PRODUCT AND CUSTOMER SERVICE PL201 FUNDAMENTAL OF LOGISTICS MANAGEMENT

PRODUCT AND CUSTOMER SERVICE

PL201 FUNDAMENTAL OF LOGISTICS

MANAGEMENT

PRODUCT

• As all logistical activities and management revolve around the product, this highlights the importance of the product. In most cases the product involved is a physical good. Physical goods will vary in its physical attributes, weight, volume and shape. The nature of the product involved will determine the types and mount of logistical activities required in order for the product to reach customers.

PRODUCT CLASSIFICATION

• There are two broad classification of products. These are consumer products and business products.

• Consumer products are products that are directed to ultimate consumers. The range of products consumed by consumers is very large.

• Business products are products that are directed to organizations or individuals in order to be processed further as an output of the organization or to be resold to another market

PRODUCT CLASSIFICATIONConvenience goods• goods/services purchased frequently,• immediately without comparative shopping, eg. banking

services, foodstuffs• – require wide distribution through many outlets• – high distribution cost & high customer service level

(availability, accessibility)• – Soft drink products/cigarettes/public phones

Shopping goods• – consumers willing to shop and compare price,• quality & performance• – examples: fashion clothes, automobiles, home• furnishings & medical care• – much less stocking points compared with• convenience goods• – lower distribution cost

PRODUCT CLASSIFICATIONSpecialty goods• – consumers willing to expend a substantial effort &

often willing to wait for a significant amount of time• – Examples: fine foods, custom-made automobiles,

management consulting advice• – lowest distribution cost, low customer service level

Industrial goods• good/services used to produce other goods/ services• Examples: raw materials, components, building,

equipment, business services

PRODUCT LIFE CYCLE

Different distribution strategies for different stages to achieve maximum efficiency

PRODUCT CHARACTERISTICS

Weight-bulk ratio

Value-bulk ratio

Substitutability

Risk Characteristics

PRODUCT CHARACTERISTICS

Weight-bulk ratio• A measure directly related to transportation and storage

costs• Products with high weight-bulk(volume) ratio show good

utilization of transportation equipment. (eg.. rolled steel) & their units costs tend to be low

• Products with low density (eg. potato chips) tends to have high transportation & handling costs relative to their selling price

Value-bulk ratio• Dollar value of products is an important factors in

developing a logistics strategy• Storage costs are particularly sensitive to value• Low value -weight products (eg.,coal) have low storage cost

(low inventory carrying cost)but high transportation cost• High value-weight ratio products (eg. Electronic

equipment) show opposite pattern

PRODUCT CHARACTERISTICS

Substitutability• High substitutable products - no difference between a

firm’s product and those of competitors (eg. food and drug) and prone to lost sales

• Logisticians need to plan products distribution (through transportation & storage choices) according to the degree of substitutability

Risk Characteristics• Risk characteristics : – perishability (fruits), flammability

(chemical), value (jewelry), tendency to explode , & ease of being stolen (pens/watches)

• Transportation and storage costs of products showing high risk in one of the above characteristics is normally higher.

OBJECTICE OF PACKAGING• Physical protection – The objects enclosed in the package may require protection from, among

other things, mechanical shock, vibration, electrostatic discharge, compression, temperature, etc.

• Barrier protection – A barrier from oxygen, water vapor, dust, etc., is often required. Permeation is a critical factor in design. Some packages contain desiccants or Oxygen absorbers to help extend shelf life. Modified atmospheres or controlled atmospheres are also maintained in some food packages. Keeping the contents clean, fresh, sterile and safe for the intended shelf life is a primary function.

• Containment or agglomeration – Small objects are typically grouped together in one package for reasons of efficiency. For example, a single box of 1000 pencils requires less physical handling than 1000 single pencils. Liquids, powders and granular materials need containment.

• Information transmission – Packages and labels communicate how to use, transport, recycle, or dispose of the package or product. With pharmaceuticals, food, medical and chemical products, some types of information are required by governments. Some packages and labels also are used for track and trace purposes.

• Marketing – The packaging and labels can be used by marketers to encourage potential buyers to purchase the product. Package graphic design and physical design have been important and constantly evolving phenomenon for several decades. Marketing communications and graphic design are applied to the surface of the package and (in many cases) the point of sale display.

• A single-serving shampoo packet

OBJECTICE OF PACKAGING• Security – Packaging can play an important role in reducing the security risks of shipment.

Packages can be made with improved tamper resistance to deter tampering and also can have tamper-evident features to help indicate tampering. Packages can be engineered to help reduce the risks of package pilferage: Some package constructions are more resistant to pilferage and some have pilfer indicating seals. Packages may include authentication seals and use security printing to help indicate that the package and contents are not counterfeit. Packages also can include anti-theft devices, such as dye-packs, RFID tags, or electronic article surveillance tags that can be activated or detected by devices at exit points and require specialized tools to deactivate. Using packaging in this way is a means of loss prevention.

• Convenience – Packages can have features that add convenience in distribution, handling, stacking, display, sale, opening, reclosing, use, dispensing, reuse, recycling, and ease of disposal

• Portion control – Single serving or single dosage packaging has a precise amount of contents to control usage. Bulk commodities (such as salt) can be divided into packages that are a more suitable size for individual households. It is also aids the control of inventory: selling sealed one-liter-bottles of milk, rather than having people bring their own bottles to fill themselves.

THE OBJECTIVE AND IMPORTANCE OF PACKAGING

•Facilitate storage and handling•Promote better utilization of transport

equipment•Provide product protection•Promote the sale of the product•Change the product density•Facilitate product use•Provide reuse value for the customer

• Packaging is considered a very important and a very considerate process that mainly affects almost all activities of a business.

• Since packaging deals mainly with designs and the convenience of delivery, it also affects logistics in a way that boosts the flow of transportation of goods and enhance smooth delivery of products out from the productivity line to outdoors.

• The process of packaging will lead to the distribution of products because it is convenient and effective both for the customers and the manufacturers themselves.

• Also, packaging is one of the most important factors that build up competition between businesses and it enhances market promotion and advertisement efficiency as well. With this reason, most products pay for packaging businesses and agencies to design catchy packages and even slogans that will fit the concepts of their products and will be appropriate for their specific business.

• Image of the product is very important for almost all businesses because it mainly affects the customers, profits, popularity, and other factors; image of a specific business can bring them up or down depending on many factors where packaging is one of them.

• Packaging affects shipping rates when products are shipped because they look at weight, material, and amount which affects money in your pockets. The higher the amount and the heavier the weight of materials, more and more money is needed to pay in order to deliver objects or items out to other regions or nations. With packaging, these fees than be minimized; containers and show products are arranged and will help reduce space and mostly weight of the products in total. With this ability to go out internationally, packaging enhances more improvements in logistics which then brought up new studies and new systems like international logistics that we all know today.

Major Roles of Packaging in Logistics• Logistics is getting wider and wider as competition between businesses come in.

Packaging has become a main factor that affects the customer's decision in our everyday lives, our modern lives today. Packaging has three main roles and functions that enhances a great flow of the productivity and distribution line as well.

1. Storage Support- Packaging as well as how things are packed affects distribution of the products and their safety.

2. Transport Support- With packages of products arranged in order, it helps a lot in transportation which then makes a positive effect in both distribution and finance.

3. Cost Reduction- Rearranging products in packages will help to reduce costs because it occupies lesser space.

• Anyhow, we all know that logistics and the packaging process are greatly related in real situations for all businesses. Within the Just-in-Time concept, time is money; we can all observe and see that there are several relationships that both packaging and logistics have with each other. Today, more businesses operate globally and causes competition to rise; this mainly affects logistics and packaging which enhanced a closer relationship between them, making them a dual pack when it comes to managing.

Types of packaging 1. Packaging for retails- For retailers, where they sell products directly to the

customers, design and appearance should be orderly structured, well-planned, and appropriate for specific products. The designs should be eye-catching, appropriate, and related to a specific theme. If possible, packaging should include information about the products that can symbolize positive means of marketing and is ethical for the social.

2. Packaging for wholesalers- For wholesalers, numbers and quantity of products are the main points for businesses. When delivering products, the quantity will determine what type of packaging will be used so that distribution and transportation of products would be easy and convenient for everyone. Multiples of 6, 12, and 24 can help make things a lot easier where these numbers serve as standard values of wholesales quantity. In this case, packaging affects DC or the distribution of products.

3. Packaging, like repeated many times, affects time, money, space, business activities, and feed backs. Of course, different types of packaging result in different effects; some packages for instance, enhance space for more products to be placed. Packages of products will make delivery easier and convenient. Now, most products are delivered and transported via airplanes, ships, and other methods.

PRODUCT PRICING METHODS

Geographic Pricing Method

Incentives Pricing Arrangements

F.O.B (FREE ON BOARD) PRICING

• a policy denotes the location at which the price is effective

• the designated location in the policy is the location at which the customer takes the title to the goods

• Example: – McDonald/Burger King price its foods at

thepoint of retail sale – IKEA: fob store/ fob destination

ZONE PRICING• a single price within a geographic area, eg. postage

SINGLE/UNIFORM PRICING• a single price for all customers regardless of location, eg., newspapers

QUANTITY DISCOUNT

• lower per-unit cost for a greater amount of goods handled in one transaction, eg. soft drink, rice

• logistics costs, especially transportation costs, have well-known volume-cost breaks

THE IMPORTANCE OF CUSTOMER SERVICE

• Higher Costs– Poor customer service can lead to higher costs for the shipper. If the

transportation company does not communicate with the shipper and the receiver, the cost for the transportation of the load will increase. For example, if the transportation company does not advise the receiver when the truck will arrive, the truck company may incur overtime costs, which will cut into the profit on the load.

• Lost Business– The receiver is a customer of the shipper, and the truck company's customer

is the shipper. If there is not adequate communication between the truck company and the shipper or receiver, the truck company may not win this business again. A representative from the truck company must periodically call the shipper or receiver to inform them of the driver's progress.

• Lost Product– Trucks have a maximum capacity. If the commodity is too heavy or too large

to fit on one truck, the truck company may have to assign another truck to carry the overage. If the commodity is highly perishable, the time needed to get another truck may cause the commodity to spoil. In this example, customer service must keep all parties aware of what is needed and work toward getting the proper trucks needed to transport the load.

RELATE SERVICES AND COSTS– Order Cycle

• shorter order cycle, less inventory required– Substitution

• more substitutable product, higher customer service level required– Inventory Effect

• increase inventory, reduce cost of lost sales– Transportation Effect

• increase transportation costs, reduce cost of lost sales

AREA OF CUSTOMER SERVICE

Pre-transaction* Written statement* Statement in hands of customer* Organization structure* System flexibility* Technical services

Transaction Stockout level* Ability to back order* Elements of order cycle* Time* Transship* System accuracy* Order conveniences* Product Substitution

Post-transaction* installation, warranty, alterations, repairs, parts* Product tracking* Customer claims, complaints*Product packaging*Temporary replacement of product during repairs

Elements Pre transaction elements

Written customer service policy: documented and well articulated policy Accessibility: easy to reach and easy to communicate Organisational culture: management focus on customer service and

organisational structure System flexibility: adaptability to meet customer requirement Transaction elements Order cycle time: elapsed time between order and delivery Inventory availability: percentage of demand met from stock in hand Order fill rate: proportion of order filled within the stated lead

time Order status information: query response time and exception advise Post- transaction elements Availability of spares: in stock level of service parts Warranty and product tracing: warranty handling and product tracing capability

Customer complaint handling: dealing with complaints and returns

SALES-SERVICES RELATIONSHIP

• Two points methods• Before-after experiments• Game playing• Buyer surveys

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