Demand management and customer service

Demand Management & Customer Service

Hany Sewilam Abdel Hamid | 2017

Inbound vs. Outbound Logistics Systems

• Inbound Logistics (_____________________)– The set of processes that precede and ________ value-

adding activities such as manufacturing, assembly, and so on.

• Outbound Logistics (_____________________)– Early attention was given after WWII.– The emphasis is on the logistics process toward

__________ to increase levels of _________________. – It is very similar to inbound logistics, – It is different from IL because it is often ____ complex

than IL and, thus, requires greater managerial attention.

The Marketing Concept• The goal of businesses is to _____________ to

satisfy customers– ______________________– ______________________– ______________________

Integrated Logistics• A part of the marketing concept, which is an umbrella

philosophy– _______________________________________________– _______________________________________________

Business Philosophy

Customer Service Defined“Customer service is a process for providing significant

value-added benefits to the supply chain in a cost-effective way.” (Council of Logistics Management 1988)

• A firm’s capability to be ________ and ________ in ________ changing __________________________ _____________ (Christopher 1994)

• A firm’s ability to provide core services and ___________________ that promote, differentiate, and facilitate the basic “core” product/service offering of the firm (La Londe and Zinszer 1976; La Londe, Cooper, and Noordewier 1988)

Customer Service in Marketing

Product

Price Promotion

The Importance of Customer Service in Marketing Mix

• An example – eBay shoppers

Customer ServiceTrends and Observations

• Expectations and Perceptions of Customer Service May Differ Between Suppliers and Customers

• Q: Customer Service More Critical When:– A market is ____________ a. competitive, b. monopoly– Products are ______ substitutable a. highly b. not– Timeliness is strategically _______ a. significant, b. not

important.

Logistics Customer Service• ________________

– in-stock rate and percent orders, units, and lines filled out completely, etc.

• ________________– consistent delivery, lead time, average delivery time, order

cycle time reliability, and minimum order cycle time, etc.• ________________

– minimum damage in transit and order-filling accuracy, etc. • _________________________

– inventory availability information, advance information on cancellations/delays, projected delivery date, etc.

• Low cost distribution– cross-functional cost-tradeoffs are explicitly considered

Customer Service Performance

CustomerService

___________Elements

__________Elements

_____________Elements

Inventory availabilityTarget delivery datesWritten statements of policyManagement Services

Order statusOrder tracingBackorder statusShipment shortagesShipment delaysProduct substitutionsRouting chargeExpediting

Order Cycle Time Analysis: an Example

© 2017, Customer Services Map

Order Cycle Length and Variability

Determining the Optimum Customer Service Policy

Customer Service Level

Revenues and

Costs ($)

100%

Inventory vs. Customer Service

InventoryLevels(Cost)

Level of Customer Service

50% 100%0%

Issues in Customer Service

• _______________________________.• __________________________________.

– Consult with customers on policies and standards.

• __________________________________.• Measure, monitor, and control customer

service standards.• All customer accounts are not the same.• __________ and added value can “lock up”

customers.

Customer Service Check Lists

Demand Management• Defined as “focused efforts to __________________

_________________, with the intention of using this information to shape operating decisions.” (Blackwell and Blackwell 1999)

• Recent _____________________ makes difficult for manufacturer to determine what, where, when, and how many of the sale will happen.

• Complicated ____________ between manufacturing and consumption requires demand management.

• Demand management will likely result in benefits flowing through the supply chain.

Demand Management Objectives

• _________________________________________ – e.g., customer requirements and solutions, market trends,

etc.• _________________________________________

– Channel functions/responsibilities are divided based upon expertise levels

– Maximize effectiveness and efficiency.• Sharing with other supply chain members market

information for:


• Collaboration – plan/implement/control– ___________________________– ___________________________ – Developing and executing the best logistics and

distribution methods to deliver products and services– ____________________________

• Bottom line:– Better match of demand to product availability.

• ______________________________– ___________________________ is the key


• _______________________________________ _______________________________________

• Developing and executing the best logistics and distribution methods to deliver products and services to consumers in the desired format.

• Primary emphasis should be on using demand information to create likely scenarios of the future as they relate to product supply alternatives.

• Resulting business successes will be a outcome of the better match of demand to product availability.

How Demand Management Supports Business Strategy

Issues in Demand Management

• Departmental/organizational silo that results in little or no coordinated efforts.

• Too much emphasis on demand forecasts with little attention to collaborative efforts to derive strategic and operational plans from the forecasts.

Forecasting: A Starting Point of Demand Management

• A major component of demand management is forecasting the amount of product that will be purchased by consumers or end users.

• In the integrated supply chain all other demand will be derived from the _______________.

• A key objective is to ______________________ _______________ as it occurs in the marketplace.

Integration of Forecasting and Production


Supply-Demand Misalignment in Traditional Forecasting


Collaborative Planning, Forecasting, and Replenishment (CPFR)

• CPFR is recognized as a breakthrough business model for planning, forecasting, and replenishment.

• Developed by Wal-Mart and Warner-Lambert in 1995.• The plan and the forecast are entered by suppliers and buyers

into an _______________________ system.• Creates a direct link between _________________________

__________________________• Emphasizes _______________________ among and

between supply chain partners.• Within established parameters, any of the participating

partners is empowered to change the forecast.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

• Collaborative planning improves the quality of the demand signal for the entire supply chain through a constant exchange of information from one end to the other.

• CPFR goes beyond the traditional practice.


Figure 3-3 CPFR Business Model

DM in Order Fulfillment Process• ______________________ link between buyers and sellers• _______________________________________


Order Fulfillment -- Different Stages of Order Fulfillment --


Order Placement/Receiving Automation


Electronic Data Interchange (EDI)

• EDI is “the _________________________, __________________ exchange of business data in a __________, _________________ format. The purpose of EDI is to _______________ and to improve the ____ and ____ of the information flow by linking computer applications between companies.”

Source: Emmelhainz, “EDI in Logistics,” Ch. 33 in The Logistics Handbook, 1994, pp. 84.

EDI vs. Traditional MethodsPurchasing

Buyer’sComputer

Post OfficeOrderEntry

Seller’sComputer

Purchasing

Buyer’sPurchasingApplication

Seller’sOrder EntryApplication

Why Use EDI?• __________________________________________

– 70% of one computer’s input is another computer’s output– 25% of a transaction’s cost is data entry and re-entry

• _________________________– Greater accuracy and consistency– Time-sensitive

• __________________________– Improved effectiveness of inventory management– Decrease in total logistics costs

• Competitive Necessity• Requested by Partners

Effects of EDI on Supply Chain

Supplier Mfg D/C Retail EndUser

EndUser

MfgSupplier D/C

Retail

Five Alternative Fulfillment Strategies for E-Commerce

1. Distributed delivery centers2. Partner fulfillment operations3. Dedicated Fulfillment centers4. Third-party fulfillment centers5. Build to order

Chapter Summary & Review Questions

• Inbound logistics vs. Outbound logistics – how is the focus of each process different?

• So, what is a business philosophy?• What is the marketing concept?• So, what is the ultimate goal of your business?• What is integrated logistics concept?• Logistics customer service is …• Demand management is …• How CPFR is different from traditional forecasting?• Why do you care about order fulfillment and management?• EDI is …