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Prestige Institute of Management &

Research

Logistics & Supply Chain Management

Assignment No. 02

 

Submitted By:-

Hemant Raghuvanshi

MBA (PT)-IV

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Questions & Answers

Q1

Briefly explain the following. Quote suitable examples wherever necessary.

- Dimensions of customer service

- Demand forecasting principles & methods

- Order processing & management system

Answer No 1

Dimensions of customer service

The ultimate or primary objective of any business in to provide excellent service. Itfollows then that the main purpose of any logistics system also is to satisfycustomers. It is an activity that might not be well understood if you are a manager responsible for production scheduling or inventory control which are activities thatseem to be some distance from the marketplace.

The objective of supply chain should be to establish a chain of customers that linkspeople at all levels in the organization directly or indirectly to the marketplace.

From the point of view of logistics function, customer service can be viewed as

having four dimensions:-

(1) Time,

(2) Dependability,

(3) Communication,

(4) Convenience.

The marketing and logistics interface

The right product at the right place at the right time has rarely been considered inmainstream marketing to be very important. However, there are sign to show thatthis is quickly changing.

The power of the brand has steadily declined and customers are willing toexperiment with substitutes even technology differences between products hasbeen removed so that it is harder to maintain competitive edge through the productitself.

The source of competitive advantage is found firstly in the ability of the organization

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to differentiate in the eyes of the customer, from its competition and secondly fromoperating at lower cost and hence at lower cost and greater profit. In thesesituations it is customer service that can provide the distinctive difference betweenthe company's offer and that of its competitors.

In the now famous management book 'In search of excellence' it was identified that

excellent companies are those that can attract customers and maintain long termrelationships with them.

Secondly, it is also recognized that there is a slow but indubitable movement tocommodity type markets. By this it is meant that increasingly the power of the brandis diminished as technologies of competing products converge, thus making productdifferences difficult to perceive at least to the average buyer.

What is customer service?

In practice many companies have varying views of customer service. A major study

conducted recently has suggested that customer service could be examined under the following 3 headings:

• Pre-transaction elements• Transaction elements• Post-transaction elements

Pre-transaction elements of customer service relate to corporate policies or programs i.e. written statements of service policy, adequacy of organizationalstructure and system flexibility.

The transaction elements are those customer service variables directly involved inperforming the physical distribution function e.g. product and delivery reliability.

The post transaction elements of customer service are generally supporting of theproduct while in use e.g. product warranty, parts and repair service, procedures for customer complaints and product replacement.

In any particular product market situation, some of these elements may be moreimportant than others and there may be factors other than those listed above whichhave significance in a specific market.

Customer service and customer retention

It is apparent from issues discussed that organizations that compete only on theproducts features will find themselves at a severe disadvantage to those companiesthat augment the basic product with value-added services.

The concept that should be recognized here is that the product in the warehouse isvery different from the product in the customer’s hands since the customer looks atthe benefit from the product rather than the product itself.

For example the core product can be said to be quality, product features,technology, durability and augmented product can be delivery and lead time

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flexibility, delivery reliability and consistency, single point of contact, ease of doingbusiness and after sales support.

Another important concept that should be clearly recognized is the lifetime value of 

a customer is much greater than the profit generated from just a single deal withthat customer. A simple formula follows:

Lifetime value = Average transaction value * Yearly frequency of purchase*customer life expectancy

More on customer service and customer lifetime value can be found here.

Service driven logistics systems

The role of logistics can be seen as the development of systems and the supportingco-ordination processes to ensure that customer service goals are met. The mainidea of service driven logistics systems is to meet predefined service goals.

Ideally all logistics service systems are defined along the following lines:

1. Identify customers' service needs2. Define customer service objectives3. Design the logistics system

Identify customers service needs

The approach to service segmentation suggested here follows a three stageprocess:

1. Identify the key components of customer service as seen by customersthemselves.

2. Establish the relative importance of those service components to customers.3. Identify 'clusters' of customers according to similarity of service preferences.

Identifying key components of customer service.

Establishing relative importance of customer service components

Identify customer service segments

Defining customer service objectives

Setting customer service priorities

As the new competitive context of business continues to change, bringing with itnew complexities and concerns for management generally, it also has to berecognized that the impact of these changes on logistics can be considerable. Of the many issues facing organizations today perhaps the most challenging are in the

area if logistics.

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Q2

With the help of a diagram depict the various classifications / types of Supply Chain

strategies.

Types of Logistics Strategies

• Time Based

• Asset Productivity Based

• Technology Based

• Relationship Based

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Time-based strategiesReductions in cycle time are based on three factors: processes, information, and decision-making.If logistics is seen as a series of processes, performing those processes faster will reduce cycle time.The utilization of faster, more efficient forms of order transmission-EDI or the Internet, for example-cansignificantly reduce the time needed to complete the transaction. Finally, empowering individuals tomake decisions can be one of the most important ways to speed cycle time. The combination of improved (faster) logistics processes; faster and more accurate flow of information; and quicker, moreresponsive decision making can lead to dramatic reductions in lead time or cycle time. Overall, leading-edge companies have used a number of initiatives to improve their competitive position by reducingcycle time, producing significant benefits in terms of efficiency and effectiveness. Time-reductionstrategies, because of the potential to reduce costs, improve cash flow, and enhance customer service,have been the focus of much attention and have enabled companies to gain a competitive advantage.

Asset productivity strategies

One of the first assets to receive attention has been inventory, and there is much evidence toindicate that companies have been successful in reducing inventory levels or investment. Strategy tokeep the goods moving throughout the logistics system has contributed to effective use of logisticsfacilities thus squeezing more productivity from these assets. Some reductions have occurred here as aresult of contraction of this equipment and smarter, more sophisticated equipment dispatching software.Another key area that has had a dramatic impact on asset productivity is the use of third partylogistics (3PL) service. Many famous companies are users of 3PLs, focusing on managing logisticsservices rather than on the assets themselves. The decision to utilize 3PL companies has beenfostered in part by the interest in reducing asset investment to improve asset productivity. It is true thatthere must be some firms that actually provide the asset-based services, the response to this matter ismore of a strategic matter than one related to logistics operations. The move to utilize a 3PL is also thetrend of 5 focusing upon core competencies as a strategy to operate more efficiently and effectively.

Technology-based strategiesIt has been evident for some time that the realization of future logistics goals will dependsignificantly on the further development and utilization of information technologies. Whether it is in the

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form of hardware, software, or connectivity, these technologies will be the springboard for progress andinnovation.

It is clearly emerging that information, enterprises, and technologies are achieving higher levels of Integration. The movement of materials and products is not governed by discrete functions, but,increasingly, by a single integrated process, appearing in various guises, the goal of which is to provideperfect information and to facilitate tight management of deliveries, inventories, and costs.

Relationship-based strategiesAn area of significant strategic interest is that of relationships and relationship formation in thelogistics processes. Since it is difficult to imagine very many logistics or supply chain improvementsthat involve only one firm, the need for effective relationships is obvious. Collaboration goes wellbeyond vague expressions of partnership and aligned interests. It means that companies leverage eachother on an operational basis so that together they perform better than they did separately. It creates asynergistic business environment in which the sum of the parts is greater than the whole. Collaborativelogistics is defined as mutually beneficial cooperative problem solving and opportunity exploitation –beyond traditional, predefined trading partners, to foster new different and innovative ways to solvebusiness problems and capture new business. Properly executed, collaborative logistics cansignificantly reduce costs, increase supply chain efficiency, and make trading partners more flexible inaddressing shifts in consumer demand.

 

Order processing & management system

Order processing Order processing is a key element of  Order fulfillment. Order processing operations or facilities are commonly called "distribution centers". "Order processing" is the term generally used to describe the process or the work flowassociated with the picking, packing and delivery of the packed item(s) to a shippingcarrier. The specific "order fulfillment process" or the operational procedures of distribution centers are determined by many factors. Each distribution center has itsown unique requirements or priorities. There is no "one size fits all" process that

universally provides the most efficient operation. Some of the factors that determinethe specific process flow of a distribution center are:

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• The nature of the shipped product - shipping eggs and shipping shirts can

require differing fulfillment processes

• The nature of the orders - the number of differing items and quantities of each

item in orders

• The nature of the shipping packaging - cases, totes, envelopes, pallets can

create process variations

• Shipping costs - consolidation of orders, shipping pre-sort can change

processing operations

• Availability and cost and productivity of workforce - can create trade-off 

decisions in automation and manual processing operations

• Timeliness of shipment windows - when shipments need to be completed

based on carriers can create processing variations

• Availability of capital expenditure dollars - influence on manual verses

automated process decisions and longer term benefits

• Value of product shipped - the ratio of the value of the shipped product and the

order fulfillment cost

• Seasonality variations in outbound volume - amount and duration of seasonal

peaks and valleys of outbound volume

• Predictability of future volume, product and order profiles -

• Predictability of distribution network - whether or not the network itself is goingto change

This list is only a small sample of factors that influence the choice of a distributioncenters operational procedures. Because each factor has varying importance in eachorganization the net effect is that each organization has unique processingrequirements.

The effect of Globalization has immense impacts on much of the order fulfillment butits impact is felt most in transportation and distribution.

Q3

Differentiate between the following:

i) Technology based strategies v/s relationship based strategies

ii) SCM planning v/s SCM implementation

iii) Order forecasting v/s order processing

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