Customer Service

Customer Service Variables

• Set customer expectations
Pre-transaction • Have customer service policy in writing
Variables • User-friendly order-taking process

• Reliable, consistent, and professional

Transaction customer service
Variables • Anticipate customer questions and concerns

• Quality follow-up
Post-transaction • Prompt and accurate invoicing process
Variables • Communication is key
 What is CRM?
Marketing philosophy based on
putting the customer first.

Supporting customer needs

through:
✓ Account management
✓ Catalog and order entry CRM
✓ Payment processing
✓ Credits and adjustments
Creating Lifetime Customers
▪ Higher customer satisfaction
Profitability
▪ Increased ability to anticipate customer
and service
levels met Top needs
▪ Growth in revenue and profits

▪ Decreased marketing costs

Second-tier
Customers

Customers
 Lifetime Customer Value (LCV)
• Metric for defining customer profitability
• Prediction of net present value of future
profits
• Focus on long-term health
Operating Profit Contribution =
Gross Profit (12 months) − (Invoices (12 months)  Average Cost per Invoice )

Use results to rank from high to low and

group into tiers by profitability.
 Customer Expectations
• Easy to order? • Is order filled
• Easy to correspond according to the
Communications Time
with questions or promised date?
concerns?

Buying Experience
• Is a guaranteed • Are the customer
delivery time offered? needs recognized?
Dependability Flexibility
• Did order arrive • Responding in
complete and timely manner?
undamaged?
Value of Service
Total Costs Customer Satisfaction

20%

80%
Service Service
Service Levels
Determining proper customer service
levels involves:
✓ Identify what each customer segment values
✓ Categorize service components
✓ Prioritize by segment or customer level
✓ Benchmark against competitors
✓ Perform gap analysis
✓ Design product/service packages to exceed service
requirements
✓ Establish metrics, targets, and monitoring and
controlling procedures
✓ Evaluate results against plan
Economic Constraints on Level of
Service Offered

Cost of
Cost to get closer
service
and closer to
100% becomes
prohibitive.

75% 80% 85% 90% 95% 100%

Level of service (percentage)
 Service Level Metrics
Pre-sale Sale Post-sale
• Single order contact ▪ Order cycle time ▪ Parts availability
point ▪ Order fill rate ▪ Inquiry response time
• Order personnel ▪ Inventory availability- ▪ Invoicing time
accessibility to-promise (ATP) ▪ Claims and complaint
• Order personnel ▪ Perfect order procedures
knowledgeability fulfillment ▪ Product tracing
• Order personnel ▪ Delivery frequency ▪ Warranty duration
quality
▪ Delivery method ▪ Returns policy
• Online ease of use and flexibility
flexibility
▪ Availability of order
• Order size constraint status data
 Inbound Order Management
Process
Procurement Logistics Purchase P.O. receipt
writes Work order creates order (P.O.) and Order
purchase is created. shipping status materials close-out.
order. order. monitoring. inspection.
Inbound Order Management

Lead Time Work Orders

• Ordering early in • Purchase order (P.O.)

process to achieve generates a work
shorter lead times order
• Time components: • Authorization to start
– Order preparation work
– Queue
– Processing • Helps determine
– Transit logistics details
– Receiving
– Inspection
• Logistics generates
shipping order
Effective Receiving Practices
✓ Coordinate delivery schedule with carriers

✓ Compare P.O. and freight bill against receipt date

✓ Compare packing list and quantity to the P.O.

✓ Complete unitization efforts

✓ Expedite urgent items to production (e.g., backorders)

✓ Prepare receiving report

✓ Sign-off to assume inventory responsibility

 Routing Guide
A B
Shipping tool that manages logistics activities for
shipments between two points.

Contains:
• Mode and carrier information ROUTING
GUIDE
• Document requirements
• Service requirements
(carriers, delivery, boxes, pallets)
 Shipment Notifications
TO:
Advance Ship Notice FROM:

Serves these purposes:

• Provides buyer with time to plan shipment
arrival
• Allows buyer time to arrange delivery
appointments
• Enables buyer to redeploy shipment contents
• Reduces uncertainty in order replenishment
 Ensuring Timely Arrival
Order Tracking
Ability to determine physical location and
status of a customer order once it has been
fulfilled.
Order Visibility
Ability to locate and view the status of a
customer order in real time within a
computerized system, application, or
platform.
 Managing Transportation Costs
• Transportation plan
• Transportation management system (TMS)
• Factory gate pricing
• Work with logistics service providers (e.g., freight
forwarders)
Tracking and Measuring Supplier
Performance
Effective performance Common Metrics:
management systems: ✓ Lead time reduction
• Standardize processes ✓ Quality
• Promote collaboration and ✓ Price index
improvements ✓ Delivery date
✓ Responsiveness
• Track all supplier performance
✓ Promised quantity
• Automate key measurement
activities
Key Performance Indicators (KPIs) for Carriers
Service Quality Service Efficiency
Perfect delivery Percentage of error-free Value vs. cost of buying
service transportation services
Freight safety and Percentage of claims-free Aggregate efficiency
protection delivery measure: total freight cost
divided by number of units
shipped
Billing accuracy Percentage of freight bill Equipment—utilization;
accuracy proper and effective use

Transit time ▪ Percentage of on-time ▪ Asset utilization

delivery ▪ Labor productivity
▪ Percentage of same
number of days for
delivery
Intracompany Order Management
Moves inventory when and where needed, positioning it
for delivery to end customer.

▪ Raw and work in process (WIP) materials

in manufacturing and assembly plants
▪ Internal customer orders
▪ Intracompany sales orders
▪ Transfer orders
 Order-to-Cash (OTC) Cycle
• Replaces concept of order cycle time
• Factors in the time it takes for the receipt of payment for an
order
• Performance used as a metric for customer service
– Longer order cycles requires buyers to have higher levels of inventory
– High variability in order cycle requires more safety stock
• Variance exists with order cycle time—usually a range of
best/worst case scenario
Order Cycle Stages
Stage 1:
Order Transmittal

Stage 4: Stage 2:
Order Delivery Order Processing

Stage 3:
Order Picking and
Packing
Fulfillment Channels
Manufacturer Storage with Direct Delivery

Orders
Fulfillment Channels
Manufacturer Storage with Drop Ship
Distributor

Orders Orders

Retailer
Fulfillment Channels
Manufacturer to DC to Retailer

Northern region

Southern region

Retailers
Fulfillment Channels
Independent Distributor with
Omni-Channel Network

Independent
distributor
Direct sales

Local distributor
Retailer
Fulfillment Channels
Independent Aggregator
with e-Business Network
Retailer

Independent
distributor

Orders

Local
Slow-moving Drop ship
distributor
 E-commerce
• Customer satisfaction:
– Convenience factor
– Instant gratification through fast fulfillment

• Faster order cycle and velocity of cash flow

• Collects customer demographic information
• Order visibility
• Cost-effective shipping methods
• Non-penalizing customer return policy
• Optional in-person pickup
Customer Service Ratio
A measure of delivery performance of finished goods.
Percentage of product delivered compared to
the amount ordered by the customer.

Variations include:
• Unit fill rate
• Line item fill rate
• Eaches fill rate
• SKU fill rate
• Monetary value fill rate
 Stockout Frequency
Evaluates the supplier’s management of stockouts,
including:
✓ The percentage of items that
are in stockout
OUT
✓ The monetary value of items OF
ordered that are in stockout STOCK
✓ The average age of stockouts
✓ The average time to recover
items from stockout
Lead Time Monitoring
Speed of
Consistency
Performance

Malfunction
Flexibility
Recovery
 Speed of Performance
Common metrics for measurement:
• Order delivery cycle time
• Time to process a customer-requested change
• Time to respond to a customer query
• Average wait time to be connected on the 800 number or in a chat function
• Percentage of calls that encounter a busy signal
• Percentage of calls to customer service that are abandoned