Business logistics/supply chain management 5th edition pdf download

Business logistics/supply chain management 5th edition pdf download

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Fill & Sign Online, Print, Email, Fax, or Download Get Form Form Popularity business logistics management 5th edition pdf form Get, Create, Make and Sign purchasing and supply 01/01/ · Concepts and theories relating to the movement of goods and coordination of the supply chain. It brings to life all the aspects of international trade and logistics to ensure the Logistics & supply chain management [Fifth edition] , , , , , (PDF) 09/08/ · Business Logistics Supply Chain Management 5th Edition by Ronald H Ballou Sponsored High Speed Downloads dl's @ KB/s Download Link1 [Full Version] 21/02/ · Logistics and Supply Chain Management 5th Edition is the latest text on the subject. It is also UK’s best selling book. This text has the feature of brevity. Publisher of the ... read more

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Ballou Just established aside numerous times in our extra or totally free times while having dish or in your workplace to check out. Ballou will certainly reveal you new thing that you could do now. It will certainly aid you to enhance the quality of your life. Ballou , you could be happier and also a lot more enjoyable to enjoy reading. For undergraduate, MBA, and other courses in Business Logistics, Physical Distribution, Operations Management, Materials Management, and Supply Chain Management, in departments of business and engineering. This comprehensive discussion-covering the planning, organizing, and controlling of such activities as transportation, inventory maintenance, facility location, order processing, purchasing, warehousing, materials handling, packaging, customer service standards, and product scheduling-is specifically designed to help students solve actual challenges that they will encounter in today's marketplace.

It provides the basic decision making tools and concepts used for finding cost reduction and strategic opportunities. Logware software on CD-ROM is included. Ballou Kindle. Post a Comment. Home Business Internet Market Stock Downloads Dvd Games Software Office Parent Category Child Category 1 Sub Child Category 1 Sub Child Category 2 Sub Child Category 3 Child Category 2 Child Category 3 Child Category 4 Featured Health Childcare Doctors Uncategorized. September 30, No comments. Ballou Be part of those who like to read this publication. Ballou Need a help to discover the new launched publication? Amazon Sales Rank: in Books Brand: Prentice Hall Published on: Ingredients: Example Ingredients Original language: English Number of items: 1 Dimensions: 9. Ballou PDF.

Email This BlogThis! Share to Twitter Share to Facebook. Social Profiles. Popular Tags Blog Archives PDF Download ECG: Essentials of ElectrocardiographyBy Cathy Soto. PDF Download ECG: Essentials of ElectrocardiographyBy Cathy Soto New upgraded! Borsodi, R. Holweg, M. In other words, the ultimate purpose of any logistics system is to satisfy customers. It is a simple idea that is not always easy to recognise if you are a ­manager involved in activities such as production scheduling or inventory control, which may seem to be some distance away from the marketplace. The fact is of course that everybody in the organisation has a stake in customer service.

The objective should be to establish a chain of customers that links people at all levels in the organisation directly or indirectly to the marketplace. They have even extended the idea to the point of linking bonuses to an index of customer satisfaction. In organisations like Xerox, managing the customer service chain through the business and onwards is the central concern of logistics management. There are signs that this view is rapidly changing, however, as the power of customer service as a potential means of differentiation is increasingly recognised. In more and more markets the power of the brand has declined and customers are more willing to accept substitutes; even technology differences between products have been reduced so that it is harder to maintain a competitive edge through the product itself.

Two factors have perhaps contributed more than anything else to the growing importance of customer service as a competitive weapon. Likewise, in industrial purchasing situations we find that buyers expect higher levels of service from vendors, particularly as more companies convert to JIT logistics systems. Take, for example, the current state of the market for laptop computers. There are many competing models which in reality are substitutable as far as most would-be purchasers are concerned. As availability is clearly an aspect of customer service, we are in effect saying that the power of customer service is paramount in a situation such as this. This trend towards the service-­ sensitive customer is as apparent in industrial markets as it is in consumer ­markets. The evidence from across a range of markets suggests that the critical determinant of whether orders are won or lost, and hence the basis for becoming a preferred supplier, is customer service.

Time has become a far more critical element in the competitive process. Delivering customer value Ultimately the success or failure of any business will be determined by the level of customer value that it delivers in its chosen markets. Customer value can be defined quite simply as the difference between the perceived benefits that flow from a purchase or a relationship and the total costs incurred. For example, inventory carrying costs, maintenance costs, running costs, disposal costs and so on. In business-­to-business markets particularly, as buyers become increasingly sophisticated, the total costs of ownership can be a critical element in the purchase decision. Figure 2. In the same way that the total cost of ownership is greater than the initial purchase price, so too the benefits that are perceived to flow from the purchase or the relationship will often be greater than the tangible product features or functionality.

For example, there may be little difference between two competitive products in terms of technical performance, but one may be superior to the other in terms of the customer support that is provided. In other words, their ratio of benefits to costs is superior to other players in that market or segment. Logistics management is almost unique in its ability to impact both the numerator and the denominator of the customer value ratio. et al. Each of the four constituent elements can briefly be defined as follows: Quality: The functionality, performance and technical specification of the offer. Service: The availability, support and commitment provided to the customer. delivery lead-times. Each of these elements requires a continuous programme of improvement, innovation and investment to ensure continued competitive advantage.

One company that has built a global leadership position in its markets is Caterpillar, marketing machines and diesel engines for the construction and mining industries. Caterpillar has for many years focused on developing not just its manufacturing capabilities and innovative products but also its customer support and responsiveness. Underpinning these initiatives has been a continuing emphasis on creating superior logistics and supply chain management capabilities. Caterpillar has developed a world-class reputation for customer support, in particular its guarantee to provide hour availability of parts no matter how remote the location. Through close partnership with its worldwide network of dealers and distributors, and through advanced inventory and information management systems, Caterpillar offers levels of customer support — and thus customer value — that few companies in any industry can match.

Put another way, there is no value in the product or service until it is in the hands of the customer or consumer. These factors might include delivery frequency and reliability, stock levels and order cycle time, for example. Indeed it could be said that ultimately customer service is determined by the interaction of all those factors that affect the process of making products and services available to the buyer. In practice, we see that many companies have varying views of customer service. LaLonde and Zinszer2 in a major study of customer service practices suggested that customer service could be examined under three headings: 1.

Pre-transaction elements 2. Transaction elements 3. Post-transaction elements The pre-transaction elements of customer service relate to corporate policies or programmes, e. written statements of service policy, adequacy of organisational structure and system flexibility. The transaction elements are those customer ­service variables directly involved in performing the physical distribution function, e. product and delivery reliability. The post-transaction elements of customer service are generally supportive of the product while in use, for instance, product warranty, parts and repair service, procedures for customer complaints and product replacement. Table 2. Is it understood? Is it specific and quantified where possible?

Is there a single point of contact? What level of control do they have over their service process? Delivering customer value 31 Table 2. Do we inform the customer of problems or do they contact us? How promptly do we deal with complaints and returns? Do we measure customer satisfaction with our response? Indeed the argument that will be developed later is that it is essential to understand customer service in terms of the differing requirements of different market segments and that no universally appropriate list of elements exists: each market that the company services will attach different importance to different service elements. It is because of the multivariate nature of customer service and the widely differing requirements of specific markets that it is essential for any business to have a clearly identified policy towards customer service.

A considerable body of evidence exists which supports the view that if the product or service is not available at the time the customer requires it and a close substitute is available then the sale will be lost to the competition. Even in markets where brand loyalty is strong a stock-out might be sufficient to trigger brand switching. The impact of out-of-stock One study3 identified that a significant cost penalty is incurred by both manufacturers and retailers when a stock-out occurs on the shelf. The research found that on a typical day a shopper in the average supermarket will face stock-outs on 8 per cent of items in the categories studied. The reaction of customers when faced with a stock-out was highlighted by the same study. As Figure 2. This represents bad news for both the manufacturer and the retailer. Even worse, other research 4 has suggested that over twothirds of shopping decisions are made at the point of purchase, i.

the purchase is triggered by seeing the product on the shelf. If the product is not on the shelf then the purchase will not be triggered. The potential loss of business for both manufacturers and retailers caused by out-of-stock situations is clearly significant. The second occurs when the product is used by the consumer — is the experience a good one? Founded in the company was once the market leader until overtaken in the mids by Tesco. The design and management of the IT system was outsourced to Accenture in one of the biggest deals of its type at the time. The reason for this, reputedly, was that it was a project that everyone felt would need at least seven years to implement and yet the need was to do it in three years because of the competitive pressure. Perhaps inevitably, when the system went live in there were major problems. The high-tech machines in the automated fulfilment factories were breaking down regularly and the information system was not delivering the expected benefits.

At the end of March , a new CEO, Justin King, was appointed with a mandate to halt the slide in shareholder value. King recognised that the continued decline in on-the-shelf product availability was driving customers away from the stores. Research amongst customers showed that the levels of product availability were of major concern. those who would shop regularly at different stores. Hence any deterioration in the customer experience at the store level can easily lead to a large-scale shift in patronage.

The technical issues with the hardware were obvious. However, Christensen believed that a major cause of the stock-out problems was the inadequate in-store processes for monitoring on-the-shelf availability. It appeared that the accuracy of the data that was being captured was extremely low and as a result the new IT systems were making inappropriate replenishment decisions. Upon re-engineering the fundamental in-store processes for checking stock levels at one pilot store, the number of out-of-stock items shrank from 2, to At the same time, the decision was taken to introduce hand-held electronic devices to all stores so that more frequent and more accurate monitoring of stock levels could be achieved. In industrial markets, too, the same pressures for improved availability seem to be at work.

The demand is for ever-shorter delivery lead-times and reliable delivery. The pressure on suppliers is further increased as these same customers seek to rationalise their supplier base and to do business with fewer suppliers. Becoming a preferred supplier in any industry today inevitably means that a high priority must be placed on delivering superior customer service. Many companies have suffered in this new competitive environment because in the past they have focused on the traditional aspects of marketing — product development, promotional activities and price competition. However, whilst these are still necessary dimensions of a successful marketing strategy they are not sufficient.

Cost reduction is a worthy goal as long as it is not achieved at the expense of value creation. Low-cost strategies may lead to efficient logistics but not to effective logistics. One powerful way of highlighting the impact that customer service and logistics management can have on marketing effectiveness is outlined in Figure 2. The suggestion here is that customer service impacts not only on the ultimate end user but also on intermediate customers such as distributors. Traditionally, marketing Delivering customer value 35 Figure 2.

More recently we have come to recognise that this by itself is not sufficient. Because of the swing in power in many marketing channels away from manufacturers and towards the distributor e. the large concentrated retailers it is now vital to develop the strongest possible relations with such intermediaries — in other words to create a customer franchise as well as a consumer franchise. It is only when all three components are working optimally that marketing effectiveness is maximised. To stress the interdependence of these three components of competitive performance it is suggested that the relationship is multiplicative. In other words the combined impact depends upon the product of all three. A simple example would be that a finished product in a warehouse is the same as a finished product in the hands of the customer in terms of its tangible features.

Clearly, however, the product in the hands of the customer has far more value than the product in the warehouse. Distribution service in this case has been the source of added value. At the centre is the core product, which is the basic product as it leaves the factory. Clearly it is not only customer service and logistics activity that add value; in many cases advertising, branding and the packaging can all enhance the perceived value of the product to the customer. However, it is increasingly evident, as we have seen, that it takes more than branding to differentiate the product.

of them. Thus an examination of the typical marketing plan will show a bias towards increasing market share rather than towards customer retention. Whilst new customers are always welcome in any business, it has to be realised that an existing customer can provide a higher profit contribution and has the potential to grow in terms of the value and frequency of purchases. A further benefit comes from the fact that the longer the customer stays with us the more profitable they become. A study by consulting company Bain and Co6 found that higher customer retention rates correlated strongly with profitability. The reasons for this are that a retained customer typically costs less to sell to and to service.

Also as the relationship develops there is a greater likelihood that they will give a greater part of their business to a supplier whom they are prepared to treat as a partner. Furthermore, satisfied customers tell others and thus the chance increases that further business from new customers will be generated through this source. It can be extended to include the value of purchases made by the retained customer base to assess how successful the company has been in increasing the overall revenue from these accounts see Figure 2. Delivering customer value 37 Figure 2.

of customers 12 months ago No. of customers today b £ £ Value of purchases 12 months ago Value of purchases by retained customers A prime objective of any customer service strategy should be to enhance customer retention. Whilst customer service obviously also plays a role in winning new customers it is perhaps the most potent weapon in the marketing armoury for the keeping of customers. The idea is that we should seek to create such a level of satisfaction with customers that they do not feel it necessary even to consider alternative offers or suppliers. In these markets customers will buy one brand on one occasion and then are just as likely to buy another on the next occasion. At the other extreme, a company like IBM will consciously seek to develop long-term relationships with its customers through training programmes, client seminars, frequent customer communication, and so on.

Thus a manufacturer might be motivated to establish supply and distribution arrangements that would enable production efficiencies to be maximised. Typically this would entail manufacturing in large batches, shipping in large quantities and buffering the factory, both upstream and downstream, with inventory. With the continuing transfer of power in the distribution channel from the producer to the consumer, this conventional philosophy has become less and less appropriate. This new perspective sees the consumer not at the end of the supply chain but at its start.

As Baker8 has suggested: Managing demand chains is … fundamentally different to managing supply chains. This sequence begins with an understanding of the value that customers seek in the market in which the company competes. This customer insight will enable the identification of the real market segmentation, i. the clusters of customers who share the same value preferences. The Spanish fashion chain Zara provides an excellent example of how market understanding and supply chain excellence can create real value for its target customers. Almost uniquely, they have developed supply chain processes that enable them to capture ideas and trends in the apparel market and to translate them into products in amazingly short lead-times.

To achieve this quick response capability, Zara have developed an agile network of closely integrated company-owned and independent manufacturing facilities that have the flexibility to produce in small batches at short notice. While this is not the cheapest way to make a garment, it ensures the achievement of their value proposition. Delivering customer value 39 Figure 2. Define the value proposition How do we translate these requirements into an offer? Identify the market winners What does it take to succeed in this market?

Develop the supply chain strategy How do we deliver against this proposition? The logistics planner needs therefore to know just what the service issues are that differentiate customers. Market research can be of great assistance in understanding this service segmentation and it is often surprising to see how little formal research is conducted in this crucial area. How might such a research programme be implemented? The first point to emphasise is that customer service is perceptual. We might use measures which, whilst providing useful measures of productivity, do not actually reflect the things the customer values. Hence it is critical that we develop a set of service criteria that are meaningful to customers. Identify the key components of customer service as seen by customers themselves. Establish the relative importance of those service components to customers. However, the truth is that it is so easy to become divorced from the reality of the marketplace when management is consumed with the day-to-day pressures of running a business.

How should we know which aspects of service are most highly rated by the customer? Given the complexity of the market that the typical company serves, how might it better understand the segmentation of those markets in terms of service requirements? What does it take for a company to become the supplier of choice? Clearly it is important to develop an understanding of the service needs of customers through detailed research. The first step in research of this type is to identify the key sources of influence upon the purchase decision. If, for example, we are selling components to a manufacturer, who in that company will make the decision on the choice of supplier? This is not always an easy question to answer as in many cases there will be several people involved. The purchasing manager of the company to which we are selling may only be acting as an agent for others within the firm. In other cases his or her influence will be much greater. Alternatively, if we are manufacturing products for sale through retail outlets, is the decision to stock made centrally or by individual store managers?

The answers can often be supplied by the sales force. The sales representative should know from experience who are the decision makers. Given that a clear indication of the source of decision-making power can be gained, the customer service researcher at least knows who to research. Ideally once the decision-making unit in a specific market has been identified, an initial, small-scale research programme should be initiated based upon personal interviews with a representative sample of buyers. The purpose of these interviews is to elicit, in the language of the customers, first the importance they attach to customer service vis-à-vis the other marketing mix elements such as price, product quality, promotion, etc. The importance of this initial step in measuring customer service is that relevant and meaningful measures of customer service are generated by the customers themselves.

Once these dimensions are defined we can identify the relative Delivering customer value 41 importance of each one and the extent to which different types of customer are prepared to trade-off one aspect of service for another. In practice this is difficult, particularly with a large number of components, and would not give any insight into the relative importance of each element. Alternatively a form of rating scale could be used. For example, the respondents could be asked to place a weighting from 1 to 10 against each component according to how much importance they attached to each element. The problem here is that respondents will tend to rate most of the components as highly important, especially since those components were generated on the grounds of importance to customers in the first place. A partial solution is to ask the respondent to allocate a total of points amongst all the elements listed, according to perceived importance. However, this is a fairly daunting task for the respondent and can often result in an arbitrary allocation.

Fortunately a relatively recent innovation in consumer research technology now enables us to evaluate very simply the implicit importance that a customer attaches to the separate elements of customer service. The technique is based around the concept of trade-off and can best be illustrated by an example from everyday life. In considering, say, the purchase of a new car, we might desire specific attributes, e. performance in terms of speed and acceleration, economy in terms of petrol consumption, size in terms of passenger and luggage capacity and, of course, low price. However, it is unlikely that any one car will meet all of these requirements so we are forced to trade-off one or more of these attributes against the others.

The same is true of the customer faced with alternative options of distribution service. The buyer might be prepared to sacrifice a day or two of lead-time in order to gain delivery reliability, or to trade-off order completeness against improvements in order entry, etc. Essentially the trade-off technique works by presenting the respondent with feasible combinations of customer service elements and asking for a rank order of preference for those combinations. Computer analysis then determines the implicit importance attached by the respondent to each service element. This understanding must then drive the design of the supply chain processes that will enable success in the marketplace.

If one group of respondents, for example, has a clearly distinct set of priorities from another then it would be reasonable to think of them both as different service segments. Thus if two respondents completed the step 2 trade-off analysis in a similar way, their importance scores on the various service dimensions would be similar and hence the cluster analysis would assign them to the same group. The classic categorisation of customers according to industry sector did not correlate with the attributes they sought from suppliers. As a result of this research, the supplier was better able to focus its marketing efforts and to re-engineer its supply chain strategy to achieve a better match with customer requirements.

The challenge to logistics management is to create appropriate supply chain solutions to meet the needs of these different value segments. This issue will be dealt with in detail in Chapter 6, where the concept of supply chain agility is discussed. Defining customer service objectives The whole purpose of supply chain management and logistics is to provide customers with the level and quality of service that they require and to do so at less cost to the total supply chain. The whole purpose of supply chain management and logistics is to provide customers with the level and quality of service that they require and to do so at less cost to the total supply chain. The definition of appropriate service objectives is made easier if we adopt the concept of the perfect order. Clearly such a definition is specific to individual customers, but it is usually possible to group customers into segments and then to identify, along the lines described earlier, the key service needs of those segments.

Normally this percentage would Delivering customer value 43 be measured across all customers over a period of time. However, it can also be used to measure service performance at the individual customer level and indeed at any level, e. segment, country or by distribution centre. An extension of this is on-time, in-full and error-free. This latter element relates to documentation, labelling and damage to the product or its packaging. To calculate the actual service level using the perfect order concept requires performance on each element to be monitored and then the percentage achievement on each element to be multiplied together. The cost benefit of customer service All companies have to face a basic fact: there will be significant differences in profitability between customers.

Not only do different customers buy different quantities of different products, but the cost to service these customers will typically vary considerably. This issue will be explored more fully in Chapter 4. Furthermore, 80 per cent of the total costs to serve will be generated from 20 per cent of the customers but probably not the same 20 per cent! This is the so-called Pareto Law, named after a nineteenth century Italian economist. The challenge to customer service management therefore is, firstly, to identify the real profitability of customers and then, secondly, to develop strategies for service that will improve the profitability of all customers. What has to be recognised is that there are costs as well as benefits in providing customer service and that therefore the appropriate level and mix of service will need to vary by customer type.

The basic relationship between the level of service and the cost is often depicted as a steeply rising curve Figure 2. it takes on the classic bell-shape. A feature of the normal distribution is that once its two key parameters, the mean xˉ and standard deviation σ , are known, the probability of a given value occurring can be easily calculated. Thus, as Figure 2. In calculating how much safety stock is required the inventory manager is only concerned with those occasions when demand is greater than average. If sales are approximately normally distributed, demand will be lower than average approximately 50 per cent of the time, and thus a 50 per cent service level would be maintained with no safety stock. It is on those occasions when demand exceeds Delivering customer value 45 the average that safety stock is required. In other words we must focus attention on the area of the curve to the right of the mean. Thus, by setting a stock level one standard deviation greater than the mean, the manager can achieve a service level of approximately 84 per cent.

By setting the level two standard deviations greater than the mean the service level would be approximately 98 per cent and with three standard deviations it would be However, if it is possible to find alternative service strategies for servicing customers, say, for example, by speeding up the flow of information about customer requirements and by using faster modes of transport, then the same level of service can be achieved with less inventory — in effect pushing the curve to the right Figure 2. In other words if we can gain earlier warning of customer requirements and our lead-times are short, then we can reduce our reliance on inventory. Setting customer service priorities Whilst it should be the objective of any logistics system to provide all customers with the level of service that has been agreed or negotiated, it must be recognised that there will inevitably need to be service priorities.

Fundamentally, the service issue is that because not all our customers are equally profitable nor are our products equally profitable, should not the highest service be given to key customers and key products? As we can assume that money spent on service is a scarce resource then we should look upon the service decision as a resource allocation issue. The precise split between the categories is arbitrary as the shape of the distribution will vary from business-to-business and from market to market. The appropriate measure should be profit rather than sales revenue or volume. The reason for this is that revenue and volume measures might disguise considerable variation in costs. In the case of product profitability we must also be careful that we are identifying the appropriate service-related costs as they differ by product. One of the problems here is that conventional accounting methods do not help in the identification of these costs. Delivering customer value 47 Figure 2. By contribution we mean the difference between total revenue accruing and the directly attributable costs that attach as the product moves through the logistics system.

Looking first at differences in product profitability, what use might be made of the A,B,C categorisation? Thus we might seek to follow the stock holding policy shown below in Table 2. overnight delivery. We can bring both these measures together in the form of a simple matrix in Figure 2. High Low Volume by SKU Figure 2. However, they are also low in profit contribution and the priority should be to re-examine product and logistics costs to see if there is any scope for enhancing profit. Quadrant 2: Provide high availability These products are frequently demanded and they are more profitable. We should offer the highest level of service on these items by holding them as close to the customer as possible and with high availability.

Because there will be relatively few of these items we can afford to follow such a strategy. Quadrant 3: Review Products in this category should be regularly appraised with a view to deletion from the range. They do not contribute to profits or at least only marginally and they are slow movers from a sales point of view. Unless they play a strategic role in the product portfolio of the firm then there is probably a strong case for dropping them. Quadrant 4: Centralised inventory Because these products are highly profitable but only sell at a relatively slow rate they are candidates for centralised management. In other words, they should be Delivering customer value 49 kept in some central location, as far back up the supply chain as possible in order to reduce the total inventory investment, and then shipped by express transport direct to customers.

This concept of service prioritisation by product can be extended to include customer priorities. How can we make use of this important fact? The first thing is obviously to offer the highest levels of service and availability to key customers ordering key products. At the other end of the spectrum we should constantly review the less profitable customers and the less profitable products. This is particularly relevant when developing a service strategy for spare parts. The Figure 2. Ultimately the only standard to be achieved is per cent conformity to customer expectations.

In other words, there must be a complete match between what the customer expects and what we are willing and able to provide. Ideally there should be a service level agreement SLA determined jointly by the supplier and the customer. This will provide the benchmark against which actual Delivering customer value 51 performance can be measured. What are the customer service elements for which performance standards should be set? To be effective these standards must be defined by the customers themselves. This requires customer research and competitive benchmarking studies to be conducted so that an objective definition of customer service for each market segment may be identified.

Order cycle time This is the elapsed time from customer order to delivery. Stock availability This relates to the percentage of demand for a given line item SKU that can be met from available inventory. Order-size constraints More and more customers seek JIT deliveries of small quantities. Do we have the flexibility to cope with the range of customer demands likely to be placed upon us? Ordering convenience Are we accessible and easy to do business with? Do our systems talk to their systems? Frequency of delivery A further manifestation of the move to JIT is that customers require more frequent deliveries within closely specified time windows.

Again it is flexibility of response that should be the basis for the performance standard. It is a reflection not just of delivery performance but also of stock availability and order processing performance. Documentation quality What is the error rate on invoices, delivery notes and other customer communications? A surprisingly large number of service failures are from this source. Claims procedure What is the trend in claims? What are their causes? How quickly do we deal with complaints and claims? Order completeness What proportion of orders do we deliver complete, i. no back orders or part shipments? Technical support What support do we provide customers with after the sale?

If appropriate do we have standards for call-out time and first-time fix rate on repairs? Order status information Can we inform customers at any time on the status of their order? Do we have procedures for informing customers of potential problems on stock availability or delivery? All of these issues are capable of quantification and measurement against customer requirements. Similarly they are all capable of comparison against competitive performance. It must also be remembered that per cent order fill rates are extremely difficult to achieve — the laws of probability see to that! If there are ten items on a particular order and each item is carried in stock at the 95 per cent level of availability then the probability that the complete order can be filled is 0. Ideally organisations should establish standards and monitor performance across a range of customer service measures.

For example, using the p ­ re-­transaction, transaction and post-transaction framework, the following measures provide ­valuable indicators of performance: Delivering customer value 53 Table 2. Such an index is shown in Table 2. The key message of this chapter has been that the quality of customer service performance depends in the main upon the skill with which the logistics system is designed and managed. Put very simply, the output of all logistics activity is customer service. Schonberger, R. LaLonde, B. and Zinszer, P. Corsten, D. Bayle, M. Reichheld, F. Delivering customer value 55 6. Levitt, T. and Ballantyne, D. Baker, S. and Peck, H. These channels usually comprise a number of linked entities that perform specific tasks to enable an efficient and effective connection to be established between a supplier and the end user.

Thus, for example, a pharmaceutical company might utilise a variety of channels to reach an end user. Wholesale distributors can be used to sell products to retail chemist shops who then make the product available to the end user. In other cases the pharmaceutical company might sell directly to healthcare organisations such as hospitals. These different channels will have different costs attached to them and will differ in terms of how effective they are in delivering value to the end user. It will be apparent then that the choice of distribution channels and the way in which those channels are managed must be key management concerns.

Traditionally, distribution channels were viewed purely as a means to enable the physical fulfilment of demand. They tended to follow well-established conventions and used structures and institutions that had been little changed in years. Now things are different. In recent years there have been seismic upheavals that have disrupted existing channels and have led to dramatic changes in how companies go to market. One often quoted example of how a business can become a significant player in its sector through channel innovation is Dell. Dell was able to gain a market leadership position in the PC industry not through the products that they sold but by the way they sold them — direct to end users. By going direct to the end user Dell was able to create a direct connection with the marketplace, building computers and related products to order rather than for stock and offering a level of product customisation.

At the same time, the margin that they would have to give to the traditional reseller or dealer was retained by Dell. This was a model that enabled the company 57 to achieve some of the best financial results in the industry for many years. This trend towards disintermediation has gathered pace as many other companies such as Amazon, Expedia and Apple have demonstrated in their different ways how channel innovation can change the rules of the game. Distribution channels are value delivery systems Distribution channels are not just physical conduits through which products flow, they are primarily a way to connect with customers and to provide a means of delivering the value that customers seek. Distribution channels should work in both directions, i. serving the customer on the one hand and providing a means of capturing customer insight and enabling market understanding on the other.

In order to ensure the smooth running of this two-way flow of products and information, there is a requirement for the creation of aligned and seamless connections between all of the entities in the channel. The problem is that often because these players are independent of each other and with low levels of shared information between them, there is little alignment with a consequential impact on the effective and effective working of the channel. One framework that can be helpful in seeking to develop a distribution channel strategy is presented in Figure 3. In a sense it can be argued that distribution channels are actually value delivery systems and hence the appropriateness of this framework. Figure 3. Source: Lanning, M. and Michaels, E. the target market s. Because markets are not homogenous there needs to be a clear understanding of the segmentation of the market and strong insight into the value preferences of each segment. The decision on which segment s the company chooses to compete in should be based on a rigorous and objective analysis of the capabilities that the organisation can access.

The value proposition is an articulation of the compelling reason s why customers should do business with us. Those companies that have recognised this tend to be very focused around developing solutions to buying problems. To this end these companies will seek to develop supply chains and distribution channels that are flexible and that can adapt to customers changing needs. Later in this chapter we will highlight the major changes that are underway in retailing — particularly through the use of multiple channels — and how those companies using conventional and slow-to-change channels have been severely impacted. A key decision therefore concerns the design and structure of the distribution channel, particularly the role if any to be played by intermediaries.

If intermediaries are to be used then they must be seen as partners in the value delivery system. Their role in providing the value that customers seek and in solving the problems that they have must be clearly defined. It is critical that channel partners are seamlessly integrated into the total value delivery system. They should share the same strategic objectives and be committed to the overall value proposition. The importance of a high level of collaborative working across the supply chain is a theme to which we shall return in later chapters but it is clear that without that willingness to work closely together, the value delivery system will not function efficiently. Going to market 59 Communicate the value A prime requirement is to ensure that the value proposition is enunciated and proclaimed not only in the end market but also within the business and to its channel partners.

The idea as we briefly outlined in Chapter 2 is that every person, every department, every business unit has a customer. It may be an external customer but more likely it will be an internal customer. In most conventional organisations this might seem like an alien ­concept. It is not sufficient, though, for employees to know who they are serving, but why. In other words what contribution are they making to the value delivery system and the overall value proposition? The communication process should be two-way.

One of the important roles of any distribution channel is to enable customer feedback and sales data to flow swiftly up the supply chain. Zara, the fast-growing fashion retailer highlighted in Chapter 2, has built a large part of its success on its ability to capture customer reactions to it styles, designs and colours in the store through conversations with sales people. These insights are fed back to the design team in Spain who can use this information to modify products and to guide them when designing new products. Scania, the Swedish truck manufacturer, is another good example of a company that stays in close contact with their customers enabling a close linkage between their approach to channel management and their go-to-market strategy.

It communicates directly with truck drivers, commits to resolving easy-to-fix problems within days and uses the full range of feedback channels from drivers and other end users in its product development processes. On the shop floor, cross-functional collaboration and working groups help employees understand the value of their delivery to the next stage in the workflow, shortening time-to-market for new products and services. Source: Kovac, M. Accessed 5 April For example, serving customers through an Internet-based channel will possibly involve home delivery of products in single units. Compare this with the same customer visiting a retail store and buying the product off-the-shelf in the traditional way.

In other words, the relative delivery costs of the two channels will be quite different. Then when we start to include the inventory investment in each of the two channels the picture might change again because of the different requirements for working capital. In Chapter 4 we will explore in detail the ways in which a clearer view of costto-serve might be obtained through using a different approach to logistics cost accounting. The reason why this information is important is that a lot of the potential financial value that could be captured by the channel is being eroded because of the failure to understand the true costs involved. A further consideration to be taken into account when developing a distribution channel strategy is how should the financial value generated through that channel be shared amongst its members? When a company uses intermediaries, for example a distributor or value-added reseller, then those intermediaries will require a margin on the sales they make.

Rather the margin should be regarded as a recompense for the transfer of cost — and possibly also risk — from the supplier to the intermediary. Thus, for example, if a wholesaler carries inventory on behalf of a manufacturer, then the wholesaler will incur a holding cost on that inventory. As this relieves the manufacturer of the need to carry that inventory, the wholesaler can be recompensed to the extent of the cost saved by the supplier. Sometimes this can be considerable and it might raise questions as to whether the channel should be re-configured to enable a greater share of the value to be retained by the supplier. Innovation in the distribution channel Until recently, channels of distribution changed very little. The same institutions and structures that had existed for centuries were still in place.

The role of the wholesaler, distributor, stockist or retailer remained more or less the same. However a Going to market 61 combination of competitive pressure and technology development has, in the last few decades, brought about dramatic changes in those distribution channels. One of the biggest drivers of these changes has been the rapid rise in the use of the Internet both for on-line shopping and for business-to-business transactions. The Internet has enabled a greater connectivity between sellers and buyers and in the process has disrupted existing channels — particularly impacting the role of intermediaries. using information and knowledge to create new value for their customers. Innovation in the logistics service sector has also been a key enabler of change. The growth of worldwide express delivery providers such as DHL, FedEx and UPS, have made direct-to-customer distribution channels commercially viable for many industries.

The growing demand from the marketplace for faster replenishment and higher levels of availability provide a further impetus for the development of new routes to market which can combine speed of response with a lower cost of ownership to the customer. One impressive example of the way in which distribution channels have been transformed is provided by the stellar growth of the Chinese company Alibaba, highlighted in the box below. Originally Alibaba was a business-to-business portal to enable overseas customers to buy from Chinese suppliers. Alibaba rapidly grew to become a platform to enable a number of other distribution channels to be developed.

Other businesses include Alipay which is an on-line payment service that facilitates transactions across the web. The distinguishing feature of Alibaba is that it is primarily a platform to enable companies, consumers and buyers and sellers generally to connect and to do business with each other. This is an on-line shopping mall where customers can browse and shop at over 1, stores for a whole host of products. Their aim is to provide an e-commerce platform for others to use, making its money through commissions on sales and on-line advertising. It is probably true to say that the rate of change in distribution channels has been greater in recent decades than in the whole of the last century. We have probably not yet fully understood the impact that these changes will have on how companies will go to market in the years ahead. Certainly it will be wise for businesses to keep their current distribution channel strategies under constant review.

Whilst most business sectors have been, or will be soon, disrupted by the Internet and related information and communication technology ICT innovation, perhaps the greatest impact of these developments has been on retailers. After 50 or so years of more or less continuous expansion, major retailers around the globe are having to re-evaluate their strategies. For many years, major retailers such as Wal-Mart, Tesco and Carrefour had ridden a global wave of growing consumer demand for their style of retailing and the products that they offered. However a combination of economic, social and technological disruptions have seemingly combined to bring this expansion to a halt. The jury is still out as to whether this is a permanent change in the retail landscape, but some of the underlying causes of this step-change in the industry are apparent.

One of the main triggers causing this upheaval was the global financial crisis of , which led to a recession across many economies both in the West and in emerging markets. One effect of that recession was to give a boost to those retailers who were able to capitalise on the new consumer focus on value. European retailers such as Aldi, Lidl and Netto were well positioned to exploit this fast-growing segment of the market. Customers now are tending to buy smaller quantities more frequently and to do this at a time and a place that suits them. Hence the rise of convenience stores — smaller formats with limited ranges — catering for time-sensitive shoppers. But perhaps the biggest game-changer of all has been the astronomic rise of on-line shopping through the Internet. In consumer markets there is growing evidence that the Internet is revolutionising both marketing and supply chain management. Every year the volume and value of transactions conducted via the Internet continues to grown in most markets around the world.

The customer can rapidly access information on alternative suppliers, they can make price comparisons, they can access delivery lead-times and they can ask to have their own specific requirements catered for. Equally the supplier can learn more about the customer and can tailor marketing strategies accordingly. One of the best examples is provided by Amazon, which has developed powerful tools to enable it to target existing customers with product suggestions that match the profile of their previous purchases. At the same time, suppliers can use the Internet to better manage demand by steering customers towards products that are currently available from stock or even towards ones that have higher margins.

the use of mobile phones to enable a two-way communication channel to be established between suppliers and customers. Suppliers can use this channel to alert customers to promotional offers, for example. Consumers increasingly are using their mobile phones for Internet access to place orders and to make price comparisons whilst on shopping expeditions. Orders can be placed whilst playing games or watching a film!

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Business Logistics Supply Chain Management 5th Edition by Ronald H Ballou,

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Thus the focus of supply chain management is upon the management of relationships in order to achieve a more profitable outcome for all parties in the chain. Because markets are not homogenous there needs to be a clear understanding of the segmentation of the market and strong insight into the value preferences of each segment. This customer insight will enable the identification of the real market segmentation, i. These channels usually comprise a number of linked entities that perform specific tasks to enable an efficient and effective connection to be established between a supplier and the end user. One of the main triggers causing this upheaval was the global financial crisis of , which led to a recession across many economies both in the West and in emerging markets. In other cases his or her influence will be much greater.

Whilst new customers are always welcome in any business, it has to be realised that an existing customer can provide a higher profit contribution and has the potential to grow in terms of the value and frequency of purchases. English Pages [] Year In other words, the relative delivery costs of the two channels will be quite different. Delivering customer value 55 6. Originally Alibaba was a business-to-business portal to enable overseas customers to buy from Chinese suppliers. At the end of Marchbusiness logistics/supply chain management 5th edition pdf download, a new CEO, Justin King, was appointed with a mandate to halt the slide in shareholder value. Home Business Internet Market Stock Downloads Dvd Games Software Office Parent Category Child Category 1 Sub Child Category 1 Sub Child Category 2 Sub Child Category 3 Child Category 2 Child Category 3 Child Category 4 Featured Health Childcare Doctors Uncategorized.