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UT Knoxville BUAD 331 - BA 331 Chapter 2-2

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Slide 1Semester–long discussion scenarioGroup Discussion ActivitySlide 4Competitive AdvantageSupply Chain and Customer ServiceSupply Chain and Customer ServiceSo what, I lost a customerDo Not Underestimate the Power of the ObviousThe Customer ExperienceSupply Chain/Marketing InterfaceSlide 13Market Driven Supply ChainsIdentifying Customer Service NeedsRelationship between Cost and ServiceRelationship between Revenue and ServiceCost Benefit of Logistics Customer ServiceSetting Customer Service Levels: Default StrategyOr We Could…Tailored Customer Service StrategyCustomer Service Level MatrixSlide 23Slide 24Business Administration 331Supply Chain ManagementChapter 2Dr. John E. BellAssociate Professor of Supply Chain Management 343 Stokely Management [email protected]–long discussion scenario•Grizzly Fly-Fishing Shop–Retail shop on Cumberland Strip opened to cater to fishing enthusiasts.•Products include flyrods, reels, flies, fishing-lines, waders, rain gear, and other tackle –Struggling to stay in business due to low revenue and high costs of business•Operating expenses – rent, utilities, COGS, shipping costs, labor, interest on loans: –YEAR 1 - $100K (before salary)•Inventory – much cash flow tied up in products in store, many don’t sell fast: –Year 1 - $75K•Year 1 Revenue: $150K2Group Discussion Activity•How can supply chain management impact Grizzly Fly-Fishing Shop (GFFS) business model?•Specifically, what kinds of things can GFFS do differently to create value through the supply chain?3What overarching goal should drive the design and execution of any company’s supply chain?4Discussion Question“Achieving Customer Value”Customer Value = Perception of Benefits / Total Cost of OwnershipCompetitive Advantage5Needs seeking benefitsat acceptable pricesAssets and utilizationAssets and utilizationCustomersCost differentialsValueValueYour CompanyCompetitorSupply Chain and Customer Service6What value do you seek when:•Going to the Apple store to get a MacBook?•Calling your cable company?•Eating at your favorite restaurant?Availability, Cost, Quality, Speed….https://www.youtube.com/watch?v=2xqkpP59UgMSupply Chain and Customer Service7Customer Service defined?•Actions that provide the time and place utility in the transfer of goods/services•The distribution activity to make a product “Available”•There are components of customer service:–Pre-transactional–Transactional–Post transactionalSo what, I lost a customerTypes of Potential Customers Number of “Lost” CustomersThe dissatisfied “lost” customer -1Potential customers not gained due the lost customer’s Word of Mouth dissatisfaction-8Potential CONVERTS of Potential Customers lost by his/her Adverse Impressions-16TOTAL LOST CUSTOMERS 2581 customer = 1 order ($50) per month for 10 years = $6,00025 customers = $150,000 lost revenueAll for an issue that could have been fixed for much less!Do Not Underestimate the Power of the ObviousDo not program your customer service standards on what you or your supervision view as “customer needs”. Ask your customers to let you know what service levels they actually require.-- William C. O’Neill, Belwith International Ltd•https://www.youtube.com/watch?v=R2a8TRSgzZY9The Customer Experience11Core ProductServiceCustomer Experience•Correct order entry•Items are available•Ship date allows delivery•Order picked correctly•Paperwork complete•Timely arrival• Product as expected•Shipment not damaged•Correct invoice•Accurate overcharges•No customer deductions•No errors in payment processingThe Perfect OrderSupply Chain/Marketing Interface12ProductOrder processing and information Inventory Place/customer service levelsPromotionPriceProduction lot sizesWarehousingTransportation Supply Chain OperationsMARKETINGBusiness Administration 331Supply Chain ManagementChapter 2Dr. John E. BellAssociate Professor of Supply Chain Management 343 Stokely Management [email protected] Driven Supply ChainsSegment CustomersDefine Customer Service ObjectivesSet Customer Service Priorities and StandardsExecute the strategyRe-Evaluate14So should a company be all things to all customers?Identifying Customer Service Needs15•Identify the key components of customer service as seen by the customers themselves•Establish the relative importance of those service components to customers•Identify clusters of customers according to similarities of service preferencesRelationship between Cost and Service16100%Service Level0Cost of ServiceRelationship between Revenue and Service17100%Service Level0Sales RevenueCost Benefit of Logistics Customer Service18100%Service Level0Cost, Revenue, & Profit ContributionRevenueCostsProfit Contribution19“Average” supplier to key accountsSuperior supplier to other customersHigh inventoriesExcessive expeditingSetting Customer Service Levels:Default StrategyEveryone gets the same service…2080%5%15%20% 50% 30%“A” “B” “C”% Products / Customers% Sales / ProfitsOr We Could…•Determine strategic profitability of customer segments•Categorize customers based upon strategic importance•Establish different customer strategy for each category21Stronger franchise with best customersLower logistics costsHigher inventory turnsReduced expeditingTailored Customer Service StrategyCustomer and/or product segments get different levels of servicehttps://www.youtube.com/watch?v=IOQ-XAkEXGIProduct TypeCustomerClassificationA B CI 1 2 6II 3 4 7III 5 8 11IV 9 12 13V 10 14 1522Efficient ServiceWatch CostCustomized ServiceHigh availabilityReview RelationshipCentralized InventoryExpedited deliverySales VolumehighhighlowlowProfit MarginCustomer Service Level Matrix23Stronger franchise with best customersLower logistics costsHigher inventory turnsReduced expeditingGrizzly Fly-Fishing Shop Customer ServiceDiscussion questions: •What different categories of customers can you think of?•Which ones would you prioritize?https://www.youtube.com/watch?v=2pjHfanIS2AProduct TypeCustomerClassificationA B CI 1 2 6II 3 4 7III 5 8 11IV 9 12 13V 10 14 15Business Administration 331Supply Chain ManagementChapter 2Dr. John E. BellAssociate Professor of Supply Chain Management 343 Stokely Management


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UT Knoxville BUAD 331 - BA 331 Chapter 2-2

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