Customer service is often the key link between logistics and marketing. If the logistics system, particularly outbound logistics, is not functioning properly and a customer does not receive a delivery as promised, the company could lose future sales. Even though manufacturing can produce a good product at the right cost and marketing can sell it-, if logistics does not deliver it when and where promised, the customer will be dissatisfied.
The role of customer service is to provide time and place utility in the transfer of goods and services between buyer and seller. Put another way, there is no value in the product or service until it is in the hands of the customer or consumer.
The 7 R’s of Customer Service:
The seven R’s rule offers a simple description of how integrated logistics creates customer service. The seven R’s mean having The Right Product, In The Right Quantity, In The Right Condition, At The Right Place, At The Right Time, For The Right Consumer And At The Right Cost.
Elements of Customer Service
Customer service has multifunctional interest for a company – but, from the point of view of the logistics function, we can view customer service as having four traditional dimensions: Time, Dependability, Communication and Convenience.
Time: The time factor is usually order cycle time particularly from the perspective of the seller looking at customer service. On the other hand the buyer usually refers to the time dimension as the lead time, or the replenishment, time Regardless of the perspective or the terminology, several basic components or variables affect the time factor.
Dependability: To some customers dependability can be more important than lead time. The customer can minimize its inventory levels if lead time is fixed. i.e., a customer that knows with 100% assurance that lead time is 10 days could adjust his inventory levels to correspond to the average demand (usage) during the ten days and would have no need for safety stock to guard against stock outs resulting fluctuations in lead time.
Cycle time: Lead time dependability then directly affects the customers’ inventory and stock out cost. Providing a dependable, lead time reduces some of the uncertainty a customer faces. A seller, who can assure the customer of a given level of lead time, plus some tolerance, distinctly differentiates its product from that of its competitors. The seller that provides a dependable lead time permits the buyer to minimize the total cost of inventory, stock outs, order processing and Production scheduling.
Safe delivery: An order’s safe delivery is the ultimate goal of any logistics system. The logistics function is the culmination of the selling function. If goods arrived damaged or are lost, the customer cannot use the goods as intended. A shipment containing damaged goods aggravates several customer cost centres, inventory, production and marketing.
Correct orders: Finally, dependability embraces the correct filling of orders. A customer who has been anxiously awaiting the arrival of a urgently needed shipment may discover upon receiving the shipment that the seller made an error in filling the order. The customer who has not received what was requested may face potential lost sales or production.
Communication: the two logistics activities vital to order fulfillment are the communication of customer order information to the order filling area and the actual process of picking out of inventory the items ordered. In the order information stage the use of EDI or internet enabled communications can reduce errors in transferring order information from the order to the warehouse receipt. The seller should simplify product identification such as product codes in order to reduce order picking errors.
Convenience: This is another way of saying that the logistics service levels must be flexible. From the logistics operations stand point, having one of a few standard service levels that apply to all customers would be ideal; but this assumes that all customers’ logistics requirements are homogeneous. In reality, this is not the situation. E.g.: one customer may require the seller to palletize and ship all shipments by rail another may register a truck delivery only, with no palletization, still others may request special delivery times. Basically logistics requirements differ with regards to packaging, the mode and the carrier the customer requires, routing and delivery times. Convenience recognizes customers’ different requirements.
Performance measures for customer service:
There are four traditional dimensions of customers Service from a logistics perspective. They are:
There are essential considerations in developing a sound and effective customer service program. They also provide basis for setting standards of performance of customer service in the logistics area.
Now, however, the standards have been changed as per the needs of the customer. They have become customer oriented as compared the previous (traditional) seller oriented standards. The NEW BASIS of customer service performance measures are:
- Order received on time
- Order received complete
- Order received damage free
- Orders filled accurately
- Orders build accurately
There was a problem with traditional form of customer service performance measures because they looked after the performance of only pre-shipment. So any problems that took place during the delivery of the goods that could cause problems and dissatisfaction to the customer were not catered to and thus the seller using the traditional methods of measurement would not have any basis upon which to evaluate the magnitude and extent of the problem.
The Current method (New Method) focusing on he measurement at the delivery level not only provides a data base to make an evaluation but also more importantly provide early warnings of problems as they are developing.
E.g.: If the standard delivery for on time delivery is 98% and it slips during a given month to 95% an investigation may show that a carrier is not following instructions or even that the buyer is at fault by not being ready to accept the shipments.