Supply Chain Logistics Management Chapter 3 Customer Accommodation

Supply Chain Logistics Management Chapter 3: Customer Accommodation Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Service Outputs: The Value Added Different supply chains provide different levels of service output to consumers/endusers: 1. Spatial Convenience 2. Lot size 3. Waiting time 4. Product variety (assortment width and depth) Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Strategic Perspectives • High level of Basic Service - The Platform • Targeted Value-Added Satisfaction • Growth through Customer Success Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

3 Levels of Customer Focus Basic Service Satisfaction Achieve 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) Success Customers of choice achieve their objectives (e. g. , logistics operation can provide product and service in a manner that ensures long term customer viability) Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Basic Service Elements • Availability – Fill rates – Stockouts – Orders shipped complete • Service Reliability * damage * mis-shipments * etc. • Operational Performance – – Speed Consistency Flexibility Recovery Logistics Customer Service Mix Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

“Perfect Order” Achievement • The “Perfect Order” Defined – Complete Orders Delivered To Customers Requested Date And Time In Perfect Condition, Including All Documentation. –. 97 x. 97=. 73 Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

WHAT IS CUSTOMER SATISFACTION? • SAT = F (Expectations, perceived performance) • Perceived Performance - Expectations < 0, Dissatisfaction • Perceived Performance - Expectations > = 0, Satisfaction “Meet or Exceed Customer Expectations” Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

A GENERIC PROFILE OF EXPECTATIONS 1. RELIABILITY 2. RESPONSIVENESS 3. COMPETENCE 4. ACCESS 5. COURTESY 6. COMMUNICATION 7. CREDIBILITY 8. SECURITY 9. TANGIBLES 10. KNOWING THE CUSTOMER Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

SATISFACTION AND QUALITY MODEL CUSTOMER Word of Mouth Communications Requirements Expectations GAP 6 Perceived Performance GAP 5 GAP 4 Actual Performance SELLER Past Experience GAP 1 External Communications GAP 3 Performance Standards GAP 2 Management Perceptions of Expectations Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Customer Satisfaction Performance Expectation LO MED HI LO Very Satisfied MED HI Very Satisfied Dissatisfied Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

WHY CUSTOMER SATISFACTION IS NOT SUFFICIENT • It focuses on customer’s expectations - not their real requirements • Considerable research suggests that “satisfied” customers still are likely to defect • There is a tendency by companies to treat all customers as being equal and identical Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Evolution of Management Thought Philosophy Focus Customer Service Meet Internal Standards Customer Satisfaction Meet Expectations Customer Success Meet Customer Requirements Notice that the satisfaction model does not focus on requirements Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Moving to Customer Success Us How can we help our customers win? Our Customer’s Customer We’ll do whatever they tell us they want Our Customer This is not our problem (WRONG) Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Development of Logistical Competency Stage 4 Stage 3 Market Extension Stage 2 Stage 1 Market Creation Market Access Gaining Costeffectiveness 0 5 10 Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

ACHIEVING CUSTOMER SUCCESS • NOT ALL CUSTOMERS HAVE THE SAME REQUIREMENTS • UNDERSTAND YOUR CUSTOMERS' REQUIREMENTS • KNOW YOUR CUSTOMERS' PROCESSES • HOW CAN YOUR CAPABILITIES ENHANCE CUSTOMERS' PERFORMANCE • NEW PERFORMANCE METRICS Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.