel; single order contact point; organizational structure; method of ordering; order size constraints; system flexibility; transaction elements. Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… 2. Transaction elements: these are the elements directly related to the physical transaction and are those that are most commonly concerned with distribution and logistics. Under this heading would be included: order cycle time; order preparation; inventory availability; Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… delivery alternatives; delivery time; delivery reliability; delivery of complete order; condition of goods; order status information. Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… 3. Post-transaction elements: these involve those elements that occur after the delivery has taken place, such as: availability of spares; call-out time; invoicing procedures; invoicing accuracy; product tracing/warranty; Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… returns policy; customer complaints and procedures; claims procedures. Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… Customer service elements can also be classified by multifunctional dimensions. The intention is to assess the different components of customer service across the whole range of company functions, to try to enable a seamless service provision. The four main multifunctional dimensions are: Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… 1. time – usually order fulfilment cycle time; 2. dependability – guaranteed fixed delivery times of accurate, undamaged orders; 3. communications – ease of order taking, and queries response; 4. flexibility – the ability to recognize and respond to a customer's changing needs. Concepts of Logistics and Distribution

THE COMPONENTS OF CUSTOMER SERVICE Cont… Concepts of Logistics and Distribution

DEVELOPING A CUSTOMER SERVICE POLICY An appropriate customer service policy needs to be developed based on identifiable customer service requirements, and a suitable logistics operation must be established to provide this service. Because there are so many different elements of customer service, this policy must be very clearly and carefully defined. Concepts of Logistics and Distribution

DEVELOPING A CUSTOMER SERVICE POLICY Cont…. Concepts of Logistics and Distribution

DEVELOPING A CUSTOMER SERVICE POLICY Cont…. Concepts of Logistics and Distribution

Concepts of Logistics and Distribution

LEVELS OF CUSTOMER SERVICE there is a need to balance the level of customer service with the cost of providing that service. It is seldom possible to devise a policy that is absolutely optimal in terms of the cost/service balance. Concepts of Logistics and Distribution

LEVELS OF CUSTOMER SERVICE Cont… Some companies adopt a cost minimization approach where specific service objectives are laid down and met at a minimum cost. Others choose a service maximization approach where a distribution budget is fixed, and the ‘best' service supplied within this cost constraint. Concepts of Logistics and Distribution

LEVELS OF CUSTOMER SERVICE Cont… The most appropriate approach to adopt will depend on particular product, business or market situations. The cost of providing a given service is markedly higher the nearer it reaches the 'perfect service' — that is, the 100 per cent mark. Concepts of Logistics and Distribution

LEVELS OF CUSTOMER SERVICE Cont… Concepts of Logistics and Distribution

MEASURING CUSTOMER SERVICE There are many different measures of customer service that might be used including: order fulfilment. order cycle time the perfect order (OTIF) The most important message is that, whatever measures are used, they must reflect the key service requirements for the customer in question. Concepts of Logistics and Distribution

THE CUSTOMER SERVICE EXPLOSION The role of customer service as a critical success factor for most companies has, once again, become very significant. the major change stems from a growing realization that satisfying the customer is the key to achieving competitive success. Companies that fail to appreciate this may lose significant market share. Concepts of Logistics and Distribution

THE CUSTOMER SERVICE EXPLOSION Cont… Service, nowadays, is the key factor of differentiation in a customer's decision to buy one brand rather than another. Good customer service can provide the distinctive difference between one company‘s offer and its competitors'. Thus, customer service strategy must play a major role in the determination of company strategy. Concepts of Logistics and Distribution

THE CUSTOMER SERVICE EXPLOSION Cont… One key lesson that also comes through is the important role that logistics plays in providing good customer service. Concepts of Logistics and Distribution

Concepts of Logistics and Distribution SUMMARY This chapter has considered some of the key aspects of customer service and logistics. The major components of customer service were described. Concepts of Logistics and Distribution