Slide 1Competitive AdvantageSupply Chain/Marketing InterfaceSCM IS Customer ServiceDo Not Underestimate the Power of the ObviousRemember the Great DivideSo what, I lost a customerDelivering Customer ValueCustomer Service and the Supply ChainThe Customer ExperienceShrinking Window of ServiceMarket Driven Supply ChainsRelationship between Cost and ServiceRelationship between Revenue and ServiceCost Benefit of Customer Service3 Levels of Customer Service FocusDefault StrategyOr We Could…Tailored Customer Service StrategyManaging Cost/Price to Influence End Customer BehaviorCustomer Service Level MatrixService Differentiation ExampleBA331-Supply Chain ManagementChapter 2Shay Scott, Ph.D.Department of Marketing and SCMManaging Director, Global Supply Chain InstituteUniversity of [email protected] Chain ManagementCompetitive AdvantageShay Scott2Needs seeking benefitsat acceptable pricesAssets and utilizationAssets and utilizationCustomersCost differentialsValueValueYour CompanyCompetitorSupply Chain/Marketing Interface3ProductOrder processing and information Inventory Place/customer service levelsPromotionPriceProduction lot sizesPurchasingLogisticsSupply Chain OperationsMARKETINGSCM IS Customer ServiceShay Scott4•Ordering a book on Amazon•Going to the Apple store to get a MacBook•Eating at your favorite restaurant•Calling customer service for your credit card•Getting your computer repaired Availability, Cost, Quality, Speed….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 LtdShay Scott56Remember the Great Divide…need….product......… need … product A, B, C...We need: 3 product A, 2 product B, 6 product C….NOW!!!!Plants Manufacturer D.C.sDistrib Network•Product Focused•Efficiency metrics•Economies of scale and scopeFocused on customerSatisfaction metricsRelevanceTheGreat DivideSo 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 25Shay Scott71 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!Delivering Customer ValueShay Scott8Customer ValuePerceptions of BenefitsTotal Cost of OwnershipQuality x ServiceCost x TimeCustomer Service and the Supply ChainShay Scott9Consumer FranchiseCustomer FranchiseSupply Chain EfficiencyMarketing effectiveness Brand Values Corporate Image Availability Customer Service Partnership Quick Response Flexibility Reduced Assets Low-cost supplier Market Share Customer Retention Superior ROICustomer Service is a process for providing significant value-added benefits to the supply chain in a cost-effective way. This definition illustrates the trend to think of customer service as a process-focused orientation that includes supply chain management concepts.The Customer ExperienceShay Scott10Core 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 Order11Fill RateDelivery Time90 %100 %2 days10 days321Today’s Competitive Reality•Zero sum gain competition•Commodity-type competition•Rising customer service “bar”•Demand maintenance is key to profitabilityShrinking Window of ServiceMarket Driven Supply ChainsSegment CustomersDefine Customer Service ObjectivesSet Customer Service Priorities and StandardsExecute the strategyRe-EvaluateShay Scott12So what do I do, be all things to all customers??Relationship between Cost and Service13100%Service Level0Cost of ServiceRelationship between Revenue and Service14100%Service Level0Sales RevenueCost Benefit of Customer Service15100%Service Level0Cost, Revenue, & Profit ContributionRevenueCostsProfit Contribution16SuccessSatisfactionBasic Service 3 Levels of Customer Service FocusAchieve internal standards (e.g., specified performance cycle of fill rate)Meet customer expectations (e.g., arrive on time with right product as measured by the customer)Customers of choice achieve their objectives (e.g., logistics operation can provide product and service in a manner that ensures long term customer)17“Average” supplier to key accountsSuperior supplier to other customersHigh inventoriesExcessive expeditingDefault StrategyEveryone gets the same service1880%5%15%20% 50% 30%“A” “B” “C”% Products / Customers% Sales / ProfitsOr We Could…•Determine strategic profitability of customer•Categorize customers based upon strategic importance•Establish different customer strategy for each category19Stronger franchise with best customersLower logistics costsHigher inventory turnsReduced expeditingTailored Customer Service StrategyCustomer segments get different levels of serviceProduct TypeCustomerClassificationA B CI 1 2 6II 3 4 7III 5 8 11IV 9 12 13V 10 14 15Managing Cost/Price to Influence End Customer Behavior20Increasingly, organizations will drive “desired” customer demand by offering lower prices for less services (or vice-versa). Knowing the incremental cost trade-off is critical to assure that profits increase.Motivating a customer via lower price to receive weekly rather than daily shipments will require keen understanding as to which and how much activity costs change.ExampleCostPrice(loss)profitDollars ($)TimeChange inservice level4 days3 days21Efficient ServiceWatch CostCustomized ServiceHigh availabilityReview RelationshipCentralized InventoryExpedited deliverySales VolumehighhighlowlowProfit MarginCustomer Service Level Matrix22Service Differentiation
View Full Document
Unlocking...