1. Chapter 2 Putting the end-customer first

2. Content The marketing perspective Segmentation Quality of service
Setting logistics priorities

3. The marketing perspective
Key issue 1
What are the marketing implications for logistics strategy?

4. The marketing perspective
Marketing is a philosophy that integrates the disparate activities and functions that take place within the network. Satisfied [end] customers are seen as the only source of profit, growth and security. (Doyle,1994)

5. The marketing perspective
The Challenge…
The
challenge
Customer
Increased productivity
Short lead times
Increased sales and
market shares
Strong brand

6. The marketing perspective
The battleground is the customer’s wallet.
The victors will be those that can order their entire organization around the challenges of getting cheaper more profitable and more loyal customers.
It’s an age of expert buyers. Customers are becoming ever more critical and demanding.
Customers know that they can play the market and are placing higher and higher demands on suppliers to give them what they want – and immediately.

7. The marketing perspective
Two pairs of concepts
business customer
end-customer
Vs.
B2C
B2B
consumer
customer
Vs.
B2B
B2B

8. The marketing perspective
Rising customers expectation
better levels of general education
better ability to discern between alternative products
Exposure to more lifestyle issue in the media 1 2 3

9. The marketing perspective
The information revolution
internet
Industry structure
Buyer-supplier relationship
Purchasing, SCM and NPD

10. Content The marketing perspective Segmentation Quality of service
Setting logistics priorities

11. Segmentation Key issue 1
What is segmentation, and what are its implications to logistics strategy?

12. A powerful way to bridge marketing and logistics
Segmentation
Market can be segmented in many ways
Demographic: such as age, gender and education
Geographic: such as urban vs. country, types of house and region
Technical: the use that customers are going to make of a product
Behavioral: such as spending pattern and frequency of purchase
A powerful way to bridge marketing and logistics

13. Segmentation Miller case Beer market consumer Consumption 1:8
Light drinker
Heavy drinker
female
High level income
Blue-collar
Over 30 years of age
Spend long time on watching TV per day
Sporting.

14. Segmentation Fragmentation of Markets and Product Variety
Are the requirements of all market segments served identical?
Are the characteristics of all products identical?
Can a single supply chain structure be used for all products / customers? No! A single supply chain will fail different customers on efficiency or responsiveness or both.

15. Segmentation Activity 1
Try to compare the segmentation strategies between Dell and Lenovo in computer market.
What logistics strategy should Dell make to fit its market segmentation? So what about Lenovo?

16. Segmentation
functional
innovative
efficient
Lenovo
responsive
Dell

17. Content The marketing perspective Segmentation Quality of service
Setting logistics priorities

18. Quality of service Key issues 1 2
How do customer expectations affect logistics service? 2
How does satisfaction stack up with customer loyalty?

19. Case: Service of a seafood restaurant
Quality of service
Case: Service of a seafood restaurant
Fourth floor
Third floor
Second floor
First floor
￥10 ￥6 ￥3 ￥2

20. Service specification
Quality of service
Service is the combination of outcomes and experiences delivered to and received by the end-customer (Johnston and Clark, 2001).
Service specification
Expected service
Service delivery
Perceived service
supplier
customer
Gap 1
Gap 4
Gap 3
Gap 2

21. Quality of service Customer loyalty＝Customer satisfaction
Value disciplines
Operational excellence
Product leadership
Customer intimacy
Customer relationship management
Bow tie
Diamond ？
supplier
customer
supplier
customer

22. Content The marketing perspective Segmentation Quality of service
Setting logistics priorities

23. Setting logistics priorities
Key issues 1
How can we set logistics priorities? 2
How do such priorities relate to customer segments?

24. Setting logistics priorities
Identify the order winners and qualifiers according to customer needs by market segment
Priority order winners for each segment
Identify gaps in existing logistics capabilities: reinforce strengths and plug weaknesses
Using market segments to set logistics priorities

25. Zara case
Flag brand of a Spanish apparel manufacturer and retailer group---Inditex
The first shop of Zara was built in 1975.
Produce and sell the most fashioned apparel, target core is female of years.
Own loyal customers, regular buyers visit 17 times per year.
Rivals of Zara: Gap(USA), Mango(Eupope), Benetton(Italy)

26. ZARA 10～14天 90天 10～15% 100% 12000 4000 11/year 3/year
China clothing firm
Lead time
10～14天
90天
Percentage of preseason production
10～15%
100%
Number of new fashions per year
12000
4000
Stock turnover
11/year
3/year

27. Product style Production system Agile design, not pilot design
Employ many cool hunters
Production system
50% production at headquarters, 20% imported from low-cost countries (Asia), 30% in other region of Spain or Europe
Spare production capacity: production is always lower than forecasted sales
Global sourcing cloth materials. Half of materials are naturally colored, and then dyed and painted in a subsidiary of Inditex. This cycle only spends about one week.
Zara’s production system only covers the elements with scale economy, such as dyeing, cutting, labeling, and packing. The processes of labor-intensive are usually operated by hundreds of sub-contractors.

28. Logistics
Receiving orders with a high frequency and small volume, shop managers keep direct contact with headquarters.
Each delivery runs within 48 hours. Goods are transported by land-carriage (less than 24 hrs) or by air (more than 24 hrs).
Two distribution centers are located in Spain. All items are labeled and priced at distribution center, and then delivered by third-party logistics firms.