Procurement- Lecture 3

Customer service and logistics

ABDIKARIM MOHAIDIN AHMED
muhudiin@gmail.com
 INTRODUCTION
• The vast majority of companies consider
customer service to be an important aspect of
their business.
• Customer service is inextricably linked to the
process of distribution and logistics.
• there are many influences that may be relevant
to customer service including ordering, stock
availability and delivery reliability.

Concepts of Logistics and Distribution 2

 THE IMPORTANCE OF CUSTOMER
SERVICE
• why is it so important? There are many
different answers to this question, ranging
from the growth in competition to the raising
of customers' expectations to the similarity of
the basic products that are offered.
• One way of considering customer service is to
differentiate between the core product itself
and the service elements related to the
product.
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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….
• The core product concerns the item itself: the
technical content, the product features, the
ease of use, the style and the quality.
• The service elements, which can be called the
'product surround', represent the availability
of the product, the ease of ordering, the
speed of delivery, and after-sales support.

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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….

Figure 3.1 Core product versus product 'surround', illustrating the importance of
the logistics-related elements
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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….
• It is recognized by the marketing departments
of many companies that the product surround
elements are very important in determining
the final demand for a product.
• True to the Pareto 80/20 rule, it is estimated
that product surround or logistics elements
represent about 80 per cent of the impact of
the product but only represent 20 per cent of
the cost.
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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….
• Thus, no matter how attractive the product may
be, it is essential that the customer service
elements are satisfactory and, as we shall see,
logistics plays a crucial role in providing good
customer service.
• One of the definitions of logistics that was
provided in the first chapter referred to 'the
positioning of resource at the right time, in the
right place, at the right cost, at the right
quality'.
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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….
• This definition can be expanded into what
might be considered as the seven 'rights' of
customer service. These are the right quantity,
cost, product, customer, time, place and
condition.
• All of these different aspects can be key
requisites of a good customer service. each of
them may be essential to ensure that a
product achieves its expected sales in the
various markets where it is made available.
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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….

Figure 3.2 The seven 'rights' of customer service, showing the main service
classifications
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 THE IMPORTANCE OF CUSTOMER
SERVICE Cont….
• It is notable that all of these elements are
affected by the standard and quality of the
logistics operations that are an integral part of
getting a product to market.
• Thus, these elements can provide the basis for
identifying the different aspects of logistics
that should form a part of any customer
service offering.

Concepts of Logistics and Distribution 10

THE COMPONENTS OF CUSTOMER
SERVICE
• The logistics components of customer service
can be classified in different ways.
– They may be seen as transaction-related
elements, where the emphasis is on the specific
service provided
– or they may be seen as functional attributes that
are related to overall aspects of order fulfillment.

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
• Transaction elements are usually divided into
three categories. These reflect the nature and
timing of the particular service requirements
(before, during and after delivery of the
product):
1.Pre-transaction elements: these are customer
service factors that arise prior to the actual
transaction taking place. They include:

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
– written customer service policy;
– accessibility of order personnel;
– single order contact point;
– organizational structure;
– method of ordering;
– order size constraints;
– system flexibility;
– transaction elements.

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
2. Transaction elements: these are the elements
directly related to the physical transaction and
are those that are most commonly concerned
with distribution and logistics. Under this
heading would be included:
– order cycle time;
– order preparation;
– inventory availability;

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
– delivery alternatives;
– delivery time;
– delivery reliability;
– delivery of complete order;
– condition of goods;
– order status information.

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
3. Post-transaction elements: these involve
those elements that occur after the delivery
has taken place, such as:
– availability of spares;
– call-out time;
– invoicing procedures;
– invoicing accuracy;
– product tracing/warranty;

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
– returns policy;
– customer complaints and procedures;
– claims procedures.

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
• Customer service elements can also be
classified by multifunctional dimensions. The
intention is to assess the different
components of customer service across the
whole range of company functions, to try to
enable a seamless service provision.
• The four main multifunctional dimensions are:

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…
1. time – usually order fulfilment cycle time;
2. dependability – guaranteed fixed delivery
times of accurate, undamaged orders;
3. communications – ease of order taking, and
queries response;
4. flexibility – the ability to recognize and
respond to a customer's changing needs.

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THE COMPONENTS OF CUSTOMER
SERVICE Cont…

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 DEVELOPING A CUSTOMER
SERVICE POLICY
• An appropriate customer service policy needs
to be developed based on identifiable
customer service requirements, and a suitable
logistics operation must be established to
provide this service.
• Because there are so many different elements
of customer service, this policy must be very
clearly and carefully defined.

Concepts of Logistics and Distribution 21

DEVELOPING A CUSTOMER
SERVICE POLICY Cont….

Concepts of Logistics and Distribution 22

DEVELOPING A CUSTOMER
SERVICE POLICY Cont….

Concepts of Logistics and Distribution 23

Concepts of Logistics and Distribution 24
 LEVELS OF CUSTOMER SERVICE
• there is a need to balance the level of
customer service with the cost of providing
that service.
• It is seldom possible to devise a policy that is
absolutely optimal in terms of the cost/service
balance.

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 LEVELS OF CUSTOMER SERVICE
Cont…
• Some companies adopt a cost minimization
approach where specific service objectives are
laid down and met at a minimum cost.
• Others choose a service maximization
approach where a distribution budget is fixed,
and the ‘best' service supplied within this cost
constraint.

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 LEVELS OF CUSTOMER SERVICE
Cont…
• The most appropriate approach to adopt will
depend on particular product, business or
market situations.
• The cost of providing a given service is
markedly higher the nearer it reaches the
'perfect service' — that is, the 100 per cent
mark.

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LEVELS OF CUSTOMER SERVICE
Cont…

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 MEASURING CUSTOMER SERVICE
• There are many different measures of customer
service that might be used including:
– order fulfilment.
– order cycle time
– the perfect order (OTIF)
• The most important message is that, whatever
measures are used, they must reflect the key
service requirements for the customer in
question.

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 THE CUSTOMER SERVICE
EXPLOSION
• The role of customer service as a critical
success factor for most companies has, once
again, become very significant.
• the major change stems from a growing
realization that satisfying the customer is the
key to achieving competitive success.
• Companies that fail to appreciate this may
lose significant market share.

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 THE CUSTOMER SERVICE
EXPLOSION Cont…
• Service, nowadays, is the key factor of
differentiation in a customer's decision to buy
one brand rather than another.
• Good customer service can provide the
distinctive difference between one company‘s
offer and its competitors'.
• Thus, customer service strategy must play a
major role in the determination of company
strategy.
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 THE CUSTOMER SERVICE
EXPLOSION Cont…
• One key lesson that also comes through is the
important role that logistics plays in providing
good customer service.

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 SUMMARY
• This chapter has considered some of the key
aspects of customer service and logistics. The
major components of customer service were
described.

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