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Logistics and Supply Chain Management-ServiceD BHUVANKUMAR, Asst. Professor

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DSC H 6.6 Supply Chain Management – Services

Unit-I: Concepts of Supply Chain: Features - Role of Supply Chain Management in Services - Design and development of Supply Chain network for Services.

Unit-II: Customer Service: Service Mix - Cost - Pricing of Service - Channels of DistributionCustomer service linkages - Customer satisfaction Enablers - Sourcing and Availing.

Unit-III: Planning Demand and Supply: Planning for supply and demand of Services - Demand Forecasting, Supply and Managing variability - Quick Response and Accurate Response System in SCM - Other Planning Strategies.

Unit-IV: Supply Chain Service Operations: Supply Chain Services Planning - Supply Chain Facilities - Capacity Planning - Services Optimization - Dynamic Routing and Scheduling.

Unit-V: Recent Trends in Supply Chain Management: New Developments - Outsourcing Operations, Co-Makership - Role of e-Commerce in Supply Chain Management - Green Supply Chain Management.

Sanjeev Institute of Planning and Management, Kakinada ICET code-SNJV


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Unit-1

INTRODUCTION

The growth of the services sector in recent times has been phenomenal with services displacing manufacturing as the main driver of western industrialised economies.

Service Chain Management can be seen as analogous to Supply Chain Management but for services. Supply Chain Management is concerned with the planning and management of activities from raw materials to the delivery of finished goods. Similarly, Service Chain Management is concerned with the planning and management of activities from support functions to the delivery of end-user services. The flow of materials is negligible in Service Chain Management thus techniques developed under Supply Chain Management are of limited direct value. The names Services-Oriented Supply Chain Management and Service Management are also in use to refer to related areas but either in a more specific context to service chaining or in a more general context to service operations respectively.

To a certain degree, Service Chain Management was until recently confined to studying the operations and systems of large and vertically integrated service organisations such as airlines, utilities, healthcare providers, banks, or the after-sales functions of manufacturers . Nonetheless, there is an increasing trend of services outsourcing and off shoring; initially focusing on customer support such as call centres but recently moving onto a broader range of activities including engineering, software development and other tasks requiring high-skilled human capital. This trend, combined with the proliferation of service providers and resellers in telephony, the Internet, gas, electricity, insurance and other services, has resulted in cross-organisational service chains of three or more tiers making chain efficiency increasingly important.

Challenges in service Operations:

Service companies are required to effectively plan and schedule their resources to offer an efficient service to customers. This is no different in principle to Manufacturing Planning and Control (MPC) that gave rise to MRP, ERP and the more sophisticated Supply Chain Management systems. However, the main focus in services is on people and assets rather than materials management which is at the heart of MPC.

1. People are the core and essence of a service business. In the context of many services, they are not even confined to a particular facility (e. g., like the factory in a manufacturing context) but are mobile, offering service across geography.

2. Assets are often networked and represent critical and expensive infrastructure. Examples of networked assets include telecommunication, electricity, gas, water, rail and road networks.

3. Facilities are also important and they are either integral part of the network (e. g., telephone exchanges, railway stations, electricity stations, etc.) or stand-alone (e. g., hospitals, airports, retail outlets, warehouses, etc.).

4. Competition is not as intense as in product industries with several service industries moving to privatisation only in recent years (e. g., telecommunications, energy and



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water utilities) or being under the state umbrella as with health, policing and education.

CHARACTERISTICS OF SERVICES

Services are intangible. They cannot be seen, felt, tasted or touched in the same manner as tangible goods. The customer usually bases its judgment on peripheral cues and experiences.

Services are heterogeneous. No two customers or employees are precisely alike. Human interaction makes defining quality a challenge and it may vary from one customer to the next.

Services are simultaneously produced and consumed. Mass production is difficult. Customer satisfaction is in “real time” with the customer “observing” and “participating” in the process.

Services are perishable. They cannot be saved, stored, resold or returned. More importantly, they cannot be inventoried. A service company may use inventory management (e. g., for spares) but this accounts for a very small part of the overall service operations.

ROLE OF LOGISTICS AND SUPPLY CHAIN MANAGMENT IN SERVICE INDUSTRY

It is very difficult to design a supply chain for service when compared to product. In product delivery process many intermediary functions take place but in service sometimes it is not and is based on type of service, its performance, reliability and cost.

Definition:

Service supply chain is defined as a network of interactive service processes. service supply chain is a network of suppliers, service providers, consumers and other supporting units that performs the functions of transaction of resources required to produce services; transformation of these resources into supporting and core services; and the delivery of these services to customers”

Service sector has become a main driver of most economies. This sector has unique characteristics entailing many distinctions in operations management and supply chain management compared with manufacturing.

1. Supply chain plays important role in service sector as it is vital to achieve strategic fit.

2. Aligning service chain management and business level strategy are important in achieving service goals of the organization.



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3. Time utility and place utility are very important in services, and is result in the supply or services form service supplier to service customer.

4. Delivering service from one place to another is a difficult as it perhaps involves in some types of services like software products.

5. Service suppliers play essential role in delivering services. For example in case of amusement parks, because there is no intervention of intermediaries in delivering of services and can be perceived the services by customer directly.

6. Designing networks for services is crucial and the role of customer and service interaction is more important.

7. In the bidirectional service supply chain, customers play many roles including co-suppliers and co-producers through providing process components and labors, helping design and deliver services, and monitoring quality service.

8. Supply chain designing for services involves more risk as selection of service provider and delivering process has to be optimized critically.

9. Collaborative processes are critical in service chain management.

DESIGN AND DEVELOPMENT OF SUPPLY CHAIN NETWORK FOR SERVICES



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As service product has distinct characteristics than product, it may be difficult to design a common type of supply chain network for it. It involves different type of activites in desining supply chain for services. Consider the following activities which describe the role of customer in services.Customer involvementCustomers play many roles including co-suppliers and co-producers through providing process components and labors, helping design and deliver services, and monitoring quality serviceFocus of Supply Chain ManagementBeside some similarities in general demand management, customer relationship management, and supplier relationship management which are critical factors in both manufacturing and service supply chain, there does exist different aspects required to examination of service supply chainSupply Chain Risk ManagementSCRM is the implementing strategies to manage both daily and exceptional risks along the supply chain based on continuous risk assessment in order to reduce vulnerability and ensure business continuityType of service:Service type also influence the design of the network, as in case of hotels and restaurants it involves two types of supply chain i.e., customer directly comes to the service scape and sometimes service provider goes to customers place. In such cases supply chain activates differ.Designing of supply chain network

Most traditional manufacturing supply chains are represented linearly, like “one-way traffic”, with product flowing from ‘‘upstream’’ entities to ‘‘downstream’’ entities. However, service supply chains are different with a bidirectional traffic, in which products/services flows go both directions. For instance, as described in figure 1, service providers receive inputs from service customers then continue to provide inputs to their downstream service suppliers who in turn provide outputs to the initial service providers and subsequently back to customers. The figure 1 shows that there are both physical goods suppliers and service suppliers in service supply chain. This feature leads to mixture and complexity of service supply chain structure. Service Supply Chain



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INTEGRATED CONCEPTUAL FRAMEWORK

It has been observed from the literature that there is a need to link different service operations in a SSC with an aim to deliver the required service to the customer. It is essential to understand the activities performed at various stages of SSC. In order to build this link between SSC and service operations, an integrated conceptual framework is proposed.

Link Between Service Supply Chain And Service Operations

After going through the history of SSC and understanding the key service operation issues in a service organization, an integrated conceptual framework is proposed which integrates the structure and decisions to form a SSC. The proposed framework highlights the structure of the SSC which has been discussed earlier in literature review section with three basic elements that are customers, service integrator as a core and service providers.

Research Directions

It is worth mentioning that the research in the area of SSC is still in its early stage. So, there is a need to address the various research directions that can be a part of SSC of an organization. Based on the literature on service operations, SSC, service marketing management and supply chain management, some of the key research directions that can be highlighted here are service demand forecasting, service provider selection, service outsourcing, cooperation and collaboration between players, demand and capacity



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management in services, service customization, service delivery systems, service quality and performance measurement etc.



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Unit – 2SERVICE MIX:

The service marketing mix is also known as an extended marketing mix and is an integral part of a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s of a product marketing mix. Simply said, the service marketing mix assumes the service as a product itself. However it adds 3 more P’s which are required for optimum service delivery.The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and Placement. These are discussed in my article on product marketing mix – the 4 P’s.The extended service marketing mix places 3 further P’s which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail.

1) ProductThe product in service marketing mix is intangible in nature. Like physical products such as soap or a detergent, service products cannot be measured. Tourism industry or the education industry can be an excellent example. At the same time service products are heterogeneous, perishable and cannot be owned.The service product thus has to be designed with care. Generally service blue printing is done to define the service product. For example – a restaurant blue print will be prepared before establishing a restaurant business. This service blue print defines exactly how the product (in this case the restaurant) is going to be.2) PlacePlace in case of services determine where is the service product going to be located. The best place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed in a business hub with a lot of companies nearby rather than being placed in a town or rural area. Read more about the role of business locations or Place element.3) PromotionPromotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is generally the brand which sets a service apart from its counterpart. You will find a lot of banks and telecom companies promoting themselves rigorously.Why is that? It is because competition in this service sector is generally high and promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or promotions.4) PricingPricing in case of services is rather more difficult than in case of products. If you were a restaurant owner, you can price people only for the food you are serving. But then who will



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pay for the nice ambiance you have built up for your customers? Who will pay for the band you have for music?Thus these elements have to be taken into consideration while costing. Generally service pricing involves taking into consideration labor, material cost and overhead costs. By adding a profit mark up you get your final service pricing. You can also read about pricing strategies.Here on we start towards the extended service marketing mix.5) PeoplePeople is one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and service staff defines you. If you are into banking, employees in your branch and their behavior towards customers defines you. In case of service marketing, people can make or break an organization.Thus many companies nowadays are involved into specially getting their staff trained in interpersonal skills and customer service with a focus towards customer satisfaction. In fact many companies have to undergo accreditation to show that their staff is better than the rest. Definitely a USP in case of services.6) ProcessService process is the way in which a service is delivered to the end customer. Lets take the example of two very good companies – Mcdonalds and Fedex. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes.On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer.7) Physical EvidenceThe last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. That’s physical evidence.Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator.

Service PricingPricing decisions are of major importance in service marketing strategy. As with other marketing mix elements, the price of a service should be related to the achievement of marketing and organisational goals and should be appropriate for the service organisation’s marketing program.Service pricing principles and practices tend to be based on principles and practices used in pricing goods. As with goods, easy generalisations about pricing are difficult to make. There is as much diversity in the service sector as in the goods sector.The great variety of environments in which service pricing decisions are made and the diversity of pricing practices which may apply, is partly reflected in the many different terms used to describe the prices of services.



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ELEMENTS TO BE CONSIDERED WHILE PRICING OF SERVICES:

(a) Service perishability: , the fact that service may be difficult (though not impossible) to be stored and that fluctuations in demand cannot be met as easily through using inventory, has price implications. Special price offers and price reductions to use up spare capacity may be used and marginal pricing may be more commonplace. This may happen in markets like airline travel and package holidays. Constant use of these forms of pricing may lead to increasing customer sophistication; buyers may deliberately hold off from purchasing certain services with the expectations that price reductions will occur. Sellers for their part may try to compensate for this effect by offering advantageous reductions on orders for services placed early. Again the holiday tour market exhibits some of these forces at work.(b) Customers may be able to delay or postpone the performance or use of many services. Alternatively they may be able to perform certain services for themselves. These features can lead to keener competition amongst the sellers of services. They can also encourage a greater degree of price stability in certain markets, in the short term.(c) Apparent Intangibility has many price implications. First-time users may have great difficulty understanding what they get for their money but this may be influenced by the material content of the service product. The higher the material content, the more will prices set tend to be based on costs and the greater the tendency towards more standard prices. The smaller the material content the more customer orientated and the less standard will prices be.Service product intangibility also means that services provided may be more easily varied than physical products. Thus service level, service quality and service quantity can be adjusted to meet particular customer requirements. Prices may ultimately be determined by negotiation between buyer and seller.(d) Where service products are fairly homogeneous (e.g. car washes, dry cleaners) then pricing may be highly competitive. On the other hand regulatory agencies may discourage price cutting through prescribed fees and charges (e.g. trade associations or government agencies). The more unique a service then the greater the discretion of the seller to vary price according to what buyers in the market are prepared to pay. In such situations price may be used as a quality indicator and the reputation of the individual or organisation offering the service may give considerable price leverage.(e) The inseparability of service from the person providing it may place geographic limits or time limits on markets that can be served. Equally buyers of services may search for service provision within certain geographic or time zones. The degree of competition operating within these limits will influence prices charged.SERVICE PRICING METHODSAn organization has various options for selecting a pricing method. Prices are based on three dimensions that are cost, demand, and competition.The organization can use any of the dimensions or combination of dimensions to set the price of a product.COST-BASED PRICING:Cost-based pricing refers to a pricing method in which some percentage of desired profit margins is added to the cost of the product to obtain the final price. In other words, cost-based



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pricing can be defined as a pricing method in which a certain percentage of the total cost of production is added to the cost of the product to determine its selling price. Cost-based pricing can be of two types, namely, cost-plus pricing and markup pricing.These two types of cost-based pricing are as follows:1. Cost-plus Pricing: Refers to the simplest method of determining the price of a product. In cost-plus pricing method, a fixed percentage, also called mark-up percentage, of the total cost (as a profit) is added to the total cost to set the price. For example, XYZ organization bears the total cost of Rs. 100 per unit for producing a product. It adds Rs. 50 per unit to the price of product as’ profit. In such a case, the final price of a product of the organization would be Rs. 150.Cost-plus pricing is also known as average cost pricing. This is the most commonly used method in manufacturing organizations.In economics, the general formula given for setting price in case of cost-plus pricing is as follows:P = AVC + AVC (M)AVC= Average Variable CostM = Mark-up percentageAVC (m) = Gross profit marginMark-up percentage (M) is fixed in which AFC and net profit margin (NPM) are covered.AVC (m) = AFC+ NPMFor determining average variable cost, the first step is to fix prices. This is done by estimating the volume of the output for a given period of time. The planned output or normal level of production is taken into account to estimate the output.The second step is to calculate Total Variable Cost (TVC) of the output. TVC includes direct costs, such as cost incurred in labor, electricity, and transportation. Once TVC is calculated, AVC is obtained by dividing TVC by output, Q. [AVC= TVC/Q]. The price is then fixed by adding the mark-up of some percentage of AVC to the profit [P = AVC + AVC (m)].The advantages of cost-plus pricing method are as follows:a. Requires minimum informationb. Involves simplicity of calculationc. Insures sellers against the unexpected changes in costsThe disadvantages of cost-plus pricing method are as follows:a. Ignores price strategies of competitorsb. Ignores the role of customers2. Markup Pricing:Refers to a pricing method in which the fixed amount or the percentage of cost of the product is added to product’s price to get the selling price of the product. Markup pricing is more common in retailing in which a retailer sells the product to earn profit. For example, if a retailer has taken a product from the wholesaler for Rs. 100, then he/she might add up a markup of Rs. 20 to gain profit.It is mostly expressed by the following formulae:a. Markup as the percentage of cost= (Markup/Cost) *100b. Markup as the percentage of selling price= (Markup/ Selling Price)*100c. For example, the product is sold for Rs. 500 whose cost was Rs. 400. The mark up as a percentage to cost is equal to (100/400)*100 =25. The mark up as a percentage of the selling price equals (100/500)*100= 20.

Demand-based Pricing:Demand-based pricing refers to a pricing method in which the price of a product is finalized according to its demand. If the demand of a product is more, an organization prefers to set high prices for products to gain profit; whereas, if the demand of a product is less, the low prices are charged to attract the customers.



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The success of demand-based pricing depends on the ability of marketers to analyze the demand. This type of pricing can be seen in the hospitality and travel industries. For instance, airlines during the period of low demand charge less rates as compared to the period of high demand. Demand-based pricing helps the organization to earn more profit if the customers accept the product at the price more than its cost.Competition-based Pricing:Competition-based pricing refers to a method in which an organization considers the prices of competitors’ products to set the prices of its own products. The organization may charge higher, lower, or equal prices as compared to the prices of its competitors.The aviation industry is the best example of competition-based pricing where airlines charge the same or fewer prices for same routes as charged by their competitors. In addition, the introductory prices charged by publishing organizations for textbooks are determined according to the competitors’ prices.Other Pricing Methods:In addition to the pricing methods, there are other methods that are discussed as follows:i. Value Pricing:Implies a method in which an organization tries to win loyal customers by charging low prices for their high- quality products. The organization aims to become a low cost producer without sacrificing the quality. It can deliver high- quality products at low prices by improving its research and development process. Value pricing is also called value-optimized pricing.ii. Target Return Pricing:Helps in achieving the required rate of return on investment done for a product. In other words, the price of a product is fixed on the basis of expected profit.iii. Going Rate Pricing:Implies a method in which an organization sets the price of a product according to the prevailing price trends in the market. Thus, the pricing strategy adopted by the organization can be same or similar to other organizations. However, in this type of pricing, the prices set by the market leaders are followed by all the organizations in the industry.iv. Transfer Pricing:Involves selling of goods and services within the departments of the organization. It is done to manage the profit and loss ratios of different departments within the organization. One department of an organization can sell its products to other departments at low prices. Sometimes, transfer pricing is used to show higher profits in the organization by showing fake sales of products within departments.DISTRIBUTION CHANNELS IN SERVICE DELIVERY PROCESS:Distributing product is quite easy while comparing with service is just because of its nature like perishability and viability. Any service delivery system can be viewed as a chain or network of activities, which involves number of participants. Just like supply chain in manufacturing, in services also we can see that all the participants are related to each other. The objective of achieving efficiency and or responsiveness is equally important and relevant in the whole network of participants involved in delivery service called service supply



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chain. The structure of supply chain can vary from a simple serial supply chain to a broad network of supply chain entities.

Direct SalesThe direct sales channel allows you to contact your customers without any intermediaries through visits, mail order or online and have complete control over presentation of your offers and pricing. As you interact with your customers, you receive direct feedback on what you are proposing and you can adjust your marketing accordingly. The disadvantage, if you don't use other distribution channels, is that demand will fluctuate and your employees will sometimes be overloaded and at other times have little work. Ideally, you plan for your service capacity to exceed expected direct sales and use other channels to fill in the gaps.

AgentIf you don't want to worry about marketing your services, you can use agents. These sales professionals either act as individual contractors or work for an agency. The agents provide you with customers for your services and take a commission. Depending on your agreement with the agents, they may offer your services exclusively or have a number of service providers that they offer to customers. You still have good customer contacts when you carry out the work, but you have no information about the customers that didn't order your services.PartnerWhen you partner with a related, non-competing business, you offer your services within the framework of the partner's operations. For example, you could offer computer repair services through a local computer store or installation services for the home through a hardware chain. The benefit of such a channel is that you reach a lot of customers via your partner, but not having an independent business with your own customers is a disadvantage.Opaque DistributionYou may want to serve a low-cost market but keep your higher-margin customers, or you may want to bridge a temporary drop in demand by selling your services at a discount. You can achieve such two-tier pricing by using an opaque distribution channel. The channel is opaque because the customers don't know you are offering the services at a lower price. The opaque reseller is reselling in his own name but offering your services. The travel and hotel industry is an example of widespread use of opaque resellers to dispose of surplus airline seats, cruise capacity or hotel rooms by selling through third-party discount agencies . You can cover your costs with the opaque channel and make profits on the services you sell at a higher price in your own name.

CUSTOMER SERVICE LINKAGE:Type of service rendered by the service provider defines the linkage between the service provider and service customer. The linkage between customer and service provider varies based on distribution options chosen by the customer

1. Customer visits the service site

2. Service providers go to customers

3. Service transaction conducts remotely

These facilities define the relationship between the customer and service provider, includes the location and facilities provided by the service provider



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Single level bidirectional relationship between customer and service provider:In single level bidirectional relationship, customer provides inputs to the service provider and service provider performs the service. The service provider converts the inputs into an output in the service production process and delivers to the customer.

Two level bidirectional relationship between customer and service provider:In two-level bidirectional relationship service provider employs another service provider (second level) or supplier who assists with the processing of customer inputs. This is also analogous to situation where some service providers (initial) outsource the repair work or any service to other service provider, that is second level service provider. That means the initial service provider acts as an interface between the second level service provider and customer.



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CHALLENGES IN MANAGING SERVICE SUPPLY CHAINSHuman element in servicesIn services human capital is the most contributory asset. Each human being is unique regardless of training given to them. Each employee works differently even if standardized procedures prevail in organization. Due to varying outcome of each employee, managing and controlling performance of service SC becomes a challenging task. The other factor impacting the performance of service supply chain is the influence of local environment which in broad sense will become more varying from global perspectives. Most of the service organizations have presence globally.Difficulty in measuring performance of service supply chainThe output or outcomes of services which are measured in terms of ‘service level agreements’ are not as precise as the clear specifications exist in goods supply chain. In service delivery it is very difficult to produce the complete service package in advance of the actual demand realized, which further adds to the complexity in measuring the performance of service. Generally, supply chain set responsiveness as important performance measure. In service supply chain like repair and servicing centre, even if the servicing employee is prompt and ready to serve, the unavailability of parts can affect the responsiveness.Varying outputIn services, the output outcome or economic activity generated varies greatly over time period, with region in which service is performed, with human skill and capability, with the level of understanding of customer as shown in TableDifferent Types of Service OutputSo, different outcomes demand for different supply chain models. The definition of supply chain management is applicable to some services like retail sector or repair and servicing centres.

CUSTOMER SATISFACTION ENABLERS:Delivering good customer service has gone from a “nice to have” to a “core deliverable” in the process of service delivery. Making sure that your organisation can deliver excellent customer service requires a good alignment of all the key enablers.1. Measure your customer service performanceThe old maxim that “what gets measured get done” is true here as it is everywhere else. Make sure that you are measuring your level of customer service. While “Customer Satisfaction” has been around for a long time there are more effective tools now such as Net Promoter Score. Investigate them and use them in your business.While you’re at it don’t just measure outcomes, also measure customer service drivers: what are the service attributes that customers care the most about. Then you can design your service process to target those key areas more effectively.2. Staff must know how to deliver good serviceDelivering good customer service is a skill that can be learned just like any other and you should not expect your staff to “just know” how to do it. Make sure that you invest in service skills training for your staff. They need to know, for example:

What good customer service is; How to listen to and question customers appropriately; How to handle difficult customer situations; Appropriate ways to build customer rapport;

You wouldn’t expect your staff to know how to use a new computer system without training; why should you expect them to know how to deliver good customer service without training.



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3. Staff should know the organisation’s service goalsHaving been trained in delivering good customer service, staff need to know the customer service goals of the organisations. This can include the hard measures that you might have in your contact center but it should also include the softer and more general service goals for your organisation.Often these goals will be an outcome of the organisation’s strategic plan and will be embodied at a high level in the balanced scorecard or other strategic document.Without knowing the goals of organisation staff will be in the dark on the day to day actions that they should be taking to move the company along that journey.4. Staff understands customer expectationsDelivering just beyond customer expectations is a critical element of delivering good customer service but the trick is in knowing your customer’s expectations. Those expectations have often been set by other parts of your organisation so understanding those expectations is critical.In a complex business those expectations can be set in a range of ways:

Sales staff promises Service contract wording Service level agreements etc

You need to provide your service staff with details of those expectations so that they can deliver beyond them.If you deal in a customisable service offerings (professional services, computer support, etc) you need to standardise those offerings as much as possible and then provide a way for service staff to easily access the difference by customer.5. The company supports goals with appropriate resourcesEven with the best will in the world you cannot deliver good service without appropriate resources.StaffingThis is a simple: do you have enough staff to deliver what you have promised to deliver. If you do not have an appropriate number of staff you will forever be behind the eight ball.As a corollary to this point you also need a robust way to determine if you have enough staff. Tools and processes to determine your staff loading are key to understanding if you have the correct number of staff.ToolsIt is true that you can run the entire operation on 4×6 index cards but that doesn’t mean it’s the best way to do it.Make sure that your staff have the right process tools such as help desk or CRM software.However, also make sure that they have the right business tools: analysis software, testing tools, etc to get the job done.ProcessesService delivery needs to have a process just like any other manufacturing process. It needs to be formalised, defined and documented. Without good processes you leave your organisation open to all sorts of issues including:

Staff wasting time through inefficient service delivery Loss of corporate memory when a key staff member leaves Dropping the ball during a service hand-off.

6. Positive company cultureYour staff have to want to provide good service and management has to support them in that goal. It is true that most staff want to do the right thing by the company and the customer. So make sure that you don’t get in their way. Generate a positive service culture for the company by making a good example of people in the organisation who provide excellent customer service.



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7. Staff are empowered to make changesLastly, if you think you know it all about delivering the best customer service you’re wrong. No-one knows everything, has had every interaction or is constantly in touch with all of their key customers. Decades of IT system implementation has automated the predictable in many organisations, making the unforeseen and unexpected service requirement the most likely to confront your people. Make sure that your staff know and understand that they are empowered to drive change in your delivery operations.Customer needs and expectations are constantly evolving and the only way that you can deliver great customer service in the long-term is to continually evolve with those expectations.

OUTSOURCING AND AVAILING:Today most of the companies wants cost cutting in their business. Now a days Outsourcing helps to achieve such goals. Outsourcing is the process of contracting with another company or person to do a particular function. In top most cases almost organizations outsource their product or services in some way. Typically, the function being outsourced is considered non-core to the business, this help them to concentrate on their original business. Key Reasons to outsource your non-core functions:Consider the following top reasons cited by companies that have successfully outsourced their non-core operations:Control operating costsDerive the benefits of lower labor costs in countries like India. Processes outsourced to these locations are done at much lower rates and at the same quality levels as in the donor location. This translates into major cost savings for companies. They also save on operational costs such as payroll, administrative costs, HR, power, rentals, and utilities.Lower infrastructure investmentsCut back drastically on expensive infrastructure requirements. State-of-the-art IT systems, customer service call centers and technical helpdesks result in heavy investments to companies. Keep your costs low by outsourcing these functions.Focus on core functionsFocus on your core competencies. Redirect your organization's internal resources toward mission-critical activities. By outsourcing functions such as transcription, medical billing, and claims processing, healthcare practices can get their focus back on their primary concern - their patients.Accelerate migration to new technologyMigrate to new technologies with minimum downtime and increased productivity and quality by outsourcing IT processes. Enjoy enhanced productivity and quality.Get access to world-class capabilities and improve operational performanceGet access to world-class capabilities and infrastructure. Have processes delivered by dedicated teams that have operational and domain expertise in the outsourced process. Their experience in the field translates into greater operational efficiencies.One-time applicationsAvoid expensive short term outlays. Outsource one-time applications which have to be ramped up in relatively short time and require high manpower resources.Overcome seasonal workflowsOvercome seasonal fluctuations in work and lack of workers during holidays and off-seasons. Deal with peak workloads and smaller staff during vacations by outsourcing these functions.Overcome talent shortagesOvercome acute talent shortages and an increased demand for skills in countries like the U.S. and U.K. Outsource to offshore locations such as India which have a large pool of qualified, English-speaking professionals.



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Enhance risk managementGet protection from natural calamities, accidents, market fluctuations, or technical crises. Disaster recovery mechanisms and detailed back up plans provided by the offshore partner will help you to respond rapidly and get operations back on track quickly.OUTSOURCING PROCESS:Outsourcing should be implemented by using a process-driven approach when outsourcing provides a systematic look at the ‘how-to’ details of developing an outsourcing plan. The steps in the process need to be followed to ensure that the company is being thorough in the management of the outsourcing relationship. Because the components of the outsourcing process do not change over time or between projects, one thing that changes is the effectiveness and efficiency of the process.

Each of the stages of outsourcing has subcomponents and sub processes that need attention. For effective outsourcing, the initiative must be evaluated in the context of the strategic posture of the company. After completing the strategic assessment, the project solutions have to be identified as suitable for outsourcing. This involves prioritizing the company’s needs by conducting a thorough needs analysis. The third stage is one of soliciting, evaluating and choosing the vendor for the outsourcing needs. The vendor selection and contracting phase provides a structured framework to guide the company through critical supplier selection and contracting activities. Choosing the right supplier is very important as the chances are that if the company makes the right decision from the beginning the company will have a potentially lasting relationship, while choosing the wrong supplier could damage and ruin a well-intentioned outsourcing project. Once a vendor was chosen, the next steps are to engage in negotiation and to reach an agreement about the details of the outsourced process. This is followed by the composition of the outsourcing contract. The stage of project initiation and transition is the one where the Procurement department is most involved in. Here is where all the materials are delivered to the subcontracting company, issues are solved with the help of all involved departments, the outsourcing relationship is formed and the effectiveness and efficiency of the process is measured. The focus of this stage is to keep up to date with the outsourcing relationship. The relevant activities include evaluation of the relationship,



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problem resolution, communications management, knowledge management and process management. Before implementing outsourcing some critical points need to be made. The outsourcing process is cyclical and it is important to follow through on each step in an organized manner. One of the reasons it is recommended to follow the steps in a structured way is that this greatly reduces difficult decision making while moving through the process.



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Unit-3

SERVICE DEMAND MANAGEMENTWhat makes service industries so distinct from manufacturing ones is their immediacy: the hamburgers have to be hot, the motel rooms exactly where the sleepy travelers want them, and the airline seats empty when the customers want to fly. Balancing the supply and demand sides of a service industry is not easy, and whether a manager does it well or not will, this author writes, make all the difference. In this rundown of the juggling feat service managers perform, the author discusses the two basic strategies—“chase demand” and “level capacity”—available to most service companies. He goes on to discuss several ways service managers can alter demand and influence capacity.The literature on capacity management focuses on goods and manufacturing, and many writers assume that services are merely goods with a few odd characteristics. Unfortunately, these researchers never fully explore the implications of these strange traits:1. Services are direct; they cannot be inventoried. The perishability of services leaves the

manager without an important buffer that is available to manufacturing managers.2. There is a high degree of producer-consumer interaction in the production of service,

which is a mixed blessing; on the one hand, consumers are a source of productive capacity, but on the other, the consumer’s role creates uncertainty for managers about the process’s time, the product’s quality, and the facility’s accommodation of the consumer’s needs.

3. Because a service cannot be transported, the consumer must be brought to the service delivery system or the system to the consumer.

4. Because of the intangible nature of a service’s output, establishing and measuring capacity levels for a service operation are often highly subjective and qualitative tasks.

Whereas the consumption of goods can be delayed, as a general rule services are produced and consumed almost simultaneously. Given this distinction, it seems clear that there are characteristics of a service delivery system that do not apply to a manufacturing one and that the service manager has to consider a different set of factors from those that would be considered by his or her counterpart in manufacturing. And if one looks at service industries, it is quite apparent that successful service executives are managing the capacity of their operations and that the unsuccessful are not. So, the “odd characteristics” often make all the difference between prosperity and failure.Consider the following service managers’ actions, which resulted in fiasco:Increasing the wrong kind of capacity—In studying the battle statistics in the war for market share among airlines, competitors observed that an air carrier in a minority position on a particular route would often get a smaller proportion of the total passengers flown on the route than the share of seats flown.1 Conversely, the dominant airline would carry a disproportionately larger share of the total passengers flown. The conclusion was obvious: Fly the seats, and you get the passengers.In an effort to fly more seats, the airlines lined up to purchase jumbo jets. However, when competitors began flying smaller planes more frequently on the same routes and reaping a good number of passengers, it became painfully apparent to many airlines that frequency (and, to some extent, timing) of departures is the key to market share. Consequently, the airlines “mothballed” many of the jumbos or sold them if they could.Not increasing all-around capacity—A resort operator decided to increase the number of rooms in a lodging facility and not to expand the central services required to support the additional guests. The fact that room rentals contribute up to 90% of total revenue and that tennis courts, swimming pools, meeting rooms, parking areas, and so on contribute next to nothing, or nothing, convinced the operator to create an imbalance in favor of revenue-producing activities. However, the number of guests adjusted itself to the level of occupancy



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that the central services could support, not to the level of room capacity. The room capacity beyond the level supported by the central services was wasted.Not considering the competitive reaction—The Orlando, Florida lodging industry’s response to the announcement of Disney World’s opening is a classic example of this type of service management fiasco. Disney executives had learned well the lessons of Orange County, California, and Disneyland, where revenue is limited to on-site entertainment, food, and souvenir dollars. However, businesses besides Disney have made large profits in lodging, restaurant, and recreational facilities. Correctly perceiving that the same thing would happen in Florida, Disney purchased 200,000 acres south of Orlando, eight times the number owned in Anaheim.When news broke that Disney would build in central Florida, however, everybody with a hotel or motel in his or her portfolio began plans for Orlando units, even though Disney had preempted all the land within two miles of the Magic Kingdom. The subsequent overbuilding has been well documented. More than 30,000 rooms were built to service a market estimated to need only 19,000. As an Orlando lender moaned, “We had a great little 200-room property there, the only one at the intersection. In less than a year, there were 5,000 rooms either built, under construction, or planned within a quarter mile of that intersection. We had to foreclose, and our occupancy has been running at only 35%.”Undercutting one’s own service—A new entrant in the overnight air freight transportation industry discovered that attempts to capture market share by adding to the existing number of planes and branch offices increased costs faster than revenues. Still looking for market share, the company then offered lower rates for second- and third-day deliveries. Because it had excess capacity, however, the company always delivered packages on the next day. As consumers discovered this fact, the mix of business shifted dramatically to the lower-priced services. So although there was an increase in volume, the resulting lower margins pushed the break-even volume even higher.These pitfalls are not inevitable. Successful service executives do avoid them, and there are enough examples of well-managed service businesses from which to glean some wisdom on how to match demand for services with capacity to supply them. There are two basic capacity-management strategies available to most companies and a number of ways open to executives to manage both the demand and the supply sides of their businesses. I will discuss the strategies and choices in turn.FLEXING CAPACITY TO MEET DEMAND (Capacity Constraints)A second strategic approach to matching demand and capacity focuses on adjusting or flexing capacity. The fundamental idea here is to adjust, stretch and align capacity to match customer demand. During periods of peak demand the organization seeks to stretch or expand its capacity as much as possible. During periods of slow demand it tries to shrink capacity so as not to waste resources.Stretch existing capacityThe existing capacity of service resources can often be expanded temporarily to match demand. In such cases no new resources are added. Rather people, facilities, and equipment are asked to work harder and longer to meet demand.

Stretch time: It may be possible to extend the hours of service temporarily to accommodate demand. A health clinic might stay open longer during flu season. Retailers are open longer hours during the Christmas shopping season. And accountants have extended appointment hours (evenings and Saturdays) before tax deadlines.

Stretch labor: In many service organizations, employees are asked to work longer and harder during periods of peak demand. For example, consulting organizations



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face extensive peaks and valleys with respect to demand for their services. During peak demand, associates are asked to take on additional projects and work longer hours. And front-line service personnel in banks, tourist attractions, restaurants and telecommunications companies are asked to serve more customers per hour during busy times.

Stretch facilities: Theaters, restaurants, meeting facilities and classrooms can sometimes be expanded temporarily by the addition of tables, chairs, or other equipment needed by customers. Or as in the case of a commuter train, a car can hold a number of people seated comfortably or can “expand” by accommodating standing passengers.

Stretch equipment: Computers, telephone lines and maintenance equipment can often be stretched beyond what would be considered the maximum capacity for short periods to accommodate peak demand. In using these types of “stretch” strategies, the organization needs to recognize the wear and tear on resources. The potential for inferior quality of service may go with the use. These strategies should thus be used for relatively short periods in order to allow for later maintenance of the facilities and equipment.

As noted earlier, sometimes it is difficult to know in advance, particularly in the case of human resources, when capacity has been stretched too far.

Align Capacity with Demand FluctuationsThis basic strategy is sometimes known as a “chase demand” strategy. By adjusting service resources creatively, organizations can in effect chase the demand curves to match capacity with customer demand patterns. Time, labor, facilities, and equipment are again the focus, this time with an eye toward adjusting the basic mix and use of these resources.Specific actions might include the following:



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Use part-time employees: In this case the organization’s labor resource is being aligned with demand. Retailers hire part-time employees during the holiday rush, tax accountants engage temporary help during tax season, tourist resorts bring in extra workers during peak season. Restaurants often ask employees to work split shifts (work the lunch shift, leave for a few hours, and come back for the dinner rush) during peak mealtime hours.Outsourcing: Firms that find they have a temporary peak in demand for a service that they cannot perform themselves may choose to outsource the entire service. For example, in recent years, many firms have found they don’t have the capacity to fulfill their own needs for technology support, Web design, and software-related services. Rather than try to hire and train additional employees, these companies look to firms that specialize in outsourcing these types of functions as a temporary (or sometimes long-term) solution.Rent or share facilities or equipmentFor some organizations it is best to rent additional equipment or facilities during periods of peak demand. For example, ex press mail delivery services rent or lease trucks during the peak holiday delivery sea son. It would not make sense to buy trucks that would sit idle during the rest of the year. Sometimes organizations with complementary demand patterns can share facilities.An example is a church that shares its facilities during the week with a Montes son preschool. The school needs the facilities Monday through Friday during the day; the church needs the facilities evenings and on the weekend.Schedule downtime during periods of low demandIf people, equipment, and facilities are being used at maximum capacity during peak periods, then it is imperative to schedule repair, maintenance, and renovations during off-peak periods. This ensures that the resources are in top condition when they are most needed. With regard to employees, this means that vacations and training are also scheduled during slow demand periods.Cross-train employeesIf employees are cross-trained, they can shift among tasks, filling in where they are most needed. This increases the efficiency of the whole system and avoids underutilizing employees in some areas while others are being over taxed. Many airlines cross-train their employees to move from ticketing to working the gate counters to assisting with baggage if needed. In some fast-food restaurants, employees specialize in one task (like making french fries) during busy hours, and the team of specialists may number 10 people. During slow hours the team may shrink to three, with each person performing a variety of functions.Grocery stores also use this strategy, with most employees able to move as needed from cashiering to stocking shelves to bagging groceries.Modify or move facilities and equipmentSometimes it is possible to adjust, move, or creatively modify existing capacity to meet demand fluctuations. Hotels accomplish this by reconfiguring rooms—two rooms with a locked door between can be rented to two different parties in high demand times or turned into a suite during slow demand. The airline industry offers dramatic examples of this type of strategy. Using an approach known as “demand-driven dispatch,” airlines have begun to experiment with methods that assign airplanes to flight schedules on the basis of fluctuating market needs.’ The method depends on accurate knowledge of demand and the ability to quickly move airplanes with different seating capacities to flight assignments that match their



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capacity The Boeing 777 aircraft is so flexible that it can be reconfigured within hours to vary the number of seats allocated to one, two, or three classes.’ The plane can thus be quickly modified to match demand from different market segments, essentially molding capacity to fit demand.Another strategy may involve moving the service to a new location to meet customer demand or even bringing the service to customers. Mobile training facilities, libraries, and blood donation facilities are examples of services that physically follow customers.QUICK RESPONSE AND ACCURATE RESPONSE SYSTEM IN SCMIntroductionIn today's business environment, one of the criteria for success is how well we manage our inventories. Both manufacturers and retailers are aware of how excessive inventory, frequent stock-outs, poor item turnover and product obsolescence, can negatively affect profits. More than ever before, retailers and manufacturers are searching for ways to manage inventory more strategically and efficiently. Manufacturers have turned to Just-In-Time (JIT) as their answer to the problem of managing inventories. They look to JIT to reduce lead time, eliminate waste, produce to customer demand and develop long term relationships with suppliers. In turn this will help manufacturers to satisfy the customers' requirements with minimum levels of inventory and increase productivity.Retailers, struggling for survival, also must find ways to substantially reduce their cost while improving customer service. One major cost incurred by retailers is the cost associated with carrying and handling inventory which serves to satisfy customer demand. The volume of inventory the retailer carries is proportional to the sizes, styles, prices, models, colors, etc., of the products and their total lead time. If lead time were zero, the inventory would be zero. Even though this is not practical, the shorter the lead time, the smaller total the inventory. Retailers are now adopting the philosophy that is referred to as Quick Response (QR).This new thinking has caused retailers to reengineer their internal processes to take advantage of this method to manage the material flow. The Quick Response Adage, "Having the right merchandise at the right place at the exact time at the right price" is becoming easier to accomplish.Definition of Quick ResponseThe above adage is the retailers equivalent of "Just-In-Time" manufacturing. The objective is to maintain maximum turn and reduce costly markdowns by keeping in stock not only the hottest selling items but also just the right amount of commodity goods to meet customer de-mand. A secondary objective is to reduce administrative cost while employing the Quick Response Technology.From its inception in the late 1980's Quick Response has taken on a number of definitions. Quick Response has been defined as a philosophical business umbrella, by which retailers decrease inventory levels while gaining greater customer delivery, through innovative use of technology and business partnerships. Quick Response in this simplest version is where the retailer sends a replenishment order to the supplier/manufacture via Electronic Data Interchange (EDI).There are countless definitions of Quick Response. This is understandable because Quick Response is not simply a single function. It is a collection of technological functions that result in the creation of a partnership environment where shifts in consumer demand can be recognized (both by retailer and more importantly the supplier/manufacturer) and satisfied



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quickly. It is this strategic partnership between the retailer and the supplier/manufacturer that makes Quick Response successful.Elements of a Quick Response SystemA typical relationship may begin simply with the exchange of purchase orders and invoices via EDI transaction sets (P0's=850 and Invoices=810). In this process, the retailer captures product activity data, analyzes the data and generates a purchase order to the supplier/manufacturer. The supplier/manufacturer receives the EDI order, produces the goods and ships the items. The retailer receives the shipment and applies the quantity against the original purchase order. The supplier/manufacturer would also send the retailer an EDI invoice. This process is typical in many industries.There are many tools used to create a Quick Response environment. The bedrock of any Quick Response program is data accuracy and rapid electronic transmission of data. Bar Coding appearing on retail items is one very important tool. Another is bar coded shipping containers, and of course, Electronic Data Interchange (EDI). Already common are numerous practices for collecting accurate data on sales, (point-of-sale) inventory shipping and receiving. Shipment container bar coding and scanning are increasing rapidly. Of course electronic data capture is replacing manual data capture all along the material flow. These present and emerging technologies have improved the accuracy and timeliness of data. Key to the use of bar coding is the Universal Product Code (UPC) to identify the retailer items, which results in a single methodology to capture sales and inventory. These Universal Product Code data are now at the Stock Keeping Unit (SKU) level.Recent IT Developments and Their Impacts on QR Popular information systems that have had a significant impact on the day-to-day supply chain operations include electronic data interchange (EDI) and point of sales (POS), RFID (radio frequency identification), enterprise resource planning (ERP), customer relationship management (CRM), and collaborative planning, forecasting, and replenishment (CPFR). The following subsections detail on how each of these developments has affected QR performance.1. Electronic Data Interchange and Point of Sales

Electronic data interchange (EDI) software is designed to automate interorganizational communication and thus improve the effectiveness of QR program. EDI is the use of standard electronic formats for the creation, transmission, and storage of documents, such as requisition, quotation, purchase orders, and invoices (Owens and Levary 2002). According to Giga Research, 88% of larger enterprises used EDI for supply chain communications because of the fewer errors and lower cost per transaction over manual processing methods (Brockmann 2003). Boyson et al. (2003) argued that electronic information exchange leads to reduction of errors and increased efficiency of processes. EDI connects the databases of different companies. For example, order placed by a company is transmitted directly from the company’s system to its supplier’s system. Supplier’s system then transmits the billing information directly to the ordering company’s system.

2. Radio Frequency IdentificationOne technology that will increase a firm’ supply chain visibility is radio-frequency identification (RFID). RFID is a wireless technology that identifies objects without having either contact or sight of them (Levary and Mathieu 2004). RFID is basically a chip



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bearing a unique serial number affixed to, for example, a container, a pallet. The reader receives a signal from RFID tag carrying the item’s serial number, which logs the item’s location and time in an online database, creating a detailed history of each item’s movement. The data obtained from RFID could be fed directly into ERP system, allowing company to track and operate on a real time basis. The tag of RFID can be active, passive, or semipassive. Active tag broadcasts information and require a power source, while passive tag just responds to queries without power source. SAP and PeopleSoft (now Oracle) had made a significant investment to modify their existing system software for RFID to prepare applications for collecting more data more frequently

3. Enterprise Resource Planning An enterprise resource planning (ERP) system is a broadly used industrial term to describe the multi-module application software for managing an enterprise’s suppliers, customers, and functional activities. ERP software systems are designed to link and integrate the various business processes of enterprises. An ERP system uses a single database and a common software infrastructure to provide a broader scope and up-to-date information. This allows the ERP system to integrate all aspects of the company, such as financial, production, supply, and customer order information. Companies can keep track of materials, orders, and financial status efficiently and coordinate manufacturing and inventory across different locations and business units. The industry views ERP system as a tool that enables them to have higher efficiency by enabling them to move financial and other data speedily from one department to another department

4. Customer Relationship Management Customer relationship management (CRM) plays a very important role in QR program as it connects company with its customers. CRM is software that plans and executes business processes that involve customer interaction, such as sales, marketing, fulfillment, and customer service. CRM allows real-time order submissions, which results in an improved customer service. As soon as a customer places the order, the system confirms adequate inventory, verifies order receipt, and goes immediately to the warehouse for delivery. CRM changes the focus from managing products to managing customers. In CRM, all data go into a data warehouse, where it is analyzed for hidden patterns (called data mining) and from which predictions of future behavior are made.

5. Collaborative Planning, Forecasting, and Replenishment Collaborative forecasting and replenishment (CPFR) is a web-based standard that empowers vendor-managed inventory and continuous replenishment by making joint forecasting. It enables firms in the supply chain to plan, forecast, and replenish inventories in a collaborative manner. With CPFR, parties exchange electronically sales trends, scheduled promotions, and forecast. This allows the participants to coordinate joint forecasts by working on their forecast differences. Sharing forecasts with other partners can result in a significant decrease in forecast errors and inventory levels.



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Unit-4

Supply chain service operations:The economic downturn increased pricing pressures from customers and challenges around operational and financial performance are all placing significant pressure on corporate supply chain operations. Supply chain functions are critical business operations and have a significant impact on company costs and profits. Supply chain operations include the systems, structures and processes to plan and execute the flow of goods and services from supplier to customer. To maximize effectiveness, it is critical to evaluate both internal operations and the extended supply chain that includes suppliers and customers. The value of successfully addressing supply chain challenges is not only cost savings, but also significant quality and customer service improvements across the entire supply chain. The need for improved and integrated supply chain planning and execution has become a common theme for companies of all sizes. A service supply chain is a network of different service organizations, which operates independently as well as in collaborations. Each organization handles its service operations like demand management, capacity management, forecasting etc.

Service supply chain planning:

Supply chain services planning can be defined as the process of coordinating production or design of services, distribution strategies to efficiently allocate supply chain resources to maximize profit or minimize system wide costs.Indeed decisions such as when and how much to produce/design, where to store/distribute the inventory and whether to lease additional operations those may not have great impact on the performance of the supply chain process.Supply chain service planning involves the following activities

1. Service Forecasting2. Service strategies3. Demand management4. Capacity management5. Coordination and collaboration6. Customer relationship management, etc.,



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Service forecasting:Service forecasting involves issues relating to estimation of demand for a particular service product in future and it can be done using previous sales reports and techniques. Based on these reports service providers estimate the demand for services. Based on these forecasting reports service providers plan for supply chain network services.

Supply chain Service strategy

Collaborative strategyThis strategy enables partners to jointly gain a better understanding of future demand for the product and thereby implement realistic programs to meet the demand. Important collaborative relationships are 1. collaboration between manufacturer and supplier2. collaboration between manufacturer and customer3. collaboration between firm and third party or fourth party logistics providersDemand flow strategyThe central issue of the demand flow strategy is to establish a linkage between the customer and source of the products and service that the firm provides to the market place. Various components of demand flow strategy are1. Channel design2. Demand planning3. Supply chain configuration4. Vendor managed inventoryCustomer Service StrategyCustomer satisfaction is directly linked to the service provided by the firm. The customers are increasingly demanding higher standard of performance from the suppliers and want value addition to the product or service they buy.1. Customer segmentation2. Cost-to-serve3. Revenue managementInformation technology strategy



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Information is the essential link between all supply chain processes and activities including suppliers, producers, retailers and customers. Information technology links and coordinates the different partners in the supply chain and provide an opportunity to increase trancaction speed while reducing cost by eliminating labour and paper transaction.The functions provided by IT to improve supply chain are

1. Centralized coordination of information flow2. Integration of ordering, production, transportation and distribution.3. Direct access to both domestic and global transportation and distribution channels.4. Locating and tracking the movement of every item in the supply chain5. Consolidation of purchasing from all suppliers6. Inter-firm and intra-firm information access7. Data interchange8. Data acquisition at the point of origin and point of sale9. Instantaneous updating of inventory levels in real time.

FACILITIES MANAGEMENT (FM) IN SERVICE SUPPLY CHAINThe operational services are characterized by both continuous service processes such as supply of electricity, heating and water, as well as discrete service processes such as maintenance, general operation and environment control. However, development towards intelligent building installations has made this service process more complex. The service process both includes monitoring the automatic control systems (CTSsystems) as well as service and maintenance of e.g. HVAC (Heating, Ventilation and Air Conditioning) systems. Maintenance services are more discrete service processes that are very people dependent and with low customization towards end users, but instead the service is directed at the FM function and facility owners. Finally environmental services are a very complex, but discrete process securing and developing the environmental profile of the facility. A key stakeholder here is the facility owner. Some of the requirements and challenges for the FM function regarding operational services (Ellram et al, 2004; Jensen, 2008):

Setting service level standards and monitoring the service performance Skills requirements among FM staff and sourcing of FM service competences Balancing costs vs. value of support service

The service area of FM is probable where the greatest focus is on outsourcing of FM service processes. These services are seen as the processes supporting the core business processes, e.g. IT, catering, reception and cleaningFrom the description of FM and S-SCM there seems to be areas where FM could gain advantages from S-SCM. Both areas are dealing with a non physical product, a service. And both areas are focused on customer demand, service levels and performance measures. However, FM are in many cases delivering services as a support function, and is considered a necessary function but not as a function supporting the strategic development of an organisation (company). Compares the three selected service areas of FM; Space, Operational services and Service, with the seven business processes of S-SCM, with the purpose of identifying how FM handles the S-SCM processes. As table shows it is possible to find elements of S-SCM processes in FM, for example the use of performance metrics and service level standards.



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Also the capacity and skills management is found to be part of both the FM area of operational service and S-SCM.

Comparison of facilities management with Service-supply chain management

Service SCM process

Content Facilities Management service areaSpace management

Operational services

Service

Information flow

demand estimation and information sharing

Knowledge and access to information for planning, allocation andutilization of space

Setting service level standards and monitoring the service performance

Service level standards and performance measurement

Capacity and skills management

investments in organizational processes, assetsand staff

Building competences in space management.

Skills requirements among FM staff and sourcing of FMservice

Education and training of service personnel. Optimizingwork processes.

Customer relationship management (CRM)

customer segmentation and relationship management

Relationship building with key management stakeholders to identify needs and propose efficiencyimprovements

Improve resource efficiency (e.g.Energy)

Investigate customer needs, and wants. Set up routines for service evaluation.

Supplier relationship management (SRM)

supplier identification, supplier selection, supplier segmentation and relationshipmanagement

Relationship building with key management stakeholders to identify needs and propose efficiency improvements


Sourcing of services Service level standards andperformancemeasurement

Service delivery management

making promises to customers, enabling service providers

Interaction and understanding of customer needs as well as client wishes


Service level standards and performance measurement

Cash flow flow of payments between parties

Rental fees Usage cost, e.g. energy consumption(Electricity, water, gas)

Balancing costs vs. value of support services

Demand management

Forecasting customer requirements

Interaction and understanding of customer needs as well as client wishes

Overview and monitoring of building utilization

Secure the right capacity to deliver the required service

ROUTING AND SCHEDULING OF SERVICESSanjeev Institute of Planning and Management, Kakinada ICET code-SNJV


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Most of our daily requirements are made by the service provider coming to our premises. These services are home delivery of Pizza within 30 minutes, transportation service of office picking all employees or school children, Milkman delivering milk door-to-door and postal/courier services. In such services, service delivery and timely service are very important. These issues mainly require scheduling and routing of service vehicles. The vehicle routing problem (VRP) is a combinatorial optimization and integer programming problem seeking to service a number of customers with a fleet of vehicles. Often the context is that of delivering goods located at a central depot to customers who have placed orders for such goods. Objective of such problems is to minimize the time and distance travelled. Many methods have been developed for searching for good solutions to the problem, but for all but the smallest problems, finding global minimum for the cost function is computationally complex. Hence many good heuristics have been developed for these types of problems which yield good solutions if not optimal solutions.

Consider a milk van delivering milk to four distribution centers (DC) every day morning as shown in the Figure. The objective of depot is to minimize the total cost of providing the services. This includes the vehicle capital cost, mileage and personnel costs

Scheduling or routing objectives of different types of services



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Characteristics of Routing and Scheduling

We can see above Figure , which is comprised of nodes and arcs. Various such characteristics of routing problems are discussed below.

Nodes

It consists of five circles called nodes. Node 1 is the depot node from which the vehicle starts and ends. Nodes 2, 3, 4 and 5 represent four distribution centers.

Arcs

The line segments connecting the nodes are called as arcs. Arcs may describe the time, cost or distance required to travel from one node to another. In Figure1, arcs describe the distance in miles between the DCs. Arcs may be directed (arrows) or undirected (simple line segments).

Arrows

Represent the direction of travel in the case of routing problems (e.g. one-way streets) or precedence relationships in case of scheduling problems.

Tour

Tour is the route for the vehicle. In Figure 1, travelling nodes in the order as given below are called tours. The total distance traveled is 53 miles in either case

Feasibility

Minimum-cost solution or any other criterion like time or distance traveled is subject to the tour being feasible. Feasibility implies that (i) A tour must include all nodes (ii) A node must be visited only once (iii) A tour must begin and end at a depot.

Route: Sequence in which the nodes (or) arcs are to be visited

Schedule: Specifies when each node has to be visited

Scheduling Service Vehicles

Scheduling problems have delivery-time restrictions with specified starting and ending times for a service in advance. Subway schedules fall into this category. A service scheduling problem is called two-sided window if the time limits are specified such as a delivery has to be made between 11 am and 2 pm. A service scheduling problem is called one-sided window if a service specifies that it should precede a given time, for example the case of newspaper, delivery should complete before 7 am. These problems consists of a

(i) Set of tasks, each with starting time and ending times



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(ii) Set of directed arcs with starting and ending locations. The set of vehicles may be housed at one or more depots.

Consider the network shown below with a depot serving to five locations (nodes) with specified starting time, S and Ending time, E in AM. An arc may join node i to node j if the start time of task j is greater than the end time of task i.

Deadhead time

Deadhead time is a user-specified period of time such that start time of task j must be longer than the end time of task i. It is the non-productive time required for the vehicle to travel from one task location to another or return to the depot empty. The deadhead time for the above example is 45 minutes.

The concurrent Scheduler Approach

This heuristic is used to solve the above type of scheduling problem. The procedure is as follows:

(i) Order all tasks by starting times

(ii) Assign first task to vehicle 1

(iii) For the remaining number of tasks, assign the next task to vehicle that has the minimum deadhead time to that task. Otherwise create a new vehicle and assign the task to it.

By doing so, the schedule obtained for the example given above is as follows:



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UNIT-5

RECENT TRENDS IN SUPPLY CHAIN MANAGEMENT

Today we will begin our two part series covering the 2016 supply chain trends we expect to see come to fruition in the next year. These trends are clear in that technology will continue to, as it has over the last decade, drive change in supply chain management. However, what is refreshing to see is that although technology and innovation are a focus, that also we must understand the fundamentals in order to make it all work. It was Bill Gates who famously quipped:

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

1: Supply Chains will Look to Go Digital

Technology has driven a new wave of productivity by digitizing key financial and business processes and enabling collaboration across the organization. This 2016 supply chain trend will continue as best-in-class organizations leverage business networks to in a more organized and informed way than in the past.

Digital technology is disrupting traditional operations and now every business is a digital business. The impact on supply chain management is particularly great. Businesses cannot unlock the full potential of digital without reinventing their supply chain strategy.



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Many companies understand the elemental nature of these changes and are already working to introduce digital technology into their operations. However, simply adding digital technology is not the answer.

This approach overlooks the fundamental difference between traditional supply chains that have been “digitally enhanced” and truly integrated, re-invented supply chains whose DNA is fundamentally digital.

For digital technology to create significant improvement in business outcomes, businesses need to:

Reinvent their supply chain strategy

Reimagine supply chain as a digital supply network (DSN) that unites not just physical flows but also talent, information and finance

2: Responding to Innovation & Change But with An Eye On FundamentalsAccording to Grant Marshbank, COO of VSc Solutions, supply chains will face a number of challenges, he said: “Supply chain managers are already under huge pressure to adapt to turbulent economies, labor issues, and expansion into global markets.

“The bad news is that the rate of change isn’t going to slow down. The good news is that emerging trends hold opportunities to reduce both costs and carbon footprints, and enable exceptional customer service at the same time.”

“Technology will only deliver the intended positive results if it is implemented with strategy and operations that adhere to best practice in supply chain management. Get basics right first. Not even the smartest technology can compensate for less-than-best practices,” he added.

“Real-time system integration, secure data exchange, visibility and traceability between disparate systems across multiple supply chains and industry verticals are just some of the options already available through technology,”

3: Augmented Reality (AR)

Is augmented reality the future of supply chain? DHL Trend Research certainly seems to think so when it comes to this 2016 Supply Chain Trend. DHL looks at the following ways Augmented Reality will provide benefits to the supply chain as listed:

1. Picking Optimization: Each picker sees a ‘digital picking list’ on a heads-up display (picture Google Glass visuals). When someone selects an item, the display calculates the most efficient path through the warehouse, guides that person to the package, scans it as ‘picked’ into the Warehouse Management System, and immediately directs the picker to the next closest package.

2. Facility Planning: You’ll be able to visualize your next warehouse in full-scale before even beginning construction. You can model workflows through the facility, test measurements, even “field test” rearrangements—all virtually. Not only will it save you money, it’ll allow you to fully experience what you’re trying to do, before actually doing it.



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3. Freight/Container Loading: Augmented reality could replace the need for a physical cargo list and load instructions. How? By allowing to see loading instructions on a heads-up display with step-by-step instructions on how to most efficiently load a container given the size, dimensions, and weight of the packages going into it.

4. Dynamic Traffic Support: Most delivery trucks already come equipped with GPS navigation, but AR systems are the natural successors. Heads-up and windshield displays would allow carriers to efficiently re-route shipments on the fly without causing any significant distraction to the driver. The display would show the driver critical information including cargo temperature (especially important when transporting medical devices or other fragile goods), gasoline efficiency (which changes based on the weight of the truck!), and a variety of interesting and critical information.

4: Artificial Intelligence on SteroidsHuge Investments being made in Artificial Intelligence by many companies including Facebook, Google, Apple, Tesla, and many many more companies.

Machine vision and robotics are already in use around us, most notably in industrial applications, including the warehouse, as well as facial recognition systems used by law enforcement. Yet as the possibilities of these two types of technology are exciting—and they can apply to a number of industries.

“Some of the most exciting work in machine/computer vision stems from subtle insight into the current deficiencies of CAD,” Gasperini writes. “In order to interact with 3D models, designers today use clunky peripherals such as keyboards, mice and joysticks. Machine vision systems are being developed that completely bypass such inefficient mechanisms by employing a gesture recognition apparatus. A camera array tracks hand and finger positions dynamically. The system then alters a 3D screen image so that a user can virtually interact with the model, reaching into the design to toggle switches, press buttons and so on.”

5: Agile = The New Lean

The fundamentals of are still valuable, but there is a shift to Agile? Agile simply means, according to agilemethodology.org:

Agile methodology is an alternative to traditional project management, typically used in software development. It helps teams respond to unpredictability through incremental, iterative work cadences, known as sprints. Agile methodologies are an alternative to waterfall, or traditional sequential development.

Considering individualization and growing complexity, the lean concept is, however, no longer sufficient. Now and in the future, processes in the supply chain must rather be agile or, more clearly, flexible and interactive, ensuring high-quality delivery results. To expand upon Agile in the supply chain management model, agile supply chain management stands for the ability to cope with unforeseen events through the use of lightning-fast decision making. The implementation of this management approach requires more than just the commitment of



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those involved. An additional technological component is essential and enables people to deal with the unplannable.

6: Procurement’s New (read Bigger) Role in the Supply Chain

Think purchasing & procurement and often what comes to mind is the struggle or battle to make a supplier give you materials or services for the lowest amount of money possible.

However, as global growth stalls and companies are forced to control costs to generate profit, could take center stage.

It won’t, however, be about beating up suppliers for every penny. Instead, procurement’s new role will be to forge new relationships with suppliers and increase collaboration..

7: Collaboration Continues to Take Center Stage for Efficient Supply Chain Management

Speaking of supplier collaboration, many companies have taken steps to improve the efficiency and effectiveness of their supply chain operations by automating key processes beyond procurement to areas such as with orders, invoicing, and payment. This is with good reason backed by data.

Some benefits realized from more collaboration in the supply chain include:

Collaboration Increases Share of Wallet: This simply means over time you gain a deeper relationship, thus in the trust of the customer, you gain more of the business.

The Longer the Collaboration, the Lower the Costs: Over time, trusted collaboration begets an understanding so intimate, you begin to understand each other and almos "finish each other's sentences." Simply put, you know internal processes and have a work flow that minimizes resources spent on administrative or time intensive tasks.

The Power of Word of Mouth: The old saying is true "If you do right by someone (in business), they will do right by you." Referrals are the life blood of any business, and if trust and collaboration is a part of a business relationship, a supplier, OEM, or the 3PL can refer you to get more business.

Innovation through Long-Term Collaboration: This goes back to the second point. The more you understand the pains and the processes of the client the easier it is to lead towards innovative ways which lead to further hard and soft cost savings.

ROLE OF E-COMMERCE IN SUPPLY CHAIN MANAGEMENTE-commerce business is completely dependent on SCM. When a customer purchases something using ecommerce site he wants that particular product in minimum time. If the logistic department is not able to provide it fast then the customer will not prefer that site again in future. New e-commerce sites are rapidly coming every day but customers prefer those sites which have proper SCM to deliver the products on time. ICT and in particular internet plays a key role in the integration of supply chain. While the most visible manifestation of the internet has been in the emergence of electronic commerce as a new retail channel. The Internet has a profound impact on business-to-business interaction, especially in the area of supply chain integration. The Internet can redefine how back-end



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operations — product design and development, procurement, production, inventory, distribution, after-sales service support, and even marketing — are conducted, and in the process alter the roles and relationships of various parties, fostering new supply networks, services, and business models. The term “e-business”— as distinct from “e-commerce” — can be used to describe this exciting adoption of the internet to accelerate the goal of supply chain integration. In this context, e-business specifically refers to “the planning and execution of the front- end and back-end operations in a supply chain using the internet.” In last five years, Indian E-Commerce business has grown immensely. People are using e-commerce sites to purchase a product because SCM helps enterprises to purchase/manufacture products on time and can able to deliver to the customer on time.

Advantages of SCM in E-Commerce Awareness among businesses in India is rising day by day about the opportunities offered by e-business. According to customer’s point of view ease of internet access is the critical factor that helps them to access ecommerce site and purchase. Safe and secure payment modes are fundamental along with the need to invent and popularize innovations such as Mobile Commerce. E-commerce provides connecting with consumers and conducting transactions. Virtual stores operate 24 hours a day, 7 days a week.1. Improved supply chain network Supply chain management software provides complete visibility across the entire supply chain network. It allows users to monitor the status of all activities across all suppliers, production plants, storage facilities and distribution centers. This enables more effective tracking and management of all related processes, from the ordering and acquisition of raw materials to manufacturing and shipping of finished goods. 2. Enhanced CRM SCM plays a vital role in establishing a relationship between enterprise and customer. SCM removes intermediate stages of delivery of product and establishes communication between customer and enterprise directly using websites and internet. Websites help enterprise to keep in touch with the customer directly and they can get requirements and feedback about products directly. 3. Trade Globally



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SCM provides facility to trade globally. If a business wants to do business globally then their SCM should be such that they can import raw material from anywhere through SCM or can export their finished product in any country easily. Indian market is also growing day by day. Business organizations have adopted ICT in their businesses. These organizations are purchasing raw material from different countries, bringing them in their factory, then converting it into the finished product and sending their products to other countries by using proper SCM. 4. Virtual Businesses With the advent of dynamic websites, organizations are focusing on virtual businesses like they are listing their products on websites rather than providing it to distributor or C&F by which many people can see their products and can purchase it from websites and further delivery of the product is dependent upon SCM logistic department. 5. Minimized delays Many supply chains are plagued by delays that can result in poor relationships and lost business. Late shipment from vendors, hold- ups on production lines and logistical errors in distribution channels are all common issues that can negatively affect a company’s ability to satisfy customer demand for its products. With SCM software all activities can b coordinated and executed from start to finish. 6. Reduction in Cost SCM based on e-commerce removes various stages of distribution, retailers, outlets, outlet staff etc. This decreases the overall cost of the product and customer gets the direct advantage of reduced cost of products as compared to the cost of product available at stores.SCM provides ICT based facilities to establish communication in between enterprise and customer so that they can directly communicate with each other and SCM takes care of the delivery of product etc. 7. Customer Satisfaction Customers expect timely deliveries. E-commerce wants to satisfy their customers and keep the right amount of inventories. Websites help the enterprise to keep track of customer requirements and are attuned to changes in their demand for various products and brands. By using an e-commerce integrated supply chain, the enterprise could track demand, determine how long the suppliers take to fulfil orders and order goods from their suppliers in time to keep their inventories replenished and their customers happy.

GREEN SUPPLY CHAIN MANAGEMENT

Scope of GSCM:

GSCM scope ranges from implementing and monitoring of the general environment engagement programmes to more creating or controlling practices implemented through various Rs (Reduce, Re-use, Rework, Refurbish, Reclaim, Recycle, Remanufacture, Reverse logistics, etc.) towards attaining a GSCM waste minimization is being considered as an important strategic. The waste, which is non-value adding activity, carried out in any operation. The most commonly perceived enemy to environmental protection in manufacturing and production operations. That is, manufacturing and production processes are viewed as the culprits in harming the environment, in the forms of waste generation, ecosystem disruption, and depletion of natural resources.



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History of GSCM

The very first green supply chain came into context in 1989. Kelle and Silver’s (1989) article was the first of this literature that developed an optimal forecasting system for organizations to use to forecast products that can be potentially be reused. This forecasting system, however, was highly contentious because returning individual containers is not usually known with certainty, so therefore, their findings may somewhat be incoherent. The first green design literature came into context in 1991. Navin- Chandra’s (1991) article was the first of the literature to consider the need for a green design to reduce the impact of product waste GSCM has gained popularity with both academics and practitioners to aim in reducing waste and preserving the quality of product-life and the natural resources. Eco-efficiency and remanufacturing processes are now important assets to achieve best practice



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Key Themes of GSCM literature:

Green Purchasing: GP is defined as an environmentally conscious purchasing initiative that tries to ensure that purchased products or materials meet environmental objectives set by the purchasing firm, such as reducing the sources of wastage, promoting recycling, reuse, resource reduction, and substitution of materials and GP ensures that purchasing or supply chain managers consider the issue of sustainability in the purchasing of inputs, in addition to the traditional purchasing criteria of cost, quality, and delivery

Green Design: It is about designing a product or a service that encourages environmental awareness. Fiksel (1996) argues that organisations have definite potential to become eco-friendly towards product re-manufacturing. Heavy industries that have complex supply chains should take into consideration the benefits of reverse logistics (RL). Designers, mostly concerned with product performance, must take into account also the effect of design details on energy/material requirements for manufacturing use and secondary use (repairability, remanufacturability and recyclability). Redesigned products will only be effective if they are able to provide at least the services of the products they replace. By extending the useful life of equipment items, additional raw materials are not needed to produce new items. Design and develop recoverable products, which are technically durable, repeatedly usable, harmlessly recoverable after use and environmentally compatible in disposal.

Life-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introduced toLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introduced toLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introduced toSanjeev Institute of Planning and Management, Kakinada ICET code-SNJV


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Life-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introduced toLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introduced



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Life-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedLife-cycle analysis: Life-cycle analysis is an important sub-concept to Green Design. Life-cycle analysis was introducedGreen Manufacturing: This is a very important area within green operations. The techniques for minimum energy and resource consumption for flow systems in order to reduce the use of virgin materials are based on three fields of study: pinch analysis (Linnhoff 1993), industrial energy (Boustead 1979) and energy and life cycle analysis (Lee et al. 1995).The wasting of materials and energy either due to inappropriate design, or due to excessive number of defects should be avoided. Intel has worked in increasing the number of transistors in a single chip, which will result in fewer chips to build and fewer chips to dispose(Gungor A, Gupta SM.1999)Using less energy is obviously good for the environment. It is also self-evidently good for business because it cuts companies’ costs, and eventually avoids potential environmental liabilities. The identification of where great amounts of energy are used could subsequently lead to redesign of the product or its use in order to make



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significant energy reductions. Major improvements in energy efficiency can often be achieved at little or no cost, even with net savings, through the use of targeted programs.

Green Packing: Packaging design is important for attaining a company’s environmental objectives. Though it serves certain needs related mainly to the distribution of the product, it is not part of the actual service offered by the product. In any case, it affects environment in many aspects. The following principles may apply concerning packaging .Limit packaging to the necessary size and Design packaging for refilling or recycling and use standardized packaging when applicable .In re-organizing the packaging policy, Xerox changed its packaging and established packaging-reuse centers in the UK, the Netherlands,and the US. In addition, it reduced the amount of internal packaging to minimize waste.


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