1.2.1.
The marketing key strategic challenge is to define the exact services and how they should be delivered to drive profitable sales.
While most executives acknowledge the importance of customer service, defining it precisely remains challenging. Common descriptions include being easy to work with and responsive to customer needs. However, these broad terms lack specificity, especially for businesses with numerous customers. To create a focused customer service strategy, a clear and measurable definition is essential.
While marketing experts can offer valuable insights into customer service, a standardized definition remains elusive. Nevertheless, certain business models can provide a framework for understanding and implementing effective customer service strategies.
LaLonde and Zinszer have researched various ways that customer service can be viewed:
(1) as an activity,
(2) in terms of performance levels, and
(3) as a philosophy of management.
Viewing customer service as an activity suggests that it is capable of being managed. Thinking of customer service in terms of performance levels has relevancy, providing it can be accurately measured. The notion of customer service as a philosophy of management exemplifies the importance of customer-focused marketing. All three dimensions are important to understand what is involved in successful customer service.
A broad definition of customer service should embody elements from all three perspectives.
Customer service is a process for providing significant value-added benefits to the supply chain in a cost-effective way. (1)
— Khari Kleab
Exceptional customer service benefits all parties in the supply chain. A successful customer service program must prioritize key activities and establish performance metrics to measure progress and alignment with business goals. A fundamental question is whether the investment in enhanced service levels justifies the return for specific customer segments. To differentiate offerings, many companies provide additional services, often termed “value-added,” tailored to meet the unique needs of high-value customers.
| Basic service capability | Main idea or definition | Practices related to the activities |
|---|---|---|
| Availability | Availability is the capacity to have inventory when a customer desires it. | A) To stock inventory anticipating customer orders. B) Appropriate number, location, and stocking policy of warehouses C) logistical system design. D) Stocking plan based on forecasted requirements and incorporate differential stocking strategies as a result f sales popularity E) product line profitability F) value of merchandise. G) Stock policy. H) Inventory planning I) logistic commitment to specific customers |
| Stockout frequency | Stockout frequency is the probability that a stockout will occur. In other words, this measure indicates if a product is available to ship to customers. A stockout occurs when demand exceeds product availability. |
The stockout frequency is a measure of how many times demand for a specific product exceeds availability. The aggregation of all stock-outs across all products is an indication of how well a firm is positioned to provide basic service commitments. This measure does not consider the fact that some products may be more critical in terms of availability than others. However, stockout frequency is a starting point in measuring inventory availability. Notes |
| Fill rate | Fill rate measures the magnitude or impact of stock-outs over time. | A) Fill rate measurement: the typical procedure is to evaluate performance over a specified time that includes multiple customer orders. B) Fill rate, used to differentiate the level of the service offered on specific products . |
| Orders shipped complete | Orders shipped complete are a measure of the times that a firm has the entire inventory ordered by a customer. | The incorporation of in a firms’ basic service platform: A) Perfect orders received by the customers B) Providing all other aspects of performance C) Zero defects. |
| Operational performances | The performance cycle was positioned as the operational structure of logistics. | A) Mission of operational performance B) type of customer C) D) Differentiated performance cycles E) Degree of operational variance experience over time: 1. Speed, 2. Consistency 3. Flexibility 4. Malfunction 5. Recovery F) Logistic commitment to expected time and acceptable variance. |
| Speed | Performance-cycle speed is the elapsed time from when an order is placed until shipment arrival. Such commitment must be viewed from a customer’s perspective. | A) Highest commitment to inventory availability B) Operational speed C) Customer inventory consignment. D) Consignment arrangements E) Performance-cycle timing F) The lower level of inventory investment requirement |
| Flexibility | Operational flexibility refers to a firm’s ability to handle extraordinary customer service requests. |
Typical events requiring flexible operations as follow: A) Modifications in basic service arrangements such as onetime changes in ship-to destinations B) Support of unique sales and marketing programs Notes |
| Malfunction / Recovery | Regardless of how fine-tuned a firm’s logistical operation is, malfunctions will occur. | A) special programs to prevent or accommodate special situations B) Preventing malfunction |
| Service realiability | Service reliability involves the combined attributes of logistics and concerns a firm’s ability to perform all order-related activities. | A) Availability and operational performance B) Damage-free shipments C) Error-free invoices D) Correct shipment locations E) Exact amount of product ordered F) Consistent amount of product ordered and shipments. G) Accurate information to customers regarding to operation and order status H) Good service program. |
| The perfect order | Everything right and to do ir right the fist time. | A) Measure the customer service performance |
Example: If a customer orders 50 units and only 47 units are available, the order fill rate is 94 percent (47/50).To effectively measure fill rate, the typical procedure is to evaluate performance over a specified time that includes multiple customer orders. Thus, fill rate performance can be calculated for a specific customer or for any combination of customers or business segment desired. Fill rate can also be used to differentiate the level of service to be offered on specific products. In the earlier example, if all 50 products were critical, an order fill rate of 94 percent could result in a stockout in the customer’s operation and create considerable dissatisfaction. However, if most of the 50 products were relatively slow movers, a fill rate of 94 percent could be satisfactory. The customer may accept a back-order or even be willing to reorder the short items. A firm can identify products that are critical and should have higher fill rates on the basis of customer requirements. Fill rate strategies can then be developed to meet customer expectations. Stockout frequency and fill rate both depend on customer order practices. Example: If a firm places frequent replenishment orders for small quantities, the probability of stockout frequency will increase as a result of shipment variability. In other words, each replenishment order represents an equal chance for a delivery delay.
Thus, as the number of orders that impact safety stock increases, more stockouts will occur. On the other hand, if a firm places fewer large replenishment orders, the potential stockout frequency will be less and the expected fill rate will be higher.
1) Quoted from: Important of supply chain management. Khari Kleab.