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Suhib Makhlouf

Assignment Chapter 8
Assignment Question
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Part 1-- 20 points
Explain the relationship between customer service levels and the costs associated with
providing those service levels for Apple products and explain how they are different.

Customer service level is basically concerned with the services offered by a company
to its clients. These services would include on-time delivery of goods and services,
order processing, order fill rate, and stock out rate.
Customer service level is directly related with the cost associated with it. Customer
service generally acts as an interface between the marketing and logistics where the
marketing objective is to distribute resources to the marketing mix and to widen the
long run profitability.
The objective of logistics system is to reduce the total cost associated with the
customer service. This relationship can be exhibited through the 'place' dimension of
the marketing mix. This dimension is often used synonymously with channel-ofdistribution decisions and the associated customer service levels. In this context,
logistics plays a vital role in curtailing the total cost of the various logistics activities
within a given set of service levels.
Costs associated with the customer service levels are listed below:

Inventory carrying cost

Carriage cost

Warehousing cost

Order processing

Information cost, and

Lot quantity cost.


Effective customer service levels would help to minimize the above costs. This in
turn, would minimize the total operational cost of an organization.