Customer Accommodation

1
Customer Accommodation
Prof. Costas Panou Lecture 7 in M.Sc New
Technologies in Shipping and Transportation
2
Learning outcomes

• At the end of this lecture, students should be
  able to
• Define who customer is
• Understand the four genetic service outputs
  theories developed by Bucklin
• Understand the role of a customer service
• Understand the fundamental attributes of customer
  service
• Understand element of customer service

3
Who is the Customer?

• From perspective of the total supply chain
• End user of product in consumer market
• Company is customer in business market
• From perspective of specific firm within a supply
  chain.
• Intermediate customer organizations exist between
  the firm and end users
• From perspective of a logistics manager
• Any delivery location
• For example, consumer homes, retail / wholesale
  businesses, receiving docks of manufacturing
  plants and warehouses

4

• CUSTOMER-FOCUSED MARKETING

5
Marketing Concept

• This concept is build on four fundamental ideas
• Customer needs and requirements are more basic
  than products or services
• Different customers have different needs and
  requirements
• Products and services become meaningful only when
  available and positioned from the customers
  perspective

6
Supply Chain Service Outputs

• Four generic service outputs necessary to
  accommodate customer requirements
• Spatial Convenience
• Lot Size
• Waiting Time
• Product Variety and Assortment
• These four genetic service outputs are theories
  developed by Bucklin, 1966, to eliminate
  discrepancies in space, time and quantity and
  assortments.

7
Spatial Convenience

• Refers to the amount of shopping time and effort
  that will be required on the part of the
  customer.
• Higher levels of spatial convenience are achieved
  in a supply chain by providing customers with
  access to its products in a larger number of
  places, thus reducing shopping effort.

8
Lot Size

• Refers to the number of units to be purchased in
  each transaction.
• When customers are required to purchase in large
  quantities, they must incur costs of product
  storage and maintenance. When the supply chain
  allows them to purchase in small lot sizes, they
  can more easily match their consumption
  requirements with their purchasing.

9
Waiting Time

• Refers to the amount of time the customer must
  wait between ordering and receiving products the
  lower the waiting time, the higher the level of
  supply chain service. Alternative supply chains
  offer consumers and end users choices in terms of
  the amount of waiting time required.

10
Product Variety and Assortment

• Different supply chains offer differing levels of
  variety and assortment to consumers and end users.

11
CUSTOMER SERVICE
12
Customer Service

• In more and more markets, the power of the brand
  has declined and customers are willing to accept
  substitutes
• It is therefore more difficult to maintain a
  competitive edge through the product itself.
• In situations like this, it is customer service
  that can provide the distinction between one
  companys offer and that of its competitors.

13
Competitive Advantage

• One way to define competitive advantage is
  simply that the successful companies will
  generally be those that deliver more customer
  value than their competitors.

14
Role of Customer Service

• It has been suggested that the role of customer
  service is to provide time and place utility in
  the transfer of goods and services between buyer
  and seller.
• Put another way, there is no value in the product
  or service until it is in the hands of the
  customer or consumer.

15
Customer Value Ratio

• Logistics management is almost unique in its
  ability to impact both the numerator and the
  denominator of the customer value ratio which is

16
Customer Value...

• Quality the functionality, performance and
  technical specification of the offer
• Service the availability, support and commitment
  provided to the customer
• Cost the customers transaction costs including
  price and life cycle costs
• Time the time taken to respond to customer
  requirements, e.g. delivery lead times

17
Example...

• One company that has built a global leadership
  position in its markets is Caterpillar, marketing
  machines and diesel engines for the construction
  and mining industries.
• Caterpillar has for many years focused on
  developing not just its manufacturing
  capabilities and innovative products but also its
  customer support and responsiveness.

18
Example (contd)

• Underpinning these initiatives has been a
  continuing emphasis on creating superior
  logistics and supply chain capabilities.
• Caterpillar has developed a world class
  reputation for customer support, in particular
  its guarantee to provide a 48 hour availability
  on parts no matter how remote the location.

19
Example (contd)

• In the industries where caterpillar equipment is
  used, the cost of down-time can be significant,
  hence the importance of responsive service.
• Through close partnership with its worldwide
  network of dealers and distributors, and through
  advanced inventory and information management
  systems, Caterpillar offers levels of customer
  support and thus customer value that few
  companies in any industry can match.

20
Customer Service Focus

• In basic customer service programs, the focus is
  typically on the operational aspect of logistics
  and ensuring that the organisation is capable of
  providing the seven rights to its customer
• the right amount of the right product at the
  right time at the right place in the right
  condition at the right price with the right
  information

21
Fundamental attributes of customer service

• Availability stockout frequency, fill rate,
  orders shipped complete
• Operational Performance speed, consistency,
  flexibility, malfunction recovery,
• Service Reliability

22
Availability

• The capacity to have inventory when desired by a
  customer.
• Factors considered
• Stockout Frequency
• Fill Rate
• Orders Shipped Complete

23

• Stockout Frequency
• A stockout occurs when a firm has no product
  available to fulfil customer demand.
• Stockout frequency refers to the probability that
  a firm will not have inventory available to meet
  a customer order.
• It is important to note that stockout does not
  actually occur until a customer desire a product

24

• Fill rate
• Fill rate measures the magnitude or impact of
  stockouts over time.
• Being out of stock does not affect service
  performance until a customer demands a product.
• While there are several approaches to measuring
  fill rates, item fill rate is a common approach.
  It is often presented as the percentage of units
  available when requested by the customer.
• For example, if a customer wants 100 units of an
  item and only 97 are available, the fill rate is
  97 percent.

25

• Fill rate example (try)
• If a customer wants 150 chairs and only 75 are
  available then the fill rate is.............?
• If a customer wants 110 tables and only 90 are
  available then the fill rate is.............?

26

• Orders Shipped Complete
• The most exacting measure of performance in
  product availability is orders shipped complete.
• It views having everything that a customer orders
  as the standard of acceptable performance.
• Failure to provide even one item on a customers
  order results in that order being recorded as
  zero in terms of complete shipment.

27
Operational Performance

• Deals with the time required to deliver a
  customers order.
• Specified in terms of
• Speed
• Consistency
• Flexibility
• Malfunction Recovery

28

• Speed
• Performance cycle speed is the elapsed time from
  when a customer establishes a need to order until
  the product is delivered and is ready for
  customer use.
• High level of communication and transportation
  technology can reduce order cycles significantly!

29

• Consistency
• Order cycle consistency is measured by the number
  of times that actual cycles meet the time planned
  for completion.
• Most logistical managers place greater value on
  consistency because it directly impacts a
  customers ability to plan and perform its own
  activities.
• For example, if order cycles vary, then the
  customer must carry safety stock to protect
  against potential late delivery

30

• Flexibility
• Flexibility involves a firms ability to
  accommodate special situations and unusual or
  unexpected customer requests.
• A firms logistical competency is directly
  related to how well it is able to accommodate
  such unexpected circumstances.

31
For example flexibility

• The standard pattern for servicing a customer may
  be to ship full trailer quantities (FTL) to a
  customers warehouse.
• However, from time to time, the customer may
  desire to have shipments of smaller quantities
  (LTL) made direct to individual retail locations.

32

• Malfunction recovery
• Regardless of how fine-tuned a firms logistical
  operations, malfunctions will occur.
• Ideally, adjustments can be implemented to
  prevent or accommodate special situations,
  thereby preventing malfunctions.

33
For example malfunction

• If a stockout of an essential item occurs at a
  warehouse that normally services a customer, the
  item may be obtained from an alternative facility
  by utilising some form of expedited
  transportation.

34
Service Reliability

• Involves the combined attributes of logistics and
  concerns a firms ability to perform all
  order-related activities, as well as provide
  customers with critical information regarding
  logistical operations and status.

35
Service ReliabilityExamples

• Shipments arrive damage-free
• Invoices are correct and error-free
• Shipments are made to the correct locations
• The exact amount of product ordered is included
  in the shipment

36
Elements of customer service

• Customer service can be examined under three
  headings
• Pre-transaction elements
• Transaction elements
• Post-transaction elements

37
Elements of customer service

• The pre-transaction elements of customer service
  relate to corporate policies or programmes, e.g.
  written statements of service policy, adequacy of
  organisational structure and system flexibility.
• The transaction elements are those customer
  service variables directly involved in forming
  the physical distribution function, e.g. product
  and delivery reliability.
• The post-transaction elements of customer service
  are generally supportive of the product while in
  use, for instance, product warranty, parts and
  repair service, procedures for customer
  complaints and product replacement.

38
Pre-transaction
39
Transaction
40
Post-Transaction