The Customer Service Dimensions

It highlights the importance of managing the marketing and logistics interface on an integrated basis, emphasized the need to understand the multiple elements of service from the customers perspective

The importance of customer retention and the lifetime value of a customer outlines the idea of service-driven logistic system based upon identified service priorities and a customer base segments according to service requirements.

Logistics cost are based mainly on customer service. Better suppliers service provides economic advantages to the customers. For example, a supplier can reduce customer inventories by utilizing air transportation rather than surface transportation (rail or trucks). Air transportation reduces transit time, which in turn reduces order cycle time resulting in lower inventory cost. But the transportation cost will be higher in the case of air transportation compared to surface transportation. The supplier’s logistic manager must balance high service level with the customer’s desire and the benefit of the supplier may gain from possible increased sales against the cost of providing that service. The logistic manager must strike a balance among customer service levels, total logistics costs, and total benefits to the firm. However there are some situations where costs can be lowered and customer service improved.

From the point of view of logistics function, customer service can be viewed as having four dimensions:-

(1)       Time,

(2)       Dependability,

(3)       Communication,

(4)       Convenience.

(1)     Time: – The time factor is usually order time from the perspective of seller looking at customer service. The buyer usually refers to the time dimensions as the lead time or replenishment time. Successful logistics operations today have high degree of control over most, if not at all, of the basic elements of lead time, including order processing, order preparation and order shipment. By effectively ensuring that order cycles will be of reasonable length and consistent duration, the seller firms have improved customer service levels.

(2)     Dependability: – Some customers think that dependability as more important than lead time. The customer firm can minimize its inventory level if lead time is fixed (i.e., does not vary). This means there is no need to keep safety stock to ground against stockouts resulting from fluctuating lead times.

Cycle time: – Providing a dependable lead time reduces some of the uncertainty a customer faces. Lead time dependable directly affects customer’s inventory level and stock out costs. A seller, who can assure the customer a given level of lead time with high reliability, distinctly differentiated 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.

Dependability encompasses more than just more than lead time variability. More generally dependability refers to delivering a customer’s order with regular, consistent lead time, in safe condition and in true with the type and quality of items the customer ordered.

(3)     Communication: – the two logistics activities vital to order filling are the communication of customer order to the order-filling area and actual process of picking out of the inventory, the items ordered.

In the order information stage, the use of EDI or internet enalbled communications can reduce errors in transferring order information from the order to warehouse receipts.

Communications with customers in vital to monitoring service levels relating to dependability. Customer communication is essential to design of logistics service levels. The communication channels must be constantly open and readily accessible to all customers. Without customer contact, the logistic manager is unable to provide the most efficient and effective service.

However, communication must be a two-way process. The sellers must be able to transmit vital logistics service information to the customers. In addition many customers request information on logistics status of shipments. For e.g. Customers may ask questions concerning shipment date, the carrier, the route, etc. The customer who needs information to plan operation expects the logistics manager to provide answers on a timely basis.

(4)     Convenience: – This means, logistic service levels must be flexible. From the logistic operation stand point, having one or few standard service levels that applies to all customers would be ideal, but this is based on the assumption that all customers would be ideal, but this is based on the assumption that all customers logistics requirement are homogenous which may not be the case always in reality. For e.g. Customer may require different modes of transport carriers and different delivery times. Basically logistics requirements differ with regard to packaging, the mode and carrier the customer require routing and delivery times.

Convenience recognizes customers’ different requirements. A seller can group custom requirements by such factors as customer size, market area and the product line the customer is purchasing. This level of market segmentation enables the logistics manager to recognize custom service requirements and to attempt to fulfill those demands as economically as possible.