1) Answer the questions.

1. What is order cycle time?

2. What does the order cycle contain?

3. Can order processing include manufacturing?

4. What is meant by order transmittal time?

5. Why is stock availability important?

2) Make up word combinations from the following words.

1. primary	a) document
2. stock	b) service
3. origin	c) availability
4. shipping	d) point
5. order	e) elements
6. transmission	f) an order
7. customer	g) point
8. time	h) channel
9. filling out	i) element
10. destination	j) processing

3) Fill in the following words into the text ( destination, primary, point, cycle, loading, logistician, stocking, time, order ).

The final ____________ element in the order _______________ over which the ____________ has direct control is the delivery ___________ - the time required to move the ____________ from the _______________ point to the customer location. It may also include the time for _____________ at the origin _____________ and unloading at the ____________ point.

Part 3. Sales-Service Relationship.

There are three stages in the relationship of sales to customer service: threshold, diminishing returns, and decline. Equal increments of service improvements do not always bring equal gains in sales.

When no customer service exists between a buyer and a supplier, or when service is extremely poor, little or no sales are generated. Obviously, if a supplier offers no logistics customer service and the buyer isn’t providing it, there is no way of overcoming the time and space gap between the two. No exchange, and thus no sales, can take place.

As service is increased to that approximating the offering by competition, little sales gain can be expected. Assuming that price and quality are equal, the firm is not in business until its service level approximates that of the competition. This point is the threshold service level.

When a firm’s sales level reaches this threshold, further service improvement relative to competition can show good sales stimulation. Sales are captured from competing suppliers by creating a service differential. As the service is further improved, sales continue to increase, but at a slower rate. The region from the service level at threshold to the point of sales decline is referred to as one of diminishing returns. It is in this region that most firms operate their supply chains.

Why do sales increase with improvements in service? It has been observed that buyers are sensitive to the service that they receive from suppliers. Improved service generally means lower inventory costs for the buyer, assuming that product quality and acquisition price remain unaffected by the improved service offering. Buyers are then motivated to shift their patronage to the supplier offering the best service.

The taper, or diminishing returns, results both from the buyer’s inability to benefit in the same degree from higher service levels as from lower ones, and of purchase policies that require more than one source of supply. The impact that service has on buyers’ costs tends to diminish with increased service. The common purchase policy of maintaining multiple sources of supply puts limits on the degree of sales patronage that any buyer can offer to a supplier.

Finally, it is possible that service improvements in inventory availability, order cycle time, and condition of delivered goods carry no negative impact on sales, such customer service factors as frequency of vendors’ visits to examine buyers’ stock levels and take orders, and the nature and frequency of order-progress reporting information may become excessive for some buyers. However, such effects would likely take place only at extreme levels of service when customers become saturated with too much of a seemingly good thing.

Exercises.