Reduced inventory levels


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Reduced inventory levels

  • Reduced inventory levels

  • reduced stockouts - less expediting

  • cross docking -

  • reduced links in chain

  • reduced number of inventories

  • reduction in order processing















Customer service is a collection of activities performed in a way that keeps customers happy and creates in the customer’s mind the perception of an organization that is easy to do business with.

  • Customer service is a collection of activities performed in a way that keeps customers happy and creates in the customer’s mind the perception of an organization that is easy to do business with.

  • Customer service is much more difficult for competitors to imitate than price cuts or other competitive strategies.



Value-added activities provided by customer service

  • Value-added activities provided by customer service

    • Placing bar code labels on cartons
    • Arranging a carton, pallet, or truck in the sequence the customer would like to unload it
    • Shrink-wrapping
    • Inserting documents into cartons
    • Blending products
    • Adding price tags
    • Adding graphics for export goods
    • Assembling kits












Order management is the activities that take place in the period between the time a firm receives an order and the time a warehouse is notified to ship the goods to fill that order.

  • Order management is the activities that take place in the period between the time a firm receives an order and the time a warehouse is notified to ship the goods to fill that order.

    • Order planning-connected to sales forecasting
    • Order transmittal
    • Order processing
    • Order picking and assembly
    • Order delivery


Order cycle defined by the seller: time from when an order is received to when the goods arrive at the customer’s dock.

  • Order cycle defined by the seller: time from when an order is received to when the goods arrive at the customer’s dock.

  • Order cycle defined by the buyer: time from when an order is placed to when the goods are received. Also called replenishment cycle

    • Getting shorter
    • More precise delivery times
    • Customer can track orders
    • Quality is important and is benchmarked


Order planning

  • Order planning

    • Needs an efficient order handling system to prevent bunching
      • Methods to reduce bunching
        • Use of field salespeople
        • Use of phone salespeople
        • Price discounts to customers placing regular orders


Order transmittal is the series of events that occur between the time a customer places or sends an order and the time the seller receives the order.

  • Order transmittal is the series of events that occur between the time a customer places or sends an order and the time the seller receives the order.

    • Methods of order transmittal
      • Phone
      • FAX
      • Mail
      • Scanning bar codes-electronic submission
      • POS registers
      • Internet


Order processing includes

  • Order processing includes

    • Checking for completeness and accuracy
    • A customer credit check
    • Order entry into the computer system
    • Marketing department credits salesperson
    • Accounting department records transaction
    • Inventory department locates nearest warehouse to customer and advises them to pick the order
    • Transportation department arranges for shipment


Order processing

  • Order processing

    • If there is a stockout
      • Notify the customer as soon as possible of stockout
      • Notify when shipment will occur
      • Give the customer the option of accepting in stock similar products
    • Export orders
      • Need a letter of credit
      • international freight forwarders prepare documents and arrange shipment


Order picking and assembly includes

  • Order picking and assembly includes

    • Notifying the warehouse to assemble a given order
    • Providing an order picking list, indicating items and order of pick to a warehouse employee
    • Checking picked orders for accuracy
    • Stockout information sent to order handling department so that documents can be adjusted
    • Packing list enclosed with order including employee initials of person who packed order


Order delivery is the time from when a carrier picks up the shipment until it is delivered to the customer’s receiving dock.

  • Order delivery is the time from when a carrier picks up the shipment until it is delivered to the customer’s receiving dock.

    • Load planning is the arrangement of goods within the trailer or container.
    • Carriers establish their own service standards.
    • Some customers pick up their orders.


Importance of the order cycle

  • Importance of the order cycle

    • Short cycle time used as a marketing and sales tool
    • Monitoring the order cycle can increase firm efficiency
    • Efficient Consumer Response (ECR)/Quick Response (QR)
      • Used in grocery industry and by mass merchandisers
      • POS data used to trigger order
      • Keyed to more orderly, regular flow of product, smaller inventory


Establishing Objectives

  • Establishing Objectives

    • Specific
    • Measurable
    • Achievable
    • Consistent with broader firm goals
    • Must consider competitor’s objectives
    • Provide guidance to operating personnel


Returned Products

  • Returned Products

    • New flow of products are set up
    • New infrastructure is required
    • Goods and materials are returned for various reasons
    • Grocery industry uses reclamation centers for returns
    • Home Depot now reserves right to limit returns
    • How returns are handled part of customer service
    • Thoughts?


Advisor to marketing

  • Advisor to marketing

  • Establishing a customer service program

    • Ask the customer what is important to them.
    • Investigate the service offered by competitors.
    • Consider the cost of alternative service programs.
    • Analyze the information and write the objectives.
    • Customer feedback
  • Using the Internet to improve customer service



Control the process

  • Control the process

    • Firms demanding higher levels of customer service
      • With reliable service, the firm can maintain lower inventory levels
      • Resellers monitor vendor quality looking for those with unacceptable quality levels
      • Process is often dehumanized; service can make it more personal






Determining channel service levels based on knowledge of consumer reactions to stockouts

  • Determining channel service levels based on knowledge of consumer reactions to stockouts

  • Analyzing cost/revenue trade-offs

  • Using ABC analysis of customer service

  • Conducting a customer service audit











How are these measures derived from corporate information flows and the order processing system?

  • How are these measures derived from corporate information flows and the order processing system?

  • What is the internal customer service reporting system?

  • How do the functional areas of the business perceive customer service?

  • What is the relation between these functional areas in terms of communication and control?



Establish quantitative standards of performance for each service element.

  • Establish quantitative standards of performance for each service element.

  • Measure actual performance for each service element.

  • Analyze variance between actual service provided and standard.

  • Take corrective action as needed to bring actual performance into line.



Reflect the customer’s point of view.

  • Reflect the customer’s point of view.

  • Provide an operational and objective measure of service performance.

  • Provide management with cues for corrective action.





What sets your supply chain apart from others? Who knows it?

  • What sets your supply chain apart from others? Who knows it?

  • Sam Walton

  • How many times will a customer tolerate a stockout?

  • What is the cost of a stockout vs. the cost of customer service?



How well do you take care of the customer after the sale? Post transaction

  • How well do you take care of the customer after the sale? Post transaction

  • What are the impacts of safety/buffer stocks on customer service?

  • P 104 - Book says: in most stockouts consumers will not switch stores - depends on how bad you want the item and how many times products are not available -



Vendor Managed Inventory

  • Vendor Managed Inventory

  • Metrics

  • ABC Classifications: customers, products, inventory - cost, velocity, volume

  • Keys to success on page 125 - WIIFM?

  • Perfect order fulfillment - on time, quantity, condition, right item

  • p 146 - JIT, ECR, QR not really systems





























Replacement of inventory with information

  • Replacement of inventory with information

  • Reduced variability in the supply chain

  • Better coordination of manufacturing, marketing, and distribution

  • Streamlined order processing and reduced lead-times





Enterprise resource planning (ERP)

  • Enterprise resource planning (ERP)

    • All company functional areas use a common database to:
    • Shortcomings
      • Costs of installation – may be coming down
      • Primarily designed for large companies – SAP now with mid-sized package
      • Time-consuming installation process
      • Standardization


Internet impacts include:

  • Internet impacts include:

    • Logistics functions
      • Transportation
      • Order management
    • Channel design


Internet impacts (continued)

  • Internet impacts (continued)

    • Intermediaries
      • 4 categories of logistics exchanges
        • Enhancing procurement services
        • Matching shippers and carriers
        • Executing relevant transactions
        • Transacting with partners
      • Application service providers provide access over the Internet to applications and related services that would otherwise have to be located in enterprise computers.


E-Fulfillment is the coordinated inbound and outbound logistics functions that facilitate the management and delivery of customer orders placed online.

  • E-Fulfillment is the coordinated inbound and outbound logistics functions that facilitate the management and delivery of customer orders placed online.



E-fulfillment

  • E-fulfillment

    • Many logistical functions and activities occur
    • More, smaller orders
    • Order management and information management systems must handle large volumes of orders
    • Smaller orders dictate open-case picking


E-fulfillment

  • E-fulfillment

    • Products slotted to facilitate picking smaller orders
    • Totes and push carts used
    • Packaging is small cartons, envelopes, bags suited to holding small quantities


E-fulfillment

  • E-fulfillment

    • Transportation companies used with extensive delivery networks; experience in parcel shipments
    • Outbound shipments usually picked up by vans
    • Return rates much higher and from ultimate consumers








Gillette Program for Mach 3 – loss prevention - 2 tests

  • Gillette Program for Mach 3 – loss prevention - 2 tests

  • Wal*Mart Directive

  • October 2003 – Department of Defense Directive for top Suppliers



1994/95: started a proof of principle test in Europe – every truck and shipment equipped with an RFID tag

  • 1994/95: started a proof of principle test in Europe – every truck and shipment equipped with an RFID tag

  • 1997/98: all pallets coming out of the Susquehanna, PA depot equipped with RFID tag

  • 1997: All vehicles coming to the National Training Center at Fort Irwin, CA were equipped with RF tags for the Advanced Warfighter Experiment



Asset Visibility



ACTIVE – always on and can be read from any interrogator – very expensive

  • ACTIVE – always on and can be read from any interrogator – very expensive

  • PASSIVE – battery activated by the interrogator and must be within close proximity to the interrogator – relatively inexpensive – goal is to get the price down to $.05 per tag – real cost is in the infrastructure to implement







EPCglobal or ISO

  • EPCglobal or ISO

  • Class 1 & Class 0

  • Intellectual Property

  • WTO

  • Frequencies

  • Item identification v. anti-counterfeiting





RFID – important but has issues

  • RFID – important but has issues

  • Bar Codes still in use for a while

  • What are the differences between e-fulfillment and traditional fulfillment?

  • Information systems – multiple systems – drive the need for ERP

  • Metrics for all logistics must be from the perspective of the customer!

  • Therefore, systems must have customer in mind

  • Have to be able to define who the customer is and what the customer wants – customer service is the differentiator

  • Hard to emulate customer service



Chapters 5-6

  • Chapters 5-6




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