OPERATIONAL LOGISTICS MANAGEMENT
Class notes
Unit 5: Customer Service
INTRODUCTION
• Competition between transport operators has become more aggressive due to
deregulation
• The success of operators e.g. airlines in growing their passenger numbers is attributed
to a high level of customer service and care
• In fact operators use customer service to differentiate their services from competition
• Excellent customers services adds value to your offering
• Consumer representative bodies have become more powerful
• Customer service is an integral part of the logistics function of an organization
• It requires knowledge of marketing and its basic concepts
• However, customer service commences from all department but only works when all
the organization’s employees adopt the concept as common work practice
Supply Chain Defined:
• A supply chain is dynamic and involves the constant flow of information, product,
and funds between different stages.
• Walmart & Dell examples
• Customer is integral to supply chain.
• Primary purpose from the existence of any supply chain is to satisfy customer needs,
in the process generating profits for itself.
• Supply chain activities begin with a customer order and end when a satisfied customer
has paid for his or her purchase.
Value Chain Defined:
Value is dynamic; simply what our customers say it is—even if they continue to change their
minds. This means that value is not static in nature; rather, it is constantly evolving, driven by
changing technologies, competitive forces, and customer desires.
Satisfying this demand for dynamic value means seeking to understand, and even anticipate,
customers’ needs and to satisfy them by constantly developing and rolling out new
innovations—not just when existing offerings have run their course
Value chain is how businesses receive raw materials as input, add value to the raw materials
through various processes, and sell finished products to customers
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1. CUSTOMER SERVICE IN THE SUPPLY CHAIN
Logistics Operational Management is directly related to a company’s customer service. And
if a company has great customer service, it can get a leg up on the competition. To be
successful, businesses must take advantage of every opportunity it can to stand out from the
competition.
Good supply chain management boosts your company’s customer service by allowing you to
do three things:
Deliver products to customers faster and with greater accuracy.
Track shipments to ensure they reach their destination safely.
Maintain optimal inventory levels so you always have what customers want in stock.
All three of these strengths help you build relationships of trust with your customers. If you
consistently fulfil your promises and exceed expectations, your customers will be much more
likely to keep coming back to you and even refer their friends to you. As economic
conditions improve and consumers cautiously increase their spending, you can put yourself in
and ideal position by optimizing your supply chain operations.
1.1Managing Customer Service Quality
One of the best ways to differentiate your firm from competitors is to deliver
consistently service quality
It is important to exceed the target of customers’ service-quality expectations
Customers will be satisfied if they get the right sort of transport to the right place at
the right time in the right quantities at the right price
1.2Determinants of Service Quality
Access: the service is easy to obtain in convenient locations at convenient times with
little waiting
Communication: the service is described accurately in the customer’s language
Competence: the employees possess the required skill and knowledge
Courtesy: the employees are friendly, respectful and considerate
Credibility: the company and employees are trustworthy and have the customer’s best
interests at heart
Reliability: the service is performed with consistency and accuracy
Responsiveness: the employees respond quickly and creatively to customers’ requests
and problems.
1.2What determines customer value?
1.3How do we measure it?
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. 2. CUSTOMER SERVICE PERFORMANCE MEASURES
2.1Customer Value Measures
Service levels
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Typical measure used to quantify a company’s market conformance.
Usually related to the ability to satisfy a customer’s delivery date
Direct relationship between the ability to achieve a certain level of service and supply
chain cost and performance.
o Demand variability and manufacturing and information lead times determine
the amount of inventory that needs to be kept in the supply chain.
Customer Satisfaction
• Customer satisfaction surveys used to measure sales department and personnel
performance
• Also provides feedback for necessary improvements in products and services.
• However, reliance on customer satisfaction surveys can often be misleading
o Surveys are easy to manipulate
o Typically measured at the selling point
o Nothing is said about retaining the customer.
• Measure customer loyalty
o Easier to measure than customer satisfaction.
Analyze customer repurchase patterns based on internal databases
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Cost
• Total Supply Chain Cost is the sum of all supply chain costs for all products
processed through a supply chain during a given period
• Inventory Turnover is the ratio of the cost of goods sold to the value of average
inventory.
• Weeks of inventory is the ratio of average inventory to the average weekly sales
•
Customer Service
• Average Response Time is the sum of delays of ordering, processing, and
transportation between the time an order is placed at a customer zone and the time the
order arrives at the customer zone
3.MEASURING CUSTOMER SATISFACTION IN THE SUPPLY CHAIN
Let your customers tell you what you should ask them so you can improve what matters
most.
Most people in business know they need feedback from customers in order to make service
delivery and product design more in line with customer needs and expectations. But too
often, the process of measuring customer satisfaction and perception is more complex and
convoluted than it needs to be
The following sections outline a sound and simple approach for measuring and
managing customer satisfaction:
1. know who your customers are- to set a context in which you can produce reliable and
useful measures of service performance
2. understand your customers' needs- to determine how customers define ‘quality of
service' and therefore what you should be measuring to monitor your quality of
service
3. measure your customer service performance- to determine what are the priority areas
you need to focus on to improve your quality of service (and therefore business
performance)
4. focus on priorities-to avoid wasting valuable resources on and focus on those
resources that need improvements and changes that will generate the greatest
improvement in overall customer satisfaction
5. Improve your SC processes- to translate the customer satisfaction priorities into action
that results in future increases in customer satisfaction
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References
1. Hine, T. [Current Edition] Supply Chain Management: Customer Driven and Focused.
2. Waters, D. [2002] Logistics: An Introduction to Supply Chain Management.
3. Taylor, L. David [2005] Global Cases in Logistics and Supply Chain Management. Thomson
Learning
4. Coughlan, A, Anderson, E.; Stern, E.; El-Ansary, A. [2002] & L. W. [2000] Marketing
Channels, Prentice Hall.
5. Govil, M. & Proth, Jean-Marie [2002] Supply Chain Design and Management: Strategic and
Tactical Perspectives.
6. Martin Christopher (4th Edition) Logistics and Supply Chain Management
7. Martin Christopher (4th Edition) Logistics and Supply Chain Management
8. Ronald H. Ballon (4th edition) Business Logistics Management
9. Patrick Jonsson (2008) Logistics and Supply Chain Management
10. Vogt JJ, Pienaar WJ, De Wit PWC( 3rd edition).: Business Logistics Management: Theory and
Practice
11. Taylor, L. David: Global Cases in Logistics and Supply Chain Management. Thomson
Learning (2005)
