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2/3/2015

Chapter 3:
Customer Relationship Mgmt

Course
Overview

Process
Power
Concepts

Ch 1: Supply Chains
Ch 2: Logistics
Ch 3: CRM
Ch 4: Procurement
Ch 6: Integrated Ops
Ch 8: Transportation
Ch 9: Warehousing

Ch 10: Packaging
Ch 11: Global SCM
Ch 12: Network Design
Ch 13: Ops Analysis
Ch 14: Collaboration
Ch 15: Perf Measurement
Ch 16: Risk/Sustainability

2/3/2015

Process
Power
Concepts

Definitions: Who is
the Customer?

From perspective of the total supply chain

End user of product in consumer market

Company is customer in business market

From perspective of a specific firm in a S/C

Intermediate customer organizations exist


between the firm and end users

From perspective of a logistics manager

Any delivery location can be a customer . . .

including end-users home, warehouse/DC,


loading dock of a manufacturing plant
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Process
Power
Concepts

Presentation
Game Plan

Customer-Focused Marketing
Customer Service
Customer Satisfaction
Customer Success
Developing CRM Strategy
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2/3/2015

Process
Power
Concepts

Customer-Focused
Marketing

Process
Power
Concepts

Basic Marketing
Principles

Customer needs and requirements are more


basic than products and services
Different customers have different needs
and requirements
Products and services become meaningful
from the customers perspective only when
available and positioned
Profit is more important than sales volume

2/3/2015

Process
Power
Concepts

Transactional vs.
Relationship Mktg

Transactional marketing: traditional


strategy;

focus on creating successful individual


transactions between the company & customers

Relationship marketing: newer strategy;

focus on developing long-term relations w/ key


supply chain participants

create & retain long-term preference and loyalty

Process
Power
Concepts

Relationship Mktg:
Segment of One

Micromarketing (a.k.a. one-to-one marketing

Recognizes that each customer may have unique


requirements

One-to-one relationships can

Significantly reduce transaction costs

Better accommodate customer requirements

Move individual customer transactions into a


matter of routine

2/3/2015

Process
Power
Concepts

Discrepancies to
Overcome for Exch

Discrepancy in space: location of


production & location of consumption
usually different
Discrepancy in time: difference in timing
between production vs. consumption
Discrepancy in quantity & assortment:
mismatch between customer demand and
manufacturing supply

Process
Power
Concepts

Supply Chain
Service Outputs

Spatial convenience: amount of shopping


time and effort required of the customer
Lot size: number of units to be purchased in
each transaction
Waiting time: how long customer must wait
between ordering & receiving products
Product variety & assortment: differs by
supply chain

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2/3/2015

Process
Power
Concepts

Three Levels of Cust


Accommodation:

Supply chains provide a mix of services to


accommodate a range of cust requirements
Each service mix can be configured to
achieve one level of cust accommodation

Customer service

Customer satisfaction

Customer success

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Process
Power
Concepts

Customer
Service

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2/3/2015

Process
Power
Concepts

Basic Customer
Service Attributes

Right amount
Right product
Right time
Right place
Right place
Right condition
Right information
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Process
Power
Concepts

Elements of
Customer Service

Availability

Fill rates

Stockout frequency

Orders shipped
complete

Service Reliability

Op Performance

Speed

Consistency

Flexibility

Malfunction recovery

Damage free

Error-free invoices

Shipment-order
match

Shipped to correct
location

Accurate info

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2/3/2015

The Perfect
Order!

Process
Power
Concepts

The perfect order is

Delivered complete

Delivered on time

Delivered at the right location

Delivered in perfect condition

Delivered w/complete & accurate documentation

Total order cycle executed with zero defects

+
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Process
Power
Concepts

Consider an order cycle that


achieves the following
performance levels for
shipments

Zero-Defect
Performance

97% delivered complete


97% delivered on time
97% delivered in perfect
condition
97% delivered with correct
documentation

Probability that any order will


be delivered with no defects is
only 88.5%

P (zero defects) = .97 x .97 x


.97 x .97 = .885

Therefore, the
probability that any
order has a problem
is 11.5% (!!!)
What resources are
needed to achieve a
zero-defect level?
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2/3/2015

The Basic
Service Platform

Process
Power
Concepts
Service platform for customer A

Service platform for customer B

Availability level = Medium

Operational performance =

High
Service reliability = Above

Operational
average
Performance

Availability level = Low


Operational performance =
Medium
Service reliability = Average

Level

Availability
Level

Basic
Service
Platform

Service
Reliability
Level
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Process
Power
Concepts

How Much Service


is Basic Service?

Zero-defect approach is not necessarily


optimal for all customers
Establish internal performance standards
for each service component
Consider industry practice,
cost, and resource
requirements

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2/3/2015

Process
Power
Concepts

Customer
Satisfaction

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Process
Power
Concepts

Cust Satisfaction:
What is it?

Expectancy disconfirmation:
If

Perceived Performance Expectations, then


Satisfaction

If

Perceived Performance < Expectations, then


Dissatisfaction

Customers will be satisfied if a supplier


meets or exceeds the customers
expectations

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Process
Power
Concepts

Expected Logistics
Performance

Reliability
Responsiveness
Access
Communication
Credibility

Security
Courtesy
Competency
Tangibles
Knowing the
customer

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Process
Power
Concepts

Cust Expectations:
From Where?

Figure 3.1 Satisfaction and Quality Model

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Gaps to Fill for


Customers

Process
Power
Concepts

Gap 1: Knowledge

Reflects managements lack


of knowledge or
understanding of customers
Exists when internal
performance standards do
not adequately reflect
customer expectations

The difference between


standard and actual
performance

Over commitment or
promising higher levels of
performance than can
actually be provided

Gap 5: Perception

Gap 3: Performance

Gap 4: Communications

Gap 2: Standards

Customers sometimes
perceive performance to be
higher or lower than actually
achieved

Gap 6: Satisfaction/Quality

When any one or more gaps


exist

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Process
Power
Concepts

Increasing
Cust Expectations

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2/3/2015

Process
Power
Concepts

Why Cust Satisfaction


is Not Sufficient

But what if
customer
requirements are
not met?

Figure 3.2 Satisfaction Is Not the Same as Happiness

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Process
Power
Concepts

Customer
Success

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Three Levels of
Customer Focus

Process
Power
Concepts
Level 3 Focus

Assess customer requirements


Extend supply chain to include our customers
customer
Provide value-added services for select customers
Manage performance cycles and levels to address
needs of each customer segment in the extended
supply chain

Level 2 Focus

Assess customer perceptions of satisfaction


Manage performance cycle levels to keep
customers satisfied

Level 1 Focus

Assess industry and competitor practices


Achieve internal standards for performance
cycles

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Process
Power
Concepts

Knowing Individual
Cust Requirements

Know your individual customers

Requirements

Processes

Know how your capabilities can add value


for the customer
Recognize next-destination requirements
Apply relevant performance metrics
Develop value-added services
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2/3/2015

Process
Power
Concepts

Cust Success &


The SCM Perspective

Figure 3.3 Moving Towards Customer Success


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Process
Power
Concepts

Developing
CRM Strategy

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Process
Power
Concepts

Framework for
CRM Strategy Choice

Table 3.4 Choosing Customer Accommodation Strategy

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Process
Power
Concepts

CRM: Trending in
Recent Years

Customer relationship management (CRM):


a process for improving the overall
performance of a business
In practice companies and vendors use the
term CRM to mean different things
Procter & Gamble has employees who live
and work in the home city of WalMart
Logistics owns many processes that drive
customer success
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2/3/2015

Process
Power
Concepts

Presentation
Recap

Customer-Focused Marketing
Customer Service
Customer Satisfaction
Customer Success
Developing CRM Strategy
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Chapter 3:
Customer Relationship Mgmt

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