13 | Logistics | Customer Satisfaction

Customer Service [Bardi page # 96…..] In the changing business scenario customer service is assuming a prominent place.

This is the result of competition that is sweeping the modern business scene. Customer’s perceptions & expectations have under gone change. Customer dissatisfaction is loss of business and reputation. Hence the new status of customer satisfaction. A good production function produces a product of high quality at competitive cost for which market already has identified a market. But business simply doesn’t take place unless logistics physically takes the product to the market. Hence customer satisfaction is the direct result of superior logistical performance. Customer satisfaction now becomes an interface between marketing and logistics Importance of Customer Service 1. Customer service level measures effectiveness of integrated logistics 2. Improved Customer service makes business grow 3. Makes customers loyal, partnerships and added value can “lock up” the customers 4. Provides edge in competitive business Objectives of Customer Service 1. Delivering 100% perfect orders 2. Creating competitive value by delivering seven R value to customers Perfect order: Perfect Order is a measure for logistical quality, which in turn indicates ability to provide customer service. Perfect Order is a customer order which is fulfilled in all respects. Time, place, quantity, fault free installation and documentation. Seven R rule: this rule states that the following factors must always be right with respect to product delivery. Quantity, Condition, Place, Time, Customer, Cost Following are the features of the above Seven R rule 1. Above are components of customer service 2. Deliver value to customer 3. Provide edge in competition 4. Any disruption causes breakdown of customer service Product,


Three levels of customer service Customer service is viewed in three principle ways. We can consider these three ways as three levels of customer service involvement or awareness. Definition of customer service is also viewed accordingly. 1. Customer service as an activity: this level treats customer service as an activity performed to satisfy customer’s needs. Order processing, invoicing, customer returns and claim handling are examples of such activities in a firm 2. Customer service as a performance measure: this level treats customer service as logistical performance measure making such measurements as perfect orders delivered and on time deliveries made 3. Customer service as a philosophy: this levels views customer service as a commitment of the company. Customer service is elevated to company wide policy to deliver customer service through superior performance. These three levels communicate what is to be done to achieve customer satisfaction, how it is to be measured and how it should be visualized. In general customer service is defined “as a process for providing competitive advantage and adding benefits to the supply chain in order to maximize the total value to the customer.” Elements of customer service Logistical resources are expended when a level of customer service is pursued. Superior service gives economic benefits to the customer. While customer gets the benefit which is expected to yield customer loyalty and better sales, supplier incurs costs as a result of expenditure of resources. Hence a logistical manager of supplier firm should carefully balance the costs and benefits before fixing the customer satisfaction level as a target. Elements of customer service are time, dependability, communication and convenience.  Time: order cycle time and lead-time are two different perspectives of same time dimension. The perspectives are supplier’s and customers. Good logistics management normally has various factors influencing this under good control to be good in customer service. These factors are order processing, order preparation and order shipment. Short and consistent lead-time improves the customer service. This


reduces inventory volume at both the customer’s & at suppliers. A note on lead-time is given at the end of this note separately.  Dependability: the time dimension loses its relevance in the absence of dependability. Following factors makes the customer rate the supplier in terms of dependability. 1. Lead-time: a dependable lead-time facilitates effective resource planning at the places of customer and supplier. 2. Safe delivery: dependability in terms of safe delivery is important as this ensures that what is delivered is readily usable. If the dependability is low stock out results. 3. Correct orders: erroneous orders give rise to customer dissatisfaction as something that is not asked for reaches the destination or nothing reaches the right destination. The above factors build the feeling of dependability in the minds of customers.  Communications: dependable order information communication is key to customer service. Modern systems like EDI or some other form of internet access are crucial for dependable communications. Dependable communications reduce order filling errors. Good coding & identification systems are also areas of prime importance for dependable communications • • Communications channel between seller and customer should always be open & accessible. Communications channel should be two way, freely accessible for seller and customer  Convenience/Flexibility: Customer service is required to be flexible. • Customer’s expectation of service differs from case to case. Hence service should be delivered as per requirement. Customer ‘A’ may want palletized raw material in railway wagons whereas ‘B’ may need non-palletized material in trucks. Supplier should be flexible enough to provide this service. • • Customers grouping should be done to recognize varied needs. This grouping may be product wise, size wise, area wise. Then attempt to satisfy the needs economically Customer profitability plays an important role when a supplier decides to meet the flexible expectations of customer. This indicates the amount of profit a customer


gives to the seller. Even a small percentage loss in sales can be substantial in case of a high profitability group customer. Salient Features of Customer Service • • • • • If basics of customer service are not in place nothing else matters. Customer service is the purpose of doing business. Customers may define service differently. The same customer may need the same product to be delivered in different packaging at different places or plants. All customer accounts [profitability] are not same. Profitability to the company differs from customer to customer. Relationships are not one dimensional. As we expect our suppliers to be sensitive to our needs our customers expect us to be sensitive to their needs. Partnerships and added value can “lock up” the customers. Customer service makes customers loyal. Categorization of Customer Service Elements  Pre-transaction Elements  Customer service policy  Organizational structure for customer service  System flexibility  Management services  Transaction Elements  Minimize stock-out  Give order information  Perform elements of order cycle  Expedite shipments  Minimize transshipment  Maintain system accuracy  Meet order convenience  Do product substitution to maintain service level  Post-transaction Elements


 Installation, warranty, repairs, alterations, parts  Product tracing  Customer claims, complaints, returns  Temporary replacement of products Customer service strategies  Customer audit to ascertain how customers define their expectation – shortest lead-time? Consistent lead-time?  ‘A’ ‘B’ C’ of customers and identify salient features of customer service  Decide degree of customization of service


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