CHAPTER 2:

CUSTOMER SERVICE
 LEARNING OUTCOMES
At the end of this unit the student should be able to:
• Understand what customer service means in the logistics context
• Explain how technology has affected customer service in the modern
business environment
• Explain why customer service is an important component of an
organization’s strategy
• Explain and apply the elements of customer service
• Explain and apply the critical dimensions of customer service
• Discuss the process of developing a customer service strategy
• Develop and justify relevant measures for gauging customer service
performance
 CUSTOMER SERVICE

• Has the potential to provide the distinctive difference between

competing firms’ offerings.

• This differentiation potential is important in light of the declining power

of the brand.

• Satisfactory customer service is a direct output of the logistics

function by ensuring the availability of the market offering to the
customer in the right place and at the right time.
 THE ESSENCE OF CUSTOMER
SERVICE
Who is the customer?
The party that patronises an organisation by purchasing its products or
services.

Logistics perspective: Any person at the receiving end of a delivery that

can exist internally or externally to the organisation.

Both internal and external customers are to be provided with replicated

timely and accurate delivery.

Department A Department E
 ELEMENTS OF CUSTOMER SERVICE
Figure 2.1 Elements of customer service

Policies to create a The physical distribution of Occur after transactions

climate for satisfactory the product and exceeding resulting in the change of
customer service customer expectations. ownership being concluded

Before purchase During purchase After purchase

ADDITIONAL INFORMATION NOT IN TEXTBOOK
Pre-transaction elements:
• Statement of policy: a customer service policy is a document that guides the way
employees and organizations approach customer service
• Customer acknowledgement: Effective acknowledgements let a customer know that
a company heard them and that what they said is important
• Organisational structure: includes creating an enabling organisational structure by
formalising the reporting structure, delegating authority and allocating responsibility.
• Capacity flexibility: Adapt to meet customer needs. Also, the system should have
flexibility and contingency plans built into it s that it can successfully respond to
unforeseen events such as labour strikes, shortage of materials, and natural
calamities.
• Technical services: refers to the support and assistance provided by a company or
service provider to customers before a sale or transaction takes place. This type of
service is focused on helping customers understand the technical aspects of a
product or service, answering questions about features, specifications, installation,
and other technical details.
ADDITIONAL INFORMATION NOT IN TEXTBOOK
Transaction elements:
• Stockout level: This should be well managed whenever it arises. Customer goodwill
should be maintained by offering a suitable substitute, shipping from another location
or expediting the shipment once the out-of-stock item arrives
• Backorder ability: Backorder means that a product is unavailable for immediate
purchase, but there is an upcoming restock date for it making it available in the future.
This way, a buyer pays in advance for the item and waits for the product’s restocking
or delivery.
• Order cycle time: the elapsed time between when a customer order, purchase order,
or service request is placed and when the product or service is received by the
customer
• Trans-shipment: This is shipping products between various distribution locations so
as to avoid stockouts and possible obsolescence.
• System accuracy: Customers expect that information they receive about order status
and stock levels will be accurate
• Order convenience: Order convenience refers to how easy it is for a customer to
place an order.
ADDITIONAL INFORMATION NOT IN TEXTBOOK
Post-transaction elements:
• Installation, warranties and repairs
• Product tracking
• Customer follow-ups
• Product packaging: It protects your products when being handled and shipped to the
various retail locations, making sure your customers don't receive broken items that
need to be returned or exchanged. Enhances product perception. Ability to return
products.
• Product returns
 ELEMENTS OF CUSTOMER SERVICE continued

Relate to the length of time it

takes to fulfil an order from
the moment it is placed

Relate to the extent to

Relate to the which a seller’s or
handling of order- supplier’s deliveries
related information are consistent with the
customer’s
expectations

Recognises the heterogeneity

of customers. Customer’s
logistics requirements tend to
differ
 BASIC CUSTOMER SERVICE
DIMENSIONS
1. Inventory availability:
Customers cannot make a purchase unless a product or service is available.
2. Operational performance:
Primarily concerned with the manner in which activities along the supply chain are
undertaken. The primary considerations along this dimension are speed, consistency,
flexibility and recovery.
• Speed: order cycle time
• Consistency: ability to render a certain level of service
• Flexibility: the organisation is adaptive to customers’ specific requirements.
• Recovery: entails anticipating some malfunctions and preparing contingency plans to
address the hiccups.
3. Service reliability:
Concerned with an organisation’s ability and willingness to provide assurance that
customers’ expectations will be met.
 CUSTOMER SERVICE STRATEGY

Four methods
1. Customer strategy based upon customers’ reaction to stockouts
2. Customer/revenue trade-offs
3. Customer-product contribution
4. The customer service audit
 CUSTOMER SERVICE STRATEGY

Customer strategy based upon customers’ reaction to stockouts

Customer settles for substitute
Manufacturer is affected

Customer insistent on product or brand

Retailer is affected
 CUSTOMER SERVICE STRATEGY continued

The customer service audit

Four stages
1. External customer service audit
2. Internal customer service audit
3. Development of potential solutions
4. Establishment of customer service levels
 CUSTOMER SERVICE STRATEGY continued

The customer service audit

Four stages
1. External customer service audit
• Determine the expectations of the customer.
• Determine the components that customers consider to be the key
determinants of their decision to make a purchase.
• Provides useful information relating to the:
• Value hierarchy of key elements of customer service
• Performance rating of the organisation, relative to competitors on
the basis of each critical customer service element
 CUSTOMER SERVICE STRATEGY continued

The customer service audit

Four stages
2. Internal customer service audit
• To determine what is the organisation doing in terms of the customer
service offerings
• To determine the manner in which customer services are measured,
standards of performance and the extent to which these standards
are being met by the organization
 CUSTOMER SERVICE STRATEGY continued

The customer service audit

Four stages
3. Development of potential solutions
• A comparative analysis of the results of both audits would reveal areas
where shortcomings exist or where the organisation’s offerings are at
parity with or exceed customer expectations
• Development of solutions that aim to overcome customer service
shortcomings or improve on current performance levels
4. Establishment of customer service levels
• Development of a system for measuring and monitoring of performances
 MEASURES OF CUSTOMER SERVICE
PERFORMANCE
• Turnaround times: the amount of time it takes for a company to respond to a
customer's inquiry or request. This can include a variety of interactions, such as
responding to an email, answering a phone call, or fulfilling an order.
• Number of customer complaints
• Queuing time
• Ratio of timely shipment of orders
• Number of items on back orders: Backorder means that a product is unavailable for
immediate purchase, but there is an upcoming restock date for it making it available
in the future. This way, a buyer pays in advance for the item and waits for the
product’s restocking or delivery.
• Percentage product availability
• Order cycle time: the elapsed time between when a customer order, purchase order,
or service request is placed and when the product or service is received by the
customer
 SECTIONS TO LEAVE OUT

• 2.2.1 A process view of customer service

• 2.2.2 A systematic view of customer service
• 2.6.2 Customer/revenue trade-offs
• 2.6.3 Customer-product contribution