Demand Management and Customer Service Ch_3

Outbound-to-Customer Logistics Systems To increase levels of customer service, significant emphasis is placed on outbound to-customer logistics systems. These systems refer to the set of processes, systems, and capabilities that enhance the firm’s ability to serve its customers.

Inbound-to-Operations Logistics Systems These systems refer to the set of processes that precede and facilitate value-adding activities such as manufacturing, assembly, and so on.

Demand Management Defined as “focused efforts to estimate and manage customers’ demand, with the intention of using this information to shape operating decisions”. Recent practice has been just the opposite, with the manufacturer determining the what, where, when, and how many of the sale.

Demand Management Objectives Gathering and analyzing knowledge about consumers, their problems, and their unmet needs. Identifying partners to perform the functions needed in the demand chain. Moving the functions that need to be done to the channel member that can perform them most effectively and efficiently.

Sharing with other supply chain members knowledge about consumers and customers, available technology, and logistics challenges and opportunities. Developing products and services that solve customers’ problems. Developing and executing the best logistics, transportation, and distribution methods to deliver products and services to consumers in the desired format.

Demand Management: Related Issues Lack of communication between departments results in little or no coordinated response to demand information. Too much emphasis is often placed on forecasts of demand with little attention paid to collaborative efforts and strategic and operational plans that need to be developed from the forecasts.

Demand information is often used more for tactical and operations purposes than for strategic purposes. Primary emphasis should be on using demand information to create likely scenarios of the future as they relate to product supply alternatives. Resulting business successes will be a outcome of the better match of demand to product availability.

Traditional Forecasting: Demand Forecasting A major component of demand management is forecasting the amount of product that will be purchased by consumers or end users. In the integrated supply chain all other demand will be derived from the primary demand. A key objective is to anticipate and respond to primary demand as it occurs in the marketplace.

Supply-Demand Misalignment

Traditional Forecasting Long-term (more than three years), midrange (one to three years), and short-term forecasting are each important contributors to the forecasting process.

Integration of Sales Forecasting and Production

Collaborative Planning, Forecasting, and Replenishment CDFR is recognized as a breakthrough business model for planning, forecasting, and replenishment. Uses available Internet-based technologies to collaborate from operational planning through execution. Developed by Wal-Mart and Warner-Lambert in 1995. Emphasizes a sharing of consumer purchasing data among and between supply chain partners. Creates a direct link between the consumer and the supply chain.

Order Fulfillment and Order Management Collaborative planning improves the quality of the demand signal for the entire supply chain through a constant exchange of information from one end to the other.

Collaborative Planning

Order fulfillment activities differ as a supply chain matures through transactional to interactive to interdependent levels.

Stages of Order Fulfillment

Order-management systems represent the principal means by which buyers and sellers communicate information relating to individual product orders and is key to operational efficiency and customer satisfaction.

Order-Management Functions

Major Components of the Order Cycle

Order Fulfillment and Order Management: Other Issues Order processing Order preparation Order shipment Length and variability of the order cycle

Example of Order Cycle Time Analysis

Order Fulfillment and Order Management: E-Commerce Success is just as much about designing and implementing the basic principles of logistics and supply chain management as it is about marketing the latest technologies.

Five Alternative Fulfillment Strategies for E-Commerce Distributed delivery centers Partner fulfillment operations Dedicated Fulfillment centers Third-party fulfillment centers Build to order

Customer Service: The Logistics/Marketing Interface Customer service is often the key link between logistics and marketing.

The Traditional Logistics/Marketing Interface

A new vision of the interface is represented by National Semiconductor, whose reengineering of the supply chain reduced overall logistics cost. Required a more dynamic, proactive approach that recognized the value-added role of logistics supply chains in creating and sustaining competitive advantage and providing win-win outcomes.

This new perspective emphasizing valueadded is providing the basis for other companies – such as Sears, Proctor & Gamble, Nabisco, Hershey, and Dell Computer – to improve both efficiency and effectiveness.

Elements of Customer Service Time Dependability Cycle time Safe delivery Correct orders Communications Convenience

Customer Service: Performance Measures Traditional % availability in base units Speed and consistency Response time to special requests Speed, accuracy, and message detail of response Response and recovery time requirements Response time, quality of response New Orders received on time Orders received complete Orders received damage free Orders filled accurately Orders billed accurately

Customer Service: Implementation of Standards Set standards at realistic levels. Quality levels set below 100% can be problematic. Consult customers on policies and standards. Communicate standards to customers. Measure, monitor, and control customer service standards

Stockouts Four possible outcomes from a stockout Customers wait Back orders Lost sales Lost customers

Expected Costs of Stockouts

Channels of Distribution One or more companies or individuals who participate in the flow of goods and services from the producer to the final user or consumer. Wide variety of firms comprise these channels.

Distribution Channel Separation

Examples of Channels of Distribution for the Food Products Manufacturing Industry

Growth and Importance of Channels of Distribution Retail channels showing dramatic growth. Mass merchandisers such as Wal-Mart, Kmart, Sears, and Target squeezing smaller retailers . Nature of logistics changing to accommodate customized systems. Successful retailers base efficiency on logistics systems.