10/26/2017 Chapter 8 - Order Management and Customer Service Flashcards | Quizlet

Chapter 8 - Order Management and Customer 25 terms dvinh

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Customer Relationship -the art and science of strategically positioning customers

Management to improve the profitability of the company and enhance
its relationships with its customer base
-the goal is to better serve different customer segments,
while at the same time improving supplier's profitability
(not all customers are equally profitable for the supplier)

Implementing CRM 1. segment the customer base by profitability

2. identify the product/service package for each customer
segment
3. develop and execute the best processes
4. measure performance and continuously improve

Cost-to-service (CTS) -often developed for each customer

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-accurately allocate costs to each customer based on

specific costs of servicing their orders on the basis of how,
how much, what, and when the customer orders

Activity-Based Costing refers to a methodology that measures the cost and

(ABC) performance of activities, resources, and cost objects

Customer Segmentation -one method to classify customers by profitability, where

Matrix the vertical axis measures the net sales value of the
customer and the horizontal axis represents the cost to
serve
-classified into one of four segments: protect, build, cost
engineer, danger zone

Order-to-cash (OTC) all activities plus the flow of funds back to the seller based
on the invoice

Replenishment cycle is used when referring to materials management while

order to cash is used when referring to physical
distribution (outbound-to-customers)

CRM Program Measure number of customers who have moved from one customer
segment to another by changing their ordering patterns

Customer Service -include anything that touches the customer

-can be the actual product itself, interaction, even word of
mouth
-how a seller interacts on products/services flows,
information flows, and cash flows
-an activity, a set of performance measures, philosophy,
core benefit, tangible product, and an augmented product

Element of Customer time, dependability, communications, convenience

Service

Time -order cycle, lead, replenishment

Dependability -more important for several buyers than the absolute

length of time. Buyers can minimize inventory levels if lead
time is constant
-three major elements: cycle/lead time; safe delivery;
correct orders

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10/26/2017 Chapter 8 - Order Management and Customer Service Flashcards | Quizlet

Cycle/Lead Time providing a dependable lead time reduce some of the

uncertainty faced by the buyer

Safe Delivery if product arrives damaged or is lost in transit, the buyer

cannot use the product as intended

Correct Orders an incorrectly filled order forces the buyer to reorder, if

they do not switch to another seller

Communications pre-transaction information; transaction information; post-

transaction information

Pre-transaction includes current product availability and expected delivery

information dates

Transaction information includes specifics about the order

Post-transaction involves the need for repairs, assembly, or returns

information

Convenience logistics service level must be flexible

Stockout -occurs when desired quantities of finished goods are not

available when or where a customer needs them
-four possible events may occur: the buyer waits until the
product is available; the buyer back-orders the products;
the seller loses current revenue; the seller loses a buyer
and future revenue

Customer waits should cost nothing; this situation is more likely to occur
where product substitutability is very low

Back-orders -occurs when a seller has a portion of products ordered

by a buyer (secures the portion of the inventory that is
currently not available)
-the buyer incurs minimal or no cost, the seller
experiences an increase in variable costs

Lost Sales occurs when a buyer has decided that if the entire order
cannot be delivered at the same time, it will cancel the
order and place it with another seller

Lost customer -occurs when a buyer permanently switches to another

supplier (may deter future buyer)
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-worst situation for the seller

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