murphy ppt ch07
TRANSCRIPT
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CHAPTER 7
Demand Management, Order
Management, and Customer Service
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Learning Objectives
To understand the linkages between demand
management, order management, and
customer service
To learn about demand forecasting models
To examine the order cycle and its four
components
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Learning Objectives
To understand the four dimensions of
customer service as they pertain to logistics
To familiarize you with select managerial
issues associated with customer service
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Order Management and Customer Service
Key Terms
Activity-based costing
Benchmarking
Cause-and-effect
(associative)forecasting
Collaborative planning,forecasting, and
replenishment (CPFR) Customer profitability
analysis (CPA)
Customer service
Demandmanagement
Judgmentalforecasting
Make-to-order
Make-to-stock Multichannel
marketing systems Order cycle
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Order Management and Customer Service
Key Terms
Order delivery
Order fill rate
Order management
Order picking andassembly
Order processing
Order to cash cycle
Order transmittal
Order triage
Pick-to-lighttechnology
Service recovery
Time seriesforecasting
Voice-based orderpicking
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Demand Management
Demand management can be defined as the
creation across the supply chain and its markets
of a coordinated flow of demand.
Source: John T. Mentzer, A Telling Fortune, Industrial Engineer, April 2006, 42-47.
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Demand Management
Demand (sales) forecasting
Refers to an effort to project future demand
Is a key component in demand management
Is helpful in make-to-stocksituations
Is helpful in make-to-ordersituations
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Demand Management
Three basic types of demand forecasting models:
Judgemental
Time series
Cause and effect (associative)
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Demand Management
Demand forecasting issues:
Selection of forecasting technique(s) depends on
many factors
Selecting an inappropriate technique will reduce
forecast accuracy
Forecast accuracy can have important logistical
implications Computer forecasting software unable to
completely eliminate forecast errors
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Order Management
Order management is the activities that take
place in the period between the time a firm
receives an order and the time a warehouse isnotified to ship the goods to fill that order
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Order Management
Order management refers to management of thevarious activities associated with the order cycle
Order cycle (replenishment cycle or lead time)refers to the time from when a customer placesan order to when goods are received
Some organizations include order to cash cycle intheir order management model
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Order Management
Four stages of the order cycle include:
Order transmittal
Order processing
Order picking and assembly Order delivery
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Order Management
Order transmittalis the series of events thatoccur between the time a customer places orsends an order and the time the seller receivesthe order
Methods of order transmittal In person
Mail
Telephone
FAX
Electronically
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Order Management
Order processing refers to the time from whenthe seller receives an order until an appropriatelocation (i.e. warehouse) is authorized to fill the
order
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Order Management
Order processing includes:
Checking for completeness and accuracy
A customer credit check
Order entry into the computer system Marketing department credits salesperson
Accounting department records transaction
Inventory department locates nearest warehouse tocustomer and advises them to pick the order
Transportation department arranges for shipment
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Figure 7-1: Flowchart of Order Handling
(Order Processing) System
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Order Management
Order picking and assembly includes all
activities from when an appropriate location is
authorized to fill the order until goods are
loaded aboard an outbound carrier
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Order Management
Order picking and assembly
Often represents the best opportunity to improve
the effectiveness and efficiency of an order cycle
Can account for up to 2/3 of a facilitys operating
cost and timeSource: Susan Lacefield, Ten Tips for Faster Picking, Logistics Management, July 2005, 71-76.
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Order Management
Examples of Order Picking and Assembly
technology:
Handheld scanners
Radio-frequency identification (RFID)
Voice-based order picking
Pick-to-light
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Order Management
Order delivery is the time from when a carrier
picks up the shipment until it is received by the
customer.
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Customer Service
Customer service is the ability of logistics
management to satisfy users in terms of time,
dependability, communication , and
convenience.Source: Roger A. Kerwin, Steve W. Hartley, and William Rudelius, Marketing, 9th ed. (Boston,
MA: McGraw-Hill/Irwin, 2009), Chapter 16.
Customer service is much more difficult for
competitors to imitate than price cuts or othercompetitive strategies
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Customer Service
Four dimensions of customer service include:
Time
Dependability
Communication
Convenience
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Managing Customer Service
Four specific customer service considerations
include:
Customer profitability analysis (CPA)
Establishing customer service objectives
Measuring customer service
Service failure and recovery
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Managing Customer Service
Customer Profitability Analysis(CPA) is theallocation of revenues and costs to customer
segments or individual customers to calculate the
profitability of the segments or customers
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Managing Customer Service
Customer Profitability Analysis (CPA) Suggests that different customers consume differing
amounts and types of resources
Recognizes that all customers are not the same andsome customers are more valuable than others to anorganization
Can help to identify when an organization shouldpursue different logistical approaches for differentcustomer groups
Has been facilitated by the acceptance of activity-based costing
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Managing Customer Service
Establishing Customer Service Objectives
Specific
Measurable
Achievable
Cost-effective
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Managing Customer Service
Measuring Customer Service
you cant manage what you cant measure
Must determine data sources to be used
Must determine what factors to measure
Organizations must resist excessive measurement
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Managing Customer Service
Service Failure and Recovery Situations will occur where actual performance does
not meet the customers expected performance (i.e.
service failure) Examples of order-related service failures include:
Lost delivery
Late delivery
Early delivery
Damaged delivery
Incorrect delivery quantity
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Managing Customer Service
Service Failure and Recovery
Service recovery
Process for returning a customer to a state of
satisfaction after a service or product has failed tolive up to expectations
Is often costly
May lead to increases customer loyalty Unsatisfactory service recovery magnifies the
initial failure
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Copyright Notice
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