Customer Service- Key

elements of logistics
Chapter 3
Meaning – Customer Service
• C u s to me r s er vi ce i s o f te n the key link b etwe en lo gi sti cs a nd m arketin g . If the l ogi s tics
s y s tem , p ar ticul arly o utbou n d lo gis ti cs, i s no t f un ctio nin g pr op erly an d a cu s to me r d oe s
n o t r e ce i ve a d e l i ve r y a s p r o m i s ed , th e co m p a ny co u l d l o s e f u tu r e s a les .

• E ve n tho ug h m an ufa ctu ring can pr od u ce a g oo d p rod u ct at the rig ht co st a n d m arketi ng

ca n s ell it -, if lo gi sti cs does n o t d elive r it w he n a n d wh e re pr omi sed , the cu s tome r will be
d i s s a tis f ie d .

• Th e r ole of cu s to me r se r vice i s to p rovid e tim e a nd pl a ce utility in the tran s fer of go ods

a n d se r vi ce s b etwe en b uyer a n d selle r. Put a no th er way, th er e i s n o valu e in th e pr od uct
o r s e r v i ce u n til i t i s i n th e h a n d s o f th e cu s to m e r o r co n s u m e r.
Objectives of Customer Service
• In cr e ased e f f i ci en cy
To i n cr e a s e e f f icie ncy, a co m p a ny m u s t d e ve l op co s t - e f fective tra n s p o r ta tion ra te s w h i l e
r e d u ci ng ove r h e a d, total i nve n to r y, a n d ove ra ll co s t - p e r - or de r p r o ce s s i n g.

• Im p r oved cu s t o m e r s e r v i ce
In d i r e ct m a r ke tin g e n te r p r is es , f u l f illme nt o p e ra tion s a r e i n p a r tn e rs h ip w i th m a r ke tin g
a n d m e r ch a n dis ing . Th i s p a r tn e r s hip i s l i ke a th r e e -le gg ed s to o l — w i th o ut a l l th r e e l e g s
th e s to o l ca n n o t s ta n d .

• In cr e ased S a l e s

Se ve ra l o p p o r tu nities e xi s t f o r i m p r oving s e r v i ce, a n d th o s e i n tu r n ca n b e u s e d to

m a r ke tin g’s a d va n tage . W i th d i r e ct p r omo tio ns a n d a d ve r tis e d r e ta i l p r o d u ct, m a i n tainin g
o n - ti me a n d i n - s to ck p o s i tion i s a m u s t.
• Bu i l d i n g r e l a t i o ns h i ps
Tr u e tw o - w a y co l l a bo ra tion b e tw e e n r e tailer a n d ca r r i er i s k e y to th e s u cce s s o f l o g i s tics
e xe cuti on. M e a sur e s o f s u cce s s a r e to ta l co s t, ti m e i n tr a nsit, a nd r e sp onsiv eness of the
ca r r i e r r ep r es en ta tive .

• I m p r o ve Ma r k e t P o s i t i o n

• E f f i cie nt cu s to m e r s e r v i ce w ill l e a d to cu s to m e r l o y a lty, cu s to m e r s a ti s fa ctio n w h i ch w i l l

r e s u l t i n h i g h e r s a l e s a n d th e r e by i m p r o ve m a r k e t p o s i tion s o f th e co m p a n y .

• E n s u re P e r fect o r d e r

• W h e n a l l th e o r d e r s a r e p e r f o r me d i n e f f icie nt m a n n e r w i th th e u l tim ate a i m o f a ch i e ving

cu s to m e r s a ti s f actio n i t i s te r m e d a s p e r f e ct o r d e r .
Categorization of customer Service Elements

Elements of Customer
Service

Pre- During Post

Transaction Transaction Transaction
Phase Phase Phase
→Order Status
→Customer Service →Order Fulfillment →Customer
Policy →Delivery Complaints
→Organization Consistency →Product
Building →Order Installation &
→Structuring the Convenience Commissioning
service →Product →Customer
Substitute Education &
Training
A) Pre- Transaction Phase
• 1. Customer service policy

• T h i s w i l l i n d i c a te t h e s e r v i c e s t a n d a rd s o f t h e f i r m . I n t h i s p h a s e , t h e f i r m
w i l l h a ve t o e vo l ve a p o l i cy f ra m e wo r k f o r p e r f o r ma nc e m e a s u re s , e va l u a ti o n
m e t h o ds , r e p o r t i ng s t r u c t ure , a n d t h e r e wa rd s t r u c t ure .

• 2. Organization building

• Fo r i m pl e me nti ng t h e p o l i c y d i r e c ti ve s o n c u s t o m e r s e r v i ce , t h e f i r m s h o u l d
f o r m a l i ze t h e p o r t i n g s t r u c t u re , d e l e g a t e a u t h o r i ty, a n d a l l o c a te
r e s p o n s i bi l ity. T h e c o n t a c t p e r s o n’s n a m e a n d c o n t a c t n u m b e r n e e d t o b e
c o m m u ni c a te d t o t h e c u s t o m e rs f o r i n f o r m a ti o n o n o r d e r s t a t u s , d i s p a tc h
d e t a i ls , wa r ra nty c l a i ms , a n d s o f o r t h .

• 3. Structuring the service

• T h e b a s i c s t r u c t u re o f t h e s e r v i ce d e p e nds o n c u s t o m e r e x p e c ta ti o ns ,
i n d u s tr y s t a n d a r d, a n d t h e s e r v i c e s t a n d a rd t h e f i r m w o u l d l i ke t o ke e p. T h e
f i r m m a r ke ti ng c a p i t a l g o o d s m a y e vo l ve a s e r v i ce s t r u c t ur e t o e x t e n d
l i f e ti me p r o d u c t s e r v i c e c o m m i tme nt s f o r t h e s u p p l y o f s p a r e s, i r r e s pe c tive
o f c o n t i n u o us p r o d u c t a n d t e c h n o l o g y u p g ra de s a t i t s e n d .
 B) During Transaction phase

• 1.Order fulfillment reliability

• This depends on the close coordination and management of the various components of the order cycle such as order
processing, material planning allocation, picking, packing, and transportation. The customer’s production schedule is very
much dependent on the reliability factor of order fulfillment by the supplier.

• 2. Delivery consistency

• The other important factor in the transaction phase is the consistency of delivery of repeat orders. The inconsistency of
delivery may be because of problems with the various elements of order fulfillment that need system improvement as well as
for better supply chain management.

• 3. Order convenience

• Order convenience is the ease with which the customer can place an order. The barriers to convenience are the paperwork
required by the supplier, compliance to various procedures complex payment terms poor communication network at the
supplier’s end, and poor coordination in the marketing network of the supplier. In competitive markets, these barriers may
lead to opportunity loss and warning of the customer base.

• 4. Product substitute

• A situation may arise that the product ordered can’t be shipped due to certain manufacturing or quality problem. The seller
may extend the service by offering a substitute product of similar or better quality in different sizes or from the available
brands in the market (on the same terms and conditions) in order to keep the relationship and retain the customer during
transaction phase.
 Levels of Customer Service

Custo mer s ervice has multifun ction al int er est for a co mp an y – but , fro m th e point of
vi ew of th e logisti cs function, w e can view custo mer s ervi ce as having four
t r ad itional d i men sions : Ti me, D ep en d ability, C o mmu n ication an d Co n v enience .

• 1 . Ti me : Th e ti me f actor i s usu all y ord er cycle ti me p articularl y f ro m the

p ersp ective of th e s eller looking at custo mer s ervi ce . On the oth er hand th e buyer
usu all y r ef ers to th e ti me di mension as th e l ead ti me, o r the repleni sh ment, time
Regardl es s o f th e p ersp ective or the ter minolog y, s ev er al b asi c co mponent s or
v ar i ables aff ect t h e t i me f act or.

• 2 . D ep en dability : To so me custo mer s d epend ability can b e mor e i mportant than

l ead ti me . Th e custo mer can mini mi ze its inv entor y lev els if lead ti me is fix ed .
i .e . , a cu sto mer th at kno ws with 100% as surance th at l ead ti me i s 10 d ays could
adjust his inventor y lev els to corr espond to the av er ag e d emand (us ag e) during
th e ten d ays and would h av e no n eed for s af ety sto ck to gu ard again st sto ck outs
r es u lting f l u ctuations i n l ead t i me .
• Cycle time: Lead time dependability t hen directly affect s the customers' inventory and stock out
cost. Providing a dependable, lead time reduces some of the uncertainty a customer faces. A
s e l l e r, w h o c a n a s s u r e t h e c u s t o m e r o f a g i v e n l e v e l o f l e a d t i m e , p l u s s o m e t o l e r a n c e , d i s t i n c t l y
differentiates its product from that of its competitors. The seller that provides a dependable lead
t i m e p e r m i t s t h e b u ye r t o m i n i m i z e t h e t o t a l c o s t o f i n v e n t o r y, s t o c k o u t s , o r d e r p r o c e s s i n g a n d
Production scheduling.

• S a f e d e l i v e r y : A n o r d e r ' s s a f e d e l i v e r y i s t h e u l t i m a t e g o a l o f a n y l o g i s t i c s s ys t e m . T h e l o g i s t i c s
function is the culmination of the selling function . If goods arrived damaged or are lost, the
customer cannot use the goods as intended. A shipment containing damaged goods aggravates
s e v e r a l c u s t o m e r c o s t c e n t r e s , i n v e n t o r y, p r o d u c t i o n a n d m a r k e t i n g .

• C o r r e c t o r d e r s : F i n a l l y, d e p e n d a b i l i t y e m b r a c e s t h e c o r r e c t f i l l i n g o f o r d e r s . A c u s t o m e r w h o
has been anxiously awaiting the arrival of a urgently needed shipment may discover upon
r e c e i v i n g t h e s h i p m e n t t h a t t h e s e l l e r m a d e a n e r r o r i n f i l l i n g t h e o r d e r. T h e c u s t o m e r w h o h a s
not received what was requested may face potential lost sales or production.
• 3 . Co mmu n ication : Th e t wo logisti cs activities vit al to order fulfill ment are th e
co mmuni cation of custo mer ord er infor mation to th e order filling area and the
actu al pro ces s of picking out o f invento r y th e items order ed . In th e o rd er
infor mation st ag e the us e of ED I or int ern et en abled co mmunication s can r edu ce
error s in tr ans ferring ord er infor mation f ro m th e ord er to the w ar ehous e r eceipt .
The sell er should si mplif y produ ct identifi cation su ch as product cod es in o rder to
r ed u ce o r d er p i cking er r o rs .

• 4 . Co nvenien ce : This is another w ay o f s aying th at th e logistics service l evels

mu st b e fl exible . Fro m the logisti cs op er ations st and point, having one of a f ew
st and ard s ervice l evel s th at appl y to all cu sto mer s would b e id eal ; but this
as su mes that all cu sto mers ' logisti cs r equir ements ar e ho mog eneou s . In r eality,
this i s not the situ ation . E.g .: one custo mer may r equir e the s eller to p alleti ze and
ship all ship ments b y r ail anoth er may r egi ster a tru ck d eliv er y onl y, with no
p alleti zation , still other s may request sp ecial d eliver y ti mes . Basi call y logisti cs
r equir ements diff er with r egards to p ackaging , the mode and th e carri er th e
custo mer r equires , routing and d eliver y ti mes . Conv enien ce recognizes custo mers '
d i fferent r eq u irements .
 7 R’s / Rights of
Customers
The seven R's rule offers a simple description of how integrated logistics
creates customer service. The seven R's mean having :

1.The Right Product: A company who offers this kind of service must first
know the kind of products that they are going to handle and transport.
Having the right knowledge will give you an advantage to properly and
efficiently manage both your time and resources.

2. The Right Quantity : Knowing and specifying the right quantity is also
one of the key in a successful LMS. Since most of the providers are third
party, companies that relies on their service must be careful in sending the
right amount or quantity of goods to be delivered. Thanks to our modern
technological developments that 3PLs can now manage all quantities of
goods to ship/deliver.
3.The Right Condition : Every product or goods that are to be entrusted by
the customers to LMS providers must be stored and delivered with the right
condition. This is where the specifications must be referred to in order to
place it on required facilities to maintain its quality.

4. Right Place: The right product must be delivered to the right place.
Courier services provided by an LMS company must have knowledgeable
drivers as well as a systematic delivery system and tracking. Both customer
and the provider must have a synchronized location tracking to ensure that
the products are delivered to the right place.

5. Right Time : Time is very important when it comes to logistics, clients

are more concern on the time of delivery. That is why every service
provider must know the right time to deliver the products and in a very
efficient way. Every system has a tracking functionality to monitor all
deliveries and making sure that they arrive on time.
6.For The Right Consumer : Every LMS Provider must know their
target market to identify the right customers. If they will offer their
services to the right market, they have more chances of gaining leads
and customers that will most likely to avail them. Some uses the
traditional marketing while others use digital marketing to reach more
customers around the globe.

7. At The Right Cost: Pricing is very essential and all products and
services. They must have an appropriate price value in order to track the
company income and expenses. A good system for storing and updating
the right prices ensures success in LMS.