20 Questions
Customer expectations have decreased in almost every market
False
Customer value is determined by the level of perceived benefits minus total costs
True
Marketing manages the 'Four Ps' which are product, price, promotion, and place
True
The slow transition towards 'commodity' type markets has not contributed to the growing importance of customer service
False
Total cost of ownership only includes the purchase price of a product
False
Logistics management does not impact quality, service, cost, and time
False
Stock-outs in supermarkets occur on 50% of items, affecting customer reactions
False
Becoming a preferred supplier does not require a high priority on superior customer service
False
Cluster analysis is a technique used to match respondents across various dimensions and identify customer service segments
True
The measure of service is defined as the percentage of occasions on which the customer's requirements are met in full
True
The actual perfect order achievement is calculated by multiplying the percentage achievement on each element
True
It takes a disproportionate investment in inventory to achieve small incremental improvements in availability as the desired service level rises
True
Rolls-Royce developed the 'power by the hour' concept to guarantee performance and take responsibility for service and repair.
True
Marketing often focuses on acquiring customers rather than retaining them, despite existing customers being more profitable.
True
Zara's success lies in its fast fashion value proposition, achieved through an agile network of manufacturing facilities.
True
Market-driven supply chains require a shift from 'factory outwards' to 'customer backwards' design.
True
Quadrant 3 products should be regularly reviewed for potential deletion due to low profitability and slow movement
True
The 80/20 rule applies to both products and customers, emphasizing the importance of key accounts and products
True
Setting service standards requires a complete match between customer expectations and what the supplier can provide
True
Each service standard, such as order cycle time and stock availability, should be defined against the customer’s stated requirements
True
Study Notes
Managing Product Service Levels and Setting Service Standards
- Managing product service levels involves considering both profit contribution and individual product demand
- A simple matrix in Figure 2.12 is used to bring profit contribution and individual product demand together
- Quadrant 1 products should seek cost reductions due to high volume but low profit contribution
- Quadrant 2 products, with high demand and profitability, should provide high availability
- Products in Quadrant 3 should be regularly reviewed for potential deletion due to low profitability and slow movement
- Quadrant 4 products, highly profitable but slow selling, should have centralized inventory management
- The concept of service prioritization by product can be extended to include customer priorities
- The 80/20 rule applies to both products and customers, emphasizing the importance of key accounts and products
- Setting service standards requires a complete match between customer expectations and what the supplier can provide
- Key areas for setting service standards include order cycle time, stock availability, order-size constraints, ordering convenience, frequency of delivery, delivery reliability, documentation quality, claims procedure, order completeness, technical support, and order status information
- Each service standard, such as order cycle time and stock availability, should be defined against the customer’s stated requirements
- Other critical elements for which standards should be set include delivery reliability, documentation quality, claims procedure, order completeness, technical support, and order status information
Test your understanding of managing product service levels and setting service standards with this quiz. Explore concepts such as profit contribution, product demand, service prioritization, and key areas for setting service standards to enhance your knowledge in supply chain management.
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