Chapter 4 :

Customer Relationship
Management
It is important to establish initially that logistics
contributes to an organization's success by
accommodating customers' delivery and
availability expectations and requirements.
Topic : Customer-Focused Marketing
The marketing concept builds on four
fundamental ideas: customer needs and
requirements are more basic than products or
services; different customers have different
needs and requirements; products and services
become meaningful only when available and
positioned from the customer's perspective,
which is the focus of logistics strategies; and
volume is secondary to profit.
• The basic idea is to develop sufficient insight
into basic needs so that products and services
can be matched to these opportunities.
Successful marketing begins with in-depth
study of customers to identify product and
service requirements.
• The second fundamental aspect of the
marketing concept is that there is no single
market for any given product or service. All
markets are composed of different
segments, each of which has somewhat
different requirements.
• The third fundamental aspect of marketing is that
customers must be readily able to obtain the
products they desire. To facilitate purchase action,
the selling firm's resources need to be focused on
customers and product positioning.

The fourth aspect of the marketing concept is the

focus on profitability as contrasted to sales volume.
An important dimension of success is the degree of
profitability resulting from relationships with
customers, not the volume sold
 TOPIC : CUSTOMER SERVICE
• The primary value of logistics is to
accommodate customer requirements in a cost-
effective manner
• Customer service represents logistics' role in
fulfilling the marketing concept. A customer
service program must identify and prioritize
all activities required to accommodate
customers' logistical requirements as well as,
or better than, competitors.
FUNDAMENTAL ATTRIBUTES OF
BASIC CUSTOMER SERVICE
AVAILABILITY
STOCKOUT FREQUENCY
OPERATIONAL PERFORMANCE
SERVICE RELIABILITY
THE PERFECT ORDER
AVAILABILITY

Availability is the capacity to

have inventory when desired
by a customer.

availability is based on three performance

measures: stockout frequency, fill rate, and
orders shipped complete.
 STOCKOUT FREQUENCY
• Stockout occurs when a firm has no
product available to fulfill customer
demand. It is popularly known as “Out
Of Stock” in the retail sectors
• Stockout frequency refers to the
probability that a firm will not have
inventory available to meet a
customer order.
 FILL RATE
Fill rate measures the magnitude or
impact of stockouts over time. Being
out of stock does not affect service
performance until a customer demands
a product.
ORDERS SHIPPED COMPLETE
• Having everything that a customer
orders as the standard of acceptable
performance.

“Failure to provide even one item on a customer's

order results in that order being recorded as zero in
terms of complete shipment. “
 OPERATIONAL PERFORMANCE
Deals with the time required to
deliver a customer's order.
 Operational performance is specified in terms of speed
of performance, consistency, flexibility, and malfunction
recovery.
Performance cycle speed is the elapsed time from when a
customer establishes a need to order until the product is
delivered and is ready for customer use.
Order cycle consistency is measured by the number of times
that actual cycles meet the time planned for completion
Flexibility involves a firm's ability to accommodate special
situations and unusual or unexpected customer requests.
Malfunction Recovery is the continuous performance of
service commitments despite Malfunction. Adjustments
can be implemented to prevent or accommodate special
situations, thereby preventing malfunctions.
 SERVICE RELIABILITY

Service reliability involves the combined

attributes of logistics and concerns a
firm's ability to perform all order-
related activities, as well as provide
customers with critical information
regarding logistical operations and
status
 THE PERFECT ORDER
The notion of the perfect order is that an order
should be delivered complete, delivered on
time, at the right location, in perfect condition,
with complete and accurate documentation.
Each of these individual elements must comply
with customer specifications.
CUSTOMER SATISFACTION
VS
CUSTOMER SUCCESS
TOPIC : CUSTOMER SATISFACTION

How can we possibly gauge or measure the customer

satisfaction is supply chain business?

As simple as, if a customer's expectations of a

supplier's performance are met or exceeded,
the customer will be satisfied. Conversely, if
perceived performance is less than what the
customer expected, then the customer is
dissatisfied.
In a logistical and supply chain
context, the notion of customer
expectations is particularly complex
because customers are usually
business organizations made up of
numerous functions and individual.
CUSTOMER SATISFACTION CYCLE
LIMITATIONS OF CUSTOMER SATISFACTION
• First limitation is that many executives make a
fundamental, yet understandable, mistake in their
interpretation of satisfaction
• The second limitation to consider is actually related
to the first: satisfied customers are not necessarily
loyal customers. Even though their expectations are
being met, satisfied customers may choose to do
business with competitor
• A third limitation to customer satisfaction is that
firms frequently forget satisfaction lies in the
expectations and perceptions of individual customers.
 TOPIC: CUSTOMER SUCCESS
• Customer success shifts the focus from
expectations to the customers' real
requirements.
• Requirements are frequently downgraded
into expectations due to perceptions of
previous performance, word-of-mouth, or
communications from the firm itself.
 ACHIEVING CUSTOMER SUCCESS
• A customer success program involves a thorough
understanding of individual customer
requirements and a commitment to focus on long-
term business relationships having high potential
for growth and profitability.
• To ensure that a customer is successful may
require a firm to reinvent the way a product is
produced, market distributed, or offered for sale.
In fact, collaboration be- tween suppliers and
customers to find potential avenues for success
may result in the greatest breakthroughs in terms
of redefining supply chain processes.
TOPIC:
DEVELOPING CUSTOMER
RELATIONSHIP MANAGEMENT
STRATEGY.
DEVELOPING CUSTOMER RELATIONSHIP
MANAGEMENT STRATEGY.
Supply chain management strategies enable
companies to ensure the business has the materials,
information and financial resources it needs to
produce quality goods and services in a timely manner.
By coordinating the flow of work from vendors to
manufacturers and then from distributors to retailers,
effective supply management techniques reduce
inventory and ensure product availability when
required.
Customer relationship management strategy
are used to ensure parts and service get to
customers when needed after sales are
completed by automating business processes
used for sales, service and support. Integrate
supply chain management and customer
relationship management functions to
maximize your operations.
HOW LOGISTICAL COMPETENCY CAN BE USED TO ACHIEVE
CUSTOMER SUCCESS AND TO GAIN COMPETITIVE SUPERIORITY.
• Cost Effectiveness
The first and most fundamental step was to gain cost-
effectiveness. It was essential that the process and
necessary related controls be in place to ensure that basic
services could be provided at a consistently high level of
performance and in a cost-effective manner.

• Market Access
consists of buyers and sellers working together and sharing
basic information to facilitate smooth joint operations.
• Market Extension
based on moving toward zero defects and introducing value-
added services in an effort to solidify and expand the business
relationship. At this point the relationship became highly
selective since the number of customers who were willing or
able to participate was limited.
• Market Creation
The final stage, market creation, requires full
commitment to a customer's success. While all previous
stages contribute to competency, the final stage
represents above- and-beyond initiatives to enhance
success