E-Business And The Distribution Network

DiSa, Flex Pricing, Funds transfer Cost Impact of E-Business Customer Service PPROCT DiSa, Flex Pricing, Funds transfer Cost Inventory, Facilities Transportation Information

IMPACT of E-Business on Customer Service Response Time to Customers: Product Variety Product Availability Customer Experience Faster Time to Market

IMPACT of E-Business on Customer Service [contd…] Order Visibility Returnability Direct Sales to Customers Flexible Pricing, Product Portfolio and Promotions Efficient Funds Transfer

Response Time to Customers In selling products that cannot be downloaded, an e-business without a physical retail outlet takes longer to fulfill a customer request than a retail store. Example: A mutual fund prospectus or music can be downloaded from the Web. Whereas a physical mailing of these products or even making a trip to a music store takes much longer.

Product Variety Product Availability More selection compared to the bricks-and- mortar store. Example: Amazon Product Availability An e-business greatly increases the speed with which info on customer demand is disseminated throughout the Supply chain, giving rise to accurate forecasts

Customer Experience Allows access to customers who cannot access a physical stores open only during business hours surge in orders after their bricks-and-mortar store closes. Without e-business, see people staying in and around visit you

Faster time to market Order visibility Returnability Dell often introduces new products earlier than its competitors' that use traditional channels. Order visibility Returnability

Direct Sales to Customers Allows manufacturers to enhance revenues by bypassing intermediaries and reaching out directly to customers. This allows collection of intermediary’s incremental revenue. Example:Dell

Flexible Pricing, Product Portfolio and Promotions An e-business, can easily alter prices by changing one entry in database linked to its Web site. Advantage: Pricing can be done based on current inventories and demand. Example: Airlines make available last minute low cost fairs…… Analogous to vegetable market….

Efficient Funds Transfer An e-business enhances revenues by speeding up collection.

Some probable questions What has been the impact of e-business on supply chain cost? What has been the impact of e-business on customer service? In the future, do you see the number of distributors decreasing, increasing, or staying about the same? Is e-business likely to be more beneficial in the early part or the mature part of a product’s life cycle?

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Impact of E-Business on Cost

DiSa, Flex Pricing, Funds transfer Impact of E-Business Customer Service PPRROCT DiSa, Flex Pricing, Funds transfer Cost Transportation, Information Facilities, Inventory,

Customer Service Dimension The Customer service dimension – Customer Service and Customer Retention, Service driven logistics systems, Setting customer service priorities and service standards

Customer should be prime focus

What is Customer Service? Customer service is the provision of service to customers  before, during and after a purchase.

Significance of Customers No value in the product or service until it is in the hands of the customer The importance of customer service may vary by product or service, industry and customer. Good customer service experience = change in entire perception a customer wrt the organization.

Availability- the concept Delivery frequency Reliability Stock levels Order cycle time Interaction among all these affects the process of making products & services available to whom ?

Argument -> Decline in Quality Customer Service To address this argument, many organizations have employed a variety of methods to improve their customer satisfaction levels, and other key performance indicators (KPIs)

Customer Service Practices Customer service could be examined under : Elements Pre- transaction elements Transaction elements Post-transaction elements

Pre- transaction Elements Corporate policies or programs  i.e. written statements of service policy, adequacy of organizational structure and system flexibility. Transaction Elements Variables directly involved in physical distribution.  Order cycle time, Inventory availability Order fill rate, Order status information For example:- • Written customer service policy It is communicated internally and externally, is it understood, is it specific and quantified where possible? • Accessibility  Are we easy to contact/ do business with? Is there a single point of contact? • Organization structure Is there a customer service management structure in place? What level of control do they have over their service process? • System flexibility Can we adapt our service delivery system to meet particular customer needs?

Post- transaction Elements The post transaction elements of customer service are generally supporting of the product while in use e.g. product tracing / warranty, parts and repair service, procedures for customer complaints and product replacement. 

How dangerous is a Stock-out? Switch in brand loyalty Cost penalty for: Manufacturers Retailers 46% of potential sales

The New Competitive Environment Many companies have suffered, why? Their focus -> traditional Marketing Product development Promotional activities Price competition via reduction in logistics Are these important? Yes they are but not at the cost of logistics

= ≠ Cost cutting Low cost strategies Low cost strategies Efficient logistics = ≠ Effective logistics

New strategy The impact of logistics has resulted in a focus on marketing towards… Creation of customer franchise Creation of consumer franchise The above two can be enhanced or diminished based upon the efficiency of the suppliers’ logistics system.

Customer Service and Retention “People don’t buy products, they buy Benefits” -Theodore Levitt What do you understand from that?

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Lifetime value of a customer The lifetime value of a customer is much greater than the profit generated from just a single deal with that customer. A simple formula follows: Lifetime value = Average transaction value * Yearly frequency of purchase* customer life expectancy

Service-driven logistics systems The role of logistics can be seen as the development of systems and the supporting co-ordination processes to ensure that customer service goals are met. Main idea of service driven logistics systems : to meet predefined service goals.  Ideally all logistics service systems are defined along the following lines: Identify customers' service needs Define customer service objectives Design the logistics system

Setting service standards We are entering the era of supply chain competition - the fundamental difference here is that the company cannot act individually but …. must act as a supply chain entity to ensure competitiveness in the marketplace.

Setting customer service priorities As the new competitive context of business continues to change, brining with it new complexities and concerns for management generally, it also has to be recognized that the impact of these changes on logistics can be considerable. Of the many issues facing organizations today perhaps the most challenging are in the area if logistics.

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