Module VI

CUSTOMER SERVICE - WHAT A Tool for Differentiation  Customer Service Is the Fuel That Drives the Logistics Engine  Logistics System Ensures Right Product/ At Right Time/ In Right Quantity Reaches Right Destination As Desired By Customer  Excellent Customer Service Is Satisfying Customer Needs Quality Products At Lowest Cost Fulfilling Customer Expectations/ Desires Best Service (Intangible but Real) Accepting Customer Perception of Best Services  Elements of Best Logistics Customer Service Availability (Product/ Place) Delivery Reliability Best Price (Lowest Cost) Delivery Frequency Order Cycle Time Order Size Constraints Ordering Convenience Documentation Quality Order Status Information Quick Response Technical Support

IMPORTANCE OF CUSTOMER SERVICE  Customer Service is Key Factor of Differentiation in Customer’s Decision to Buy One Brand Against Another  Good Customer Service Provides Distinctive Difference Between One Company’s Offer & Its Competitors  Major Factors That Resulted in Enhancing Importance of Providing Excellent Customer Service Growth in Customer Expectations – Service Fulfillment Essential Growing Professionalism of Buyers – Both Service & Price Important All Markets Becoming Service-Sensitive – Little Else To Differentiate Product Brand Loyalty No Longer Strong Enough – Particularly in FMCG Products Where Availability is of Paramount Importance Development of New Ideas – Relationship Marketing Where Fulfilling Service Expectations is the Key & Customer Retention the Priority

IMPORTANCE OF CUSTOMER RETENTION After 12 Months No of Customers New Customers Retained Customers Value of Purchase Retained Customers Higher Sales & Profitability Achieved By Retaining Customers Through Excellent Customer Service

CUSTOMER SERVICE  Customer Service is a Feature of the Augmented Product That Adds Value for the Buyer Definition  3 Levels of Product That Together Provide Customer Value  Core Benefit/ Core Service Constitutes What Buyer is Really Buying  Tangible Product/ Service Itself  Augmented Product Includes Benefits That Are Secondary But an Integral Enhancement To The Tangible Product/ Services Customer Buys Customer Service is a Process for Providing Competitive Advantage and Adding Benefits to the Supply Chain in Order To Maximize Total Value To the Ultimate Customer

Core Product Service Surround SERVICE SURROUND AUGMENTS PRODUCT VALUE Factory Inputs Product Quality Features Technology Durability SCM Inputs Customer Service Packaging Delivery Lead time & Flexibility Delivery Reliability & Responsiveness Single Point Contact Ease of Doing Business After Sales Support (Intangibles) (Tangibles)  Logistics Delivers Time/ Place Utility of Customer Service At Competitive Costs Through Efficiently Designed & Effectively Managed Distribution Channels  Service Costs 20% of Sales Cost But Has 80% Impact on Customer Retention

CUSTOMER SERVICE CRITICAL Availability is of Paramount Importance Though Brand Image and Price Remain Important Factors for Purchase Considerations  Competing Products Pushed Towards ‘Commodity’ Due to Technology Convergence Increased Competition  Competition Leads to High Customer Expectations  Competition Forces Company’s to Reduce Suppliers  Best Supplier Retention – Critical for Companies  Enhanced Customer Service Strategies Take Business Away From Commodity Towards Position of Strength Based on Differentiation and Cost Advantage

COMPONENTS OF CUSTOMER SERVICE  Post-Transactional Elements  Pre-Transactional Elements  Transactional Elements Written Customer Service Policy Accessibility of Order Personnel Single Order Contact Point Customer Service Management Organizational Structure Order Size Constraint System Flexibility/ Adaptability Order Cycle Time Order Preparation Stock Availability Order Fill Rate/ Delivery Time Order Status Information Availability of Spares Call-out Time Product Tractability/ Warranty Product Return Policy Customer Complaint/ Claims Settlement Time

COST TO SERVICE 100 % Service Level Cost to Service Cost of Additional Inventory Required for Providing Higher Service Levels

COST/ BENEFIT OF SERVICE Revenue Costs Profit Contribution Service Levels100% Costs, Revenue & Profit Contribution Beyond this Point, Additional Service Reduces Profit Margins = =

 Customers Create Sales  Winning and Retaining Customers Through Service Differentiation Product Differentiation  Service Priority Varies By Product Company Market  Customer Service - Multivariate in Nature Management Commitment Costs Involved CUSTOMER SERVICE POLICY Companies Need Appropriate Customer Service Policy

DEVELOPING APPROPRIATE SERVICE POLICY Identify Main Elements of Service Desired By Market Determine Relative Significance of Each Service Element in Business Determine Company’s Competitiveness at Current Service Levels Identify Distinct Service Requirements for Different Markets Develop Specific Customer Service Packages Determine Monitoring and Control Procedures

COMPANY’S COMPETITIVENESS AT CURRENT SERVICE LEVELS Importance To CustomerElementsPerformance Low Medium High Poor Satisfactory Good Reliable Delivery Order Cycle Time Delivery Frequency Stock Availability Quality of Salespeople Technical Service Order Status Information * * * * * * * Customer * Company # # # # # # # # Key Competitor Competitive Benchmarking

SERVICE DRIVEN SCM SYSTEMS  Systems/ Infrastructure Designed to Meet Service Goals  Service Goals Externally Focussed Objectives  Internal Outcomes Derived from External Focussed Objectives  Systems Satisfy Customer Needs at Minimal Cost

 External Focussed Outcome Service Criteria Valued by Customer Determines the PRICE Customers Willing to Pay SERVICE GOALS  Internal Outcome Quality/ Productivity/ Inventory/ Rejections Determines COST of Providing Customer Service

CUSTOMER SERVICE OBJECTIVES  Provide Consistent Service Excellence at Least Cost  ‘Perfect Order’ Concept Defines Customer Service  Customer Satisfied on Achieving ‘Perfect Order’  Measure of Customer Service Percentage of Occasions when Customer’s Expectations Fully Met

THE PERFECT ORDER  Measure That Attempts To Take Into Account All Main Attributes That Go Towards Completion of An Order That Absolutely Satisfies Customer Requirement  Also Known as OTIF – On Time In Full Delivered Complete To the Quantities Ordered Delivered Exactly To The Customer’s Requested Date and Time No Delivery Problems – Damage/ Shortage/ Refusal Complete & Accurate Delivery Documentation Number of Perfect Orders Order Fulfillment = × 100 Total Number of Orders  OTIF is Measured By the Formula:

 Pre-Transaction Stock Availability Target Delivery Dates Response Times Establish Standards And Monitor Performance Across Range of Customer Service Parameters ESSENTIAL SERVICE PARAMETERS  Post-Transaction First Call fix Rate Customer Complaints Returns/ Claims Invoice Errors Service Parts Availability  Transaction Order Fill Rate On-time Delivery Ageing of Back-Orders Shipment Delays Product Substitution

 Elements of Offer Having Identifiable Positive Impact On Customer’s Own Value-Creating Process ORDER WINNING CRITERIA  Customer Service Has the Potential to Provide Differentiation to Win and Retain Customers  Logistics/ Supply Chain Manages the Customer Service Chain through Distribution/ Intermediaries  Customer Service Provided Through Internal Supplier-Customer Chain Linking All Employees

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