Supply Chain Management ESCM 2724 Unit 2 PDF

SUPPLY CHAIN MANAGEMENT ESCM 2724 UNIT 2 PRESENTER: NKOSINGIPHILE MKHIZE LEARNING UNIT 2: CUSTOMER MANAGEMENT (CHAPTER7) After you have studied this chapter, you should be able to: q describe logistics customer service within the context of the marketi...

SUPPLY CHAIN MANAGEMENT ESCM 2724 UNIT 2 PRESENTER: NKOSINGIPHILE MKHIZE LEARNING UNIT 2: CUSTOMER MANAGEMENT (CHAPTER7) After you have studied this chapter, you should be able to: q describe logistics customer service within the context of the marketing mix; q describe the dimensions and elements of customer service; q explain the cost/revenue impact of incremental customer service increases; and q outline the prioritisation of customers and products through an ABC analysis.  LEARNING UNIT 2: CUSTOMER MANAGEMENT 7.1 Introduction The seven Rs rule offers a simple description of how an integrated focus creates customer value. The seven Rs refer to having the right product, in the right quantity, in the right condition, at the right place, at the right time, for the right customer and at the right cost (including life-cycle costs). Customer value is then the relationship between the perceived benefits accrued from a commercial interaction (the first six Rs, except in the event of a malfunction, which implies cost) and total cost incurred (price, product life cycle cost, as well as the cost of malfunctions). LEARNING UNIT 2: CUSTOMER MANAGEMENT 7.2 Customer service as an element of the marketing mix: Elements of market mix Price refers to what the customer pays for the product or service. Product is the tangible product or the intangible service that addresses the customer’s needs. Promotion. Has now been expanded to include two-way communication between buyer and seller. Logistics at the forefront of this two-way communication event Place refers to making the product available at the correct geographical location and at the right time for the customer to use. This therefore is a key focus of logistics. LEARNING UNIT 2: CUSTOMER MANAGEMENT The people aspect refers to employees. (head-office, back-office and logistics staff) as well as the actual product or service delivery process. Process refers to the buying experience of customers for example documentation surrounding the purchase, and complaint resolution. This can be expanded to include the pre- and post- transactional dimensions of customer service. The physical environment refers to the physical aspects related to the organisation that customers come into contact with, for example warehouses, delivery vehicles and storefronts. Ergonomically designed, well-maintained, clean and efficient spaces create a positive perception with the customer. Many of these facilities are under the direct control of logistics. It can also refer to the physical perception a product and its packaging imprint on the customer. LEARNING UNIT 2: CUSTOMER MANAGEMENT LEARNING UNIT 2: CUSTOMER MANAGEMENT LEARNING UNIT 2: CUSTOMER MANAGEMENT 7.3 Customer service dimensions and elements Pre-transaction elements ( strategy policy) Transaction elements – Product availability – Order convenience – Order cycle – Quality assurance – Appropriate transport – Expedited shipments and – Product-substitution policy LEARNING UNIT 2: CUSTOMER MANAGEMENT Post-transaction elements 7.4 Market strategy An organisation’s ability to grow depends on its ability to attract and retain the target market’s most profitable customers When an organisation uses its logistics performance capabilities to enhance the success of these customers, a lasting competitive advantage can be obtained (for instance bulk-handling capability that enables mines to move more export commodities efficiently to foreign markets). LEARNING UNIT 2: CUSTOMER MANAGEMENT 7.5 The cost of customer services The ‘triangular’ trade-off between customer service, cost and quality is a critical component of customer service strategy development. Logistics can, fulfil a value-adding role through grounding marketing’s objectives by determining the cost of execution and providing alternatives, not only to inform, but also to guide the trade-offs. LEARNING UNIT 2 CUSTOMER MANAGEMENT LEARNING UNIT 2 CUSTOMER MANAGEMENT 7.6. Customer/product prioritisation matrix The ABC analysis refers to the categorisation of customers and products according to their relative contribution to profit. Referred to as Pareto principle, which states that, typically, roughly 80 per cent of the effects come from 20 per cent of the causes – in this case, a small number of products or customers will account for the majority of revenues and profit, PARETO PRINCIPLE Category A refers to the most profitable customers, while category I refers to the most profitable products. The numbers in Table 7.1 refer to the customer– product combination priorities, with 1 being the most profitable combination, consequently receiving the highest service priority, and 16 the least profita 7.6 CUSTOMER/PRODUCT PRIORITISATION MATRIX The numbers in Table 7.1 refer to the customer–product combination priorities, with 1 being the most profitable combination, consequently receiving the highest service priority, and 16 the least profita 7.6 CUSTOMER/PRODUCT PRIORITISATION MATRIX For logistics this could, mean that: priorities 1 to 4 items receive wide geographic distribution through many warehouses and with high levels of stock, priorities 5 to 8 items can have an intermediate distribution strategy stocked at a few regional warehouses, while priorities 9 to 16 items can be distributed from a central warehouse.