Logistics & Customer Service - Introduction to Logistics Management, Logistics Management | Logistics Management - B Com PDF Download

CUSTOMER SERVICE (CS)

Definition: Customer Service is defined as a process of providing significant value added benefits to the supply chain in a cost-effective way.

ELEMENTS OF CUSTOMER SERVICE 

A] Availability                                                                                                          

Availability is the capacity to have inventory when it is desired by a customer. The most common practice to achieve availability is to stock inventory in anticipation of customer order. Availability is based on following three performance measures:

1. Stockout Frequency: Stockout frequency is a measure of how many times demands for a product exceed its availability. The aggregation of stock outs of all products indicates how well a firm is able to provide basic service commitments.

2. Fill Rate: Fill rate measures the magnitude of stockouts over time. E.g. if a customer orders 50 units and only 47 units are available, the order fill rate is 94 % (47/50). Just because a product is out of stock does not mean that a customer requirement is going unsatisfied. Before a stockout affects service performance it is necessary to forecast customer requirements then to identify the product unavailability and to determine how many units customer wanted. Stockout frequency and fill rate are inversely related through order quantity. i.e. if a firm places larger order the stockout frequency will be less and the expected fill rate will be higher.

3. Orders Shipped Complete: It is a measure of time when a firm received the entire inventory ordered by a customer. It indicates the potential times that customers will receive perfect orders.

B] Operational Performance

1. Operational Speed: Performance speed is the interval between placement of order and shipment arrival. Depending upon the logistical system design, the speed can be as short as a few hours or as long as several weeks. In critical situation service can be performed in a few hours by special delivery or on overnight basis. But every customer does not need maximum speed if it results in increase in logistics cost.

2. Operational Consistency: Consistency refers to a firm’s ability to perform at the expected delivery time. When a form fails to be consistent it forces customers to carry extra safety stock to protect against possible late delivery.

3. Operational Flexibility: Flexibility refers to a firm’s ability to handle extraordinary customer service requests. The events that requires flexibility are:

–          Modifications in basic service arrangements

–          Product modification

–          Product introduction

–          Product phaseout

–          Product recall

–          Disruption in supply

C] Reliability

Reliability refers to logistics quality i.e. ability of firm to comply with levels of planned inventory availability and operational performance. Reliability also includes firm’s capability to provide accurate customer information regarding logistical operations and order status.

OBJECTIVES / IMPORTANCE OF CUSTOMER SERVICE 

1. Maintaining customer loyalty and level of satisfaction.
2. Receiving repeat orders from customers.
3. To win new customers and keep existing customers
4. An edge over competition

CUSTOMER RETENTION

Once a customer is own by a company, it must be retained such that customer keep coming again and again. This depends on the Customer Service. For that the company has to motivate employees and to reinforce the service concepts with top management.

Advantage:

1. Retaining more customers result in higher profit.
2. The cost of retaining customers is much less than to acquire them.
3. It helps in strengthening and expanding customer base.
4. If a regular customer were lost, then it would cost very heavily to generate new customer.

Methods:

1. Offer only quality services and products
2. Demonstrate the use of product or services
3. Provide responsive customer service
4. Share testimonials of customers with other potential customers
5. Educate the customer about the market and value of the business
6. Invite customer’s opinion and feedback on products or services