1) Answer the questions.

1. What three elements of sales-service relationship do you know?

2. What is the threshold service level?

3. When can sales diminish?

4. Can service improvements carry any negative impact on sales? Why?

5. In what way can you motivate the buyer?

2) Make word combinations, using the following words.

1. increased	a) differential
2. supply	b) sales
3. diminishing	c) suppliers
4. service	d) quality
5. little	e) costs
6. competing	f) returns
7. slow	g) gap
8. product	h) rate
9. inventory	i) service
10. space	j) chain

Part 4. Service Variability.

Variability in customer service performance is usually more important than average performance. Customers can plan, but variability in service performance is uncertainty. High degrees of service uncertainty cause the customer to incur high costs through elevated inventories, expedited transportation, and additional administrative costs. How much variability to allow is an economic issue. When variability cannot be controlled, information may be used to soften the uncertainty effects.

Just as product quality can be judged by its conformance to specifications, logistics customer service can be judged by the extent to which the supply chain processes meet target delivery dates, in-stock frequencies, order-filling accuracy rates, or other service variables. Quality and customer service are similar and, therefore, much of what has been said about product quality in the last 10 to 15 years applies to cus­tomer service as well. Inconsis­tent quality in product and services results in expense, waste, loss of goodwill, and lost opportunity whenever the quality target value is not met exactly. Traditionally, quality was viewed to be satisfactory and without cost penalty as long as quality variation remained within the upper and lower limits of an acceptable range. Losses occur at an increasing rate as service (qual­ity) deviates from its target value.

Information Substitution.

At times, the uncertainty in customer service performance cannot be controlled to the level that might be desired by customers. In such cases, it may be possible to reduce the impact of the uncertainty by using information as a substitute. One obvi­ous practice is to provide customers with information about their order progress. Order-tracking systems that provide information from the time of order entry until delivery are increasing in popularity. Their use in just-in-time systems is essential to managing the flow of product where little or no inventory is maintained. They are appearing in many retail systems as well. The benefit is that customers know the stage of their order and can anticipate its arrival rather than be in doubt about order progress and unable to plan accurately for delivery delays on inventory levels, pro­duction schedules, and the like. A well-designed tracking system should, in addition to providing order-tracking status, give the current estimate of completion times for each stage.

Measuring Service.

Finding a comprehensive measure to effectively assess logistics customer service performance is quite difficult. Total order-cycle time and its variability are probably the best single measures of logistics customer service since they embody so many of the variables that are considered important to customers.

Customer service may be measured in terms of each logistics activity. Some common performance measures include the following:

1. Order entry.

-minimum, maximum, and average time for order handling

2. Order documentation accuracy.

-percent of order documents with errors

3. Transportation.

-percent of deliveries on time

- percent of orders delivered by customer request date

- damage and loss claims as a percent of freight costs

4. Inventory and product availability.

- stockout percentage

- percent of orders filled complete

- order fill rate and weighted average fill rate

- average percent of items on backorder

- item fill rate

5. Product damage.

- number of returns to total orders

- value of returns to total sales

6. Production/warehousing processing time

- minimum, maximum, and average time to process orders

Many other measures can be used and they should be tailored to the design of the particular logistics system operated by a company.

Exercices.

1) Answer the questions.

1. How do you understand the term ‘service variability’ and is it important?

2. In what way is it possible to measure the level of customer service?

3. In what cases is quality satisfactory?

4. What is information substitution?

5. Do the supply chain processes always meet delivery dates?

2) Make up word combinations.

1. fill	a) arrival
2. order	b) systems
3. documentation	c) information
4. anticipate	d) substitution
5. order-tracking	e) accuracy
6. provide	f) issue
7. information	g) specifications
8. economic	h) rate
9. conformance to	i) date
10. delivery	j) processing