The Intangible Necessity
- Length: 1783 words (5.1 double-spaced pages)
- Rating: Excellent
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It’s the strategic interface between marketing and logistics, it adds value to any given product, yet it’s intangible – what is it? The answer is simple: customer service. “Customer service has been an issue since the early 1970’s” (Cavinato 60). Though it’s long been considered an issue, it’s important to remember that there isn’t one set formula to developing customer service, it’s more of a mindset (Cavinato 61).
Customer service is usually only considered between retailers and end users; however, customer service is the “fuel that drives the logistics supply chain engine” (Coyle 92). It’s important for logistics companies to look at customer service from all aspects, since it is one way that companies can have a distinctive competitive advantage over competitors.
This essay will discuss customer service in two parts, by explaining customer service in terms of its definition and the elements that comprise it and how customer service is applied in the logistics world.
What is Customer Service?
One author defines customer service as “a process for providing competitive advantage and adding benefits to the supply chain in order to maximize the total value to the ultimate customer” (Coyle 96). It’s difficult to specifically define customer service because it incorporates several different areas; however, it can be narrowed down to something that a company provides to the end users of its products (Coyle 95).
Customer service is important in all areas of a business, upstream to the suppliers of the raw materials and downstream to the end users. Customer service can be viewed in three standard ways: as an activity, as a performance measure, and as a philosophy (Coyle 96).
Customer service at this first level is very common. It’s the “particular task that a firm must accomplish to satisfy the customer’s needs” (Coyle 96). An example at this level would be a customer at a department store voicing a complaint to the “customer service” desk. The employees at the store must listen and attempt to correct the customer’s problem. The manner in which the employee or the store corrects the problem reflects on the company’s customer service. At the logistics level, it’s merely a transaction (Coyle 96). It’s the communication between the person placing the order and the company’s representative on the other end.
Convenience is the value that’s added to the product at this stage. For example, if a logistics company has pertinent information on its website concerning schedules and rates, the convenience for the customer would add value to the company’s product, thus creating a competitive advantage over competitors.
At the second level, customer service is “in terms of specific performance measures, such as the percentage of orders delivered on time and complete and the number of orders processed within the time limits” (Coyle 96). This level is merely a step above the activity level. This level is important because “it provides a method of evaluating how well the logistics system is functioning” (Coyle 96). A company can benchmark themselves against prior performance or a competitor to see if their figures increase or decrease (Coyle 96).
At the third level, a company can interpret customer service as a philosophy. This type of approach “broadens the role of customer service in the firm” (Coyle 96). This may be one of the best definitions because customer service at this level includes quality management and an emphasis on making the customer happy. This idea looks at customer service in a wide view, not narrowly as just an activity or just a measure of performance. It looks at it as the company’s ideology of servicing the customer to the best of their ability (Coyle 96).
To define customer service it’s important to look at it as more than an activity, a performance level, or a company philosophy. It must be looked at with regards to the elements it represents.
Logistics managers must learn to balance high customer service levels with the costs associated with them. There are four areas of logistics customer service that a manager should be concerned with: time, dependability, communications, and convenience (Coyle 97).
There are two ways to look at the time element of customer service, one is from the buyer point of view and the other is from the seller’s point of view. For the buyer, lead time is important. It’s important to for the buyer to know how much time is needed for the seller to process the buyer’s order, fill the order, and ship the order. For the seller, order cycle time is important. For the seller, it’s important to reduce the amount of time it takes to complete an order. For both the buyer and the seller, a reduction in time is key, although it’s worthless without dependability (Coyle 97).
It could be argued that dependability is one of the most important elements of customer service. For any company, revenue hinges on whether or not the product is in the right place at the right time. For example, suppose a retailing chain is hosting a special promotion on Saturday. The merchandise is only useful to the retailer if it arrives before Saturday, if it arrives the following Sunday, it’s useless to the retailer.
Although a large portion of dependability includes the time factor, it also incorporates the safe delivery of the goods and correct orders. If goods arrive damaged, they are useless to the customer. Filling the correct orders is also crucial. If a customer orders ten copiers and instead receives ten damaged desks, the goods will be useless to the customer and will only cost the customer money in terms of lost copier sales and potential stock outs (Coyle 98). In order to increase dependability, firms must communicate.
The time and dependability elements of customer service are intertwined in the ability of the logistics company to communicate. There are a wide variety of errors that could occur, causing an increase in lead time, or a mistake in order filling. Most logistics companies implement an Electronic Data Interchange system, also known as an EDI system, or another similar system to help reduce such errors (Coyle 99).
Although it’s important for a logistics company to communicate well internally, it’s also important for the company to communicate with the customer. The company must make information such as delivery dates and routing schedules available to its customers (Coyle 100). By communicating with customers and making information readily available to them, companies are providing convenience to customers that’s specially important in today’s fast-paced world.
“Convenience is another way of saying that the logistics service level must be flexible” (Coyle 100). This element of customer service combines time, dependability, and communication. “Convenience recognizes customers’ different requirements” (Coyle 100). It can have many different definitions, depending on the type of customer. Convenience to a wheat producer may be having the wheat picked up twice a year. To a dairy farmer, convenience may be having the milk picked-up once a day.
It’s important for a logistics company to know the market, so the company can provide the correct level of convenience to customers. This “enables the logistics manager to recognize customer service requirements and to attempt to fulfill those demands” (Coyle 100). By segmenting the market, the logistics company can determine which customers will be most profitable, thus showing the company which customers should receive higher levels of convenience (Coyle 100).
Once a company understands what customer service is, the company must apply that knowledge to its day-to-day operations.
Applying Customer Service
Customer service can cause a company to ‘sink or swim’ in the competitive market. For the United Parcel Service, UPS, customer service begins with the mechanics that service the delivery trucks. District automotive manager-Metro New York, Philip Aielo, believes that “if one of those vehicles breaks done, he has a customer service problem: If packages aren’t delivered on time, the customers who paid for them are very unhappy” (Kilcarr 21). Aielo also believes that it’s important to stay at the forefront of customer service. Because there are more competitors in the package delivery business, the ability of a company to distinguish themselves from another is imperative. “The competitive advantage lies in your ability to keep customers and build repeat business” (Kilcarr 22).
“It’s also important to remember that what’s considered great customer service today may become just part of the basic package of expectations for tomorrow. Nowhere is that more true than in trucking and the larger world of logistics” (Kilcarr 23). It’s imperative for logistic companies to have dependable schedules and the ability to meet the customer’s needs because customers will go elsewhere. There is no company loyalty in today’s competitive logistics market. Because of that, companies are providing more information to customers. Customers are able to instantly track packages, in real time, to see exactly where the shipment is and when it’s going to arrive.
Companies are always looking for the competitive advantage that will set them apart from competitors. Delivery companies, such as UPS are now implementing a plan named UPS Supply Chain Solutions for businesses (“UPS: Logistics”). “The UPS Supply Chain Solutions will act as a bridge between UPS logistics, freight, capital, consulting, and mail innovations groups” (Shah 10). This customer service plan will put customer’s minds at ease with UPS handing all of the company’s supply chain needs (Shah 10).
UPS currently offers “a full portfolio of supply chain services on a global or regional level” (“UPS: Logistics”). Within UPS’s logistics activities, the company offers the following logistics management options (“UPS: Logistics”):
§ Design and Planning
§ Order Fulfillment
§ Order to Cash
§ Reverse Logistics
§ Service Parts Logistics
§ Supplier Management
§ UPS SonicAir
The ability of UPS to offer such a massive array of services to customers sets the company apart from competitors. By offering these services, UPS has taken the hassle out of the supply chain for a business of any size.
UPS believes the company that believes customer service begins with the mechanics working on the delivery trucks, UPS has also realized customer service can include non-delivery services such as logistics management (Kilcarr 21; Miller 7).
This essay discussed customer service in two parts, by explaining customer service in terms of its definition and the elements that comprise it and how customer service is applied in the logistics world.
It’s important for a company to have a competitive advantage over the competition. A company can differentiate itself from others is to have excellent customer service. Defining customer service might prove difficult for the company; however, if the company can piece together a mindset using the various elements and implement a plan that benefits customers, it’s bound to be successful.