Customer Service

Product Life-Cycle Curve

Represents the stages a product goes through from introduction to decline.

Product Characteristics

• Weight-bulk ratio.

• Value-weight ratio.

• Substitutability.

• Risk.

Weight-bulk ratio

The relationship between the weight and volume of a product affecting logistics costs.

Value-weight ratio

The ratio of a product's value to its weight, influencing logistics decisions.

Substitutability

The extent to which a product can be replaced by another.

Risk

Potential for loss or harm in logistics operations.

Product Packaging

• Facilitate storage and handling.

• Promote better utilization of transport equipment.

• Provide product protection.

• Promote the sale of the product.

• Change the product density.

• Facilitate product use.

• Provide reuse value for the customer.

Product Pricing

• Geographic Pricing Methods

  • Incoterms (e.g., F.O.B. pricing).

  • Zone pricing.

  • Single or uniform pricing.

  • Freight equalization.

  • Basing point pricing.

Customer Service

Presumed to be a means by which companies attempt to differentiate their product, keep customers loyal, increase sales, and improve profits.

Customer Service Elements

• Price.

• Product quality.

• Service.

Integral part of the Marketing Mix

• Price.

• Product.

• Promotion.

• Place (Physical Distribution).

Most Important Customer Service Elements

• On-time delivery.

• Order fill rate.

• Product condition.

• Accurate documentation.

Order Cycle Time

The time elapsed between when a customer order, purchase order, or service request is placed by a customer and when it is received by that customer.

Order cycle elements

• Transport time.

• Order transmittal time.

• Order processing and assembly time.

• Production time.

• Stock availability.

Order cycle time is expressed as?

A bimodal frequency distribution.

Constraints on order cycle time.

• Order processing priorities.

• Order condition standards (e.g., damage and filling accuracy).

• Order constraints (e.g., size minimum and placement schedule).

Service Observations

• The dominant customer service elements are logistical in nature.

• Late delivery is the most common service complaint and speed of delivery is the most important service element.

• The penalty for service failure is primarily reduced patronage, i.e., lost sales.

• The logistics customer service effect on sales is difficult to determine.

Sales-Service Relationship

Mathematical model to optimize service levels for profit.

Optimum Service Levels

• Optimum profit is the point where profit contribution equals marginal cost.

Service Performance Metrics

Include on-time deliveries, stockouts, and order accuracy.

Measuring Service Performance

• Percent of sales on backorder.

• Number of stockouts.

• Percent of on-time deliveries.

• The number of inaccurate orders.

• Order cycle time.

• Fill rate--% of demand met, % of orders filled complete, etc.

Service Contingencies

Plans for system breakdowns, supply disruptions, and product recalls.

Product Recall Actions

• Establish a task force committee.

• Trace the product.

• Design a reverse logistics channel.

System Breakdown Actions

• Insure the risk.

• Plan for alternate supply sources.

• Arrange alternate transportation.

• Shift demand.

• Build quick responses to demand shifts.

• Set inventories for disruptions.