• 1. CHAPTER 3 Customer Service
    • 2. Cost trade-offs in Marketing and LogisticsProductOrder processing and information costs Inventory carrying costs Place/customer service levelsOrder processing and information costsPriceLot quantity costsWarehousing costsTransportation costsLOGISTICSMARKETING
    • 3. Elements of Customer ServiceTransaction elementsWritten statement of policy Customer receipt of policy statement Organization structure System flexibility Management servicesInstallation, warranty, alterations, repairs, parts Product tracing Customer claims, complaints, returns Temporary replacement of productsStockout levels Order information Elements of order cycle Expedited shipments Transshipment System accuracy Order convenience Product substitutionPosttransaction elementsPretransaction elements
    • 4. Methods of Establishing a Customer Service StrategyDetermining channel service levels based on knowledge of consumer reactions to stockouts Analyzing cost/revenue trade-offs Using ABC analysis of customer service Conducting a customer service audit
    • 5. Model of Consumer Reaction to a Repeated StockoutSource: Clyde K. Walter, “An Empirical Analysis of Two Stockout Models,” unpublished Ph. D. Dissertation, Ohio State University, 1971.Customer3 Lower4 Other size2 Same1 Higher Another store 6 Ask here again5 Special order Switch stores ? Substitute ? Switch brand ? Substitute ? Switch price ?NoNoYesYesYesYesNoNo
    • 6. Relationship Between Customer Service and Inventory Investment
    • 7. Internal AuditExternal AuditEvaluate Customer PerceptionsDifferentiate Channel Levels & Market SegmentsIdentify OpportunitiesDetermine Marketing Services Mix & LevelsStages of the Customer Service Audit
    • 8. Overall Importance Compared To Selected Performance Of Major Manufacturers Evaluated By DealersSource: Douglas M. Lambert and Jay U. Sterling, “Developing Customer Service Strategy,” unpublished manuscript. All Rights reserved.OverallImpt. -Dealer Evaluationsof ManufacturersAllDealersMfr. 1Mfr. 2Mfr. 3Mfr. 4Mfr. 5Mfr. 6RankVar.NumDescriptionM.SDM.SDM.SDM.SDM.SDM.SDM.SD19Ability of manufacturer to meet promised delivery date (on-timeshipments)6.40.85.91.04.11.64.71.66.60.63.71.83.31.6239Accuracy in filling orders (correct product is shipped)6.40.85.61.14.71.45.01.35.81.15.11.24.41.5390Competitivenessof price6.31.05.11.24.91.44.51.55.41.34.41.53.61.8440Advance notice on shipping delays6.10.94.61.93.01.63.71.75.11.73.01.73.11.7594Special pricing discounts available on contract/project quotes6.11.15.41.34.01.74.11.66.01.24.71.54.51.863Overall manufacturing and design quality of product relative tothe price and range involved6.00.96.01.05.31.35.11.26.50.85.21.34.81.5716Updated and current price data, specifications and promotionmaterials provided by manufacturer6.00.95.71.34.11.54.81.46.30.94.91.74.31.9847Timely response to requests for assistance from manufacturer'ssales representative6.00.95.21.74.61.64.41.65.41.64.22.04.31.7914Order cycle consistency (small variability in promised versusactual delivery, i.e., vendor consistency meets expected date).6.00.95.81.04.11.54.81.46.30.93.61.74.41.7104bLength of promised order cycle (lead) times (from ordersubmission to delivery) for base line/in-stock ("quick ship")product6.01.06.11.14.51.44.91.56.21.14.31.73.72.01154Accuracy of manufacturer in forecasting and committing toestimated shipping dates on contract/project orders6.01.05.51.24.01.64.31.46.31.13.81.73.51.61249aCompleteness of order (% of line items eventually shippedcomplete) -- made to order product (contract orders)6.01.05.51.24.31.24.71.36.01.14.41.44.01.65033aPrice range of product line offering (e;g., low, medium, highprice levels) for major vendor5.01.34.41.54.61.65.11.55.21.44.31.63.91.610177Store layout planning assistance from manufacturer2.91.64.21.73.01.53.41.64.71.63.01.43.41.2Note: Mean (average score) based on a scale of 1 (not important) through 7 (very important).
    • 9. Internal Audit QuestionsHow is customer service currently measured? What are the units of measurement? What are the performance standards? What is the current level of attainment?3-9 a
    • 10. Internal Audit Questions cont.How are these measures derived from corporate information flows and the order processing system? What is the internal customer service reporting system? How do the functional areas of the business perceive customer service? What is the relation between these functional areas in terms of communication and control?3-9 b
    • 11. Importance And Performance Evaluations For Selected Customer Service AttributesRelative Performance -0.36** Performance evaluations of A and B are significantly different at p < 0.05.123456789Performance EvaluationImportanceCompany ACompany BNo.AttributeAccuracy in filling ordersAbility to expedite emergency orders in a fast, responsive mannerAction on complaints (e.g., order servicing, shipping, product, etc.)Accuracy of supplier in forecasting and committing to shipping date for custom-made products Completeness rate (percentage of ordereventually shipped)Rapid adjustment of billing and shipping errorsAvailability of blanket ordersFrequency of deliveries (supplier consolidates multiple/split shipments into one larger, less frequent shipment)Order processing personnel located in your market areaComputer-to-computer order entry6.426.256.075.925.695.344.554.293.582.305.544.984.824.535.294.645.035.075.334.075.655.235.184.735.274.904.155.035.213.53-0.11-0.25-0.20 +0.02-0.24+0.04+0.1210 +0.54** +0.88**** Performance evaluations of A and B are significantly different at p < 0.01.Source: Douglas M. Lambert and Arun Sharma, “A Customer-Based Competitive Analysis for Logistics Decisions,” International Journal of Physical Distribution and Logistics Management 20, no.1 (1990), p.18. 3-9 c
    • 12. Competitive Position MatrixIMPORTANCEHIGHMEDIUMLOWMinor weaknessMinor strengthMajor weaknessMajor strengthCompetitive disadvantageCompetitive parityCompetitive advantageRelative performance1357-3.0-1.0+1.0+3.01*2*4*3*6*5*7*8*9*10*3-10
    • 13. Performance Evaluation MatrixPerformance evaluationIMPORTANCEHIGHMEDIUMLOWMaintainDefinitely improveMaintain/improve135713571*2*4*3*6*5*7*8*9*10*MaintainReduce/maintainReduce/maintainReduce/maintainImprove Improve 3-11
    • 14. Strategic Opportunities For A Competitive Advantage* denotes attribute numberindicates desired shift in relative performanceindicates potential opportunities that may be revealed within specific customer segmentsCompetitivedisadvantageCompetitiveparityCompetitiveadvantageMajorweaknessMinorweaknessMajorstrengthMinorstrengthRelativeperformanceIMPORTANCEHIGHMEDIUMLOW7531-3.0-1.0+1.0+3.01*2*3*4*5*6**8*9*10*7Source: Douglas M. Lambert and Arun Sharma, “A Customer-Based Competitive Analysis for Logistics Decisions,” International Journal of Physical Distribution and Logistics Management 20, no.1 (1990), p.23. 3-12
    • 15. Measuring and Controlling Customer Service PerformanceEstablish quantitative standards of performance for each service element. Measure actual performance for each service element. Analyze variance between actual service provided and standard. Take corrective action as needed to bring actual performance into line. 3-13
    • 16. Customer Service StandardsReflect the customer’s point of view. Provide an operational and objective measure of service performance. Provide management with cues for corrective action.3-14