3 – Customer Accommodation

Introduction

Logistics adds to an organization’s success by ensuring timely and correct product delivery to customers. The most important question is, “Who is the customer?” In logistics, a client is any delivery location. Consumers’ residences, retail and wholesale enterprises, and the receiving docks of a company’s manufacturing plants and warehouses are common destinations. In certain circumstances, the client is a different organisation or individual who accepts responsibility for the product or service being given. In many other cases, the customer is a different facility of the same company or a business partner at a different point in the supply chain.

Regardless of motivation or delivery goal, the customer is the focal point and driving factor in determining logistical performance standards. When developing a logistical strategy, it is critical to comprehend customer service deliverables properly. This unit discusses the nature of customer service and the development of facilitating tactics.

A customer is any delivery location to a logistician. Consumers’ residences, retail and wholesale enterprises, and the receiving docks of industrial plants and distribution centres are common destinations. In certain circumstances, the client is a different organisation or individual who accepts responsibility for the product or service being given. In many other cases, the customer is a different facility of the same company or a business partner at a different point in the supply chain. Even if the stores are part of the same business, it is usual for the logistics manager of a retail distribution centre to consider the individual stores to be serviced as customers of the distribution centre.

Regardless of motivation or delivery goal, the customer is the focal point and driving factor in determining logistical performance standards. It is vital to comprehend thoroughly the client requirements that must be met while developing a logistical strategy. This unit describes the many techniques for meeting customers’ needs.

3.1 Customer-Centered Marketing

Understanding how logistical competency adds to marketing performance is a logical starting point. Firms driven by market opportunity see addressing client needs as the driving force behind all actions. Marketing strategies are designed to reach specific markets and generate profitable transactions. This posture, also known as the marketing notion, arose as part of the post-World War II change from seller-dominated to buyer-dominated marketplaces. Three fundamental principles are highlighted in this section. The essence of a marketing perspective in business planning is first developed. The increased emphasis on building logistics as a core capability is emphasised. Using logistical competence as a strategic resource is crucial in customer service planning. Finally, the changing character of the most desired logistics practice regarding product life-cycle requirements is investigated. Recognizing that logistical performance should be adjusted over time to meet changing marketing demands is critical.

3.1.1 Managing Customer Waiting Periods

Most good customer service criteria include waiting time – in airlines, banking, health care, retail, and so on. Customers tend to lose patience, and the service provider must agonise over prioritising speed over security. However, delayed service is viewed as inefficient around the world. Waiting time management is difficult, but it may be handled creatively. Doctors’ clinics have ergonomically built sofas, magazines, and quietly played televisions. Hairdressers also have magazines and extra chairs, while airlines spend money on exclusive lounges. Here are a few instances of customer wait management:

• Keep the consumer entertained by reading publications, listening to music, or watching television.
• Inform the consumer that the service procedure has begun; this will make them less agitated. Bankers begin preliminary administrative operations while doctors move patients to other examination rooms.
• Make an effort to reassure consumers because fear makes waiting seem longer.
• Provide the consumers with as much information as possible, lowering their tension and giving them reasons to get occupied.
• Do not make it evident that some consumers are more equal than others; discrimination will enrage and irritate customers.
• Encourage customers to interact with one another to keep them interested and engaged. The wait may seem long if they are alone.

3.1.2 Dealing with Difficult Customers

Surprisingly, the characteristics and behaviours of the customers also have a significant impact on quality-of-service transactions.

1. Education and background: occupation, skills, experience, family history, social circle, etc.

A professional consumer, such as a chartered accountant, will better grasp bank savings account opening norms than an illiterate farmer. The latter would almost certainly require comprehensive explanations in his language and assistance in filling out all of the forms, which would surely make the service transaction take longer. Furthermore, service delivery would suffer if the provider was not fluent in the customer’s language or could not communicate at the customer’s comprehension level.

For example, if there is a “system fault,” an educated housewife may feel helpless inside an ATM kiosk and must resort to “manned” banking operations.

2. The customer’s mood, attitude, and personality may impede a seamless service transaction.

• When a raucous non-family party disrupts the quiet ambience in a popular family restaurant, the service provider fails to deliver on the promise.
• The ill-mannered group’s demeanour significantly differs from the ordered demeanour of the rest of the family-type clients. Despite their modest number, they damage the experience of all other customers. For the service marketer, this is also an uncontrollable aspect.

For high-quality service transactions and delivery, the supplier and the customers must carry out their responsibilities according to the operational blueprints. While it is possible to regulate the quality of internal customer performance to a large extent, extracting compliant behaviour from customers becomes difficult.

Customers of the same service firm and offer differ from one another because of the following:

-Differing educational, family, occupational, and financial backgrounds;

-Differing skills, attitudes, and aptitudes; -Differing moods, involvement, experience, awareness, and perspective

If the service must be supplied with consistent quality—and customer engagement is required for service delivery—then the service marketer must account for the differences in the customers’ characteristics. The client must be controlled, which may be accomplished through customer training and education and selecting the proper group of desirable and manageable consumers by the service marketer.

-Training and education of the customer: As previously stated, airline personnel gesture and verbally advise passengers on flight safety measures before takeoff. Package tour companies provide thorough instruction books and other information pamphlets to their consumers, requiring them to sign a slew of behaviour and disclaimer clauses.

-Targeting the chosen segment: In maintaining a high minimum balance condition for its account customers, Citibank led the way, with other foreign banks following suit and eventually most private banks. In the process, they escaped the vast majority of the mass-banking crowd, which was unprofitable (from their perspective) and varied widely regarding service participation quality.

-Customer retention strategies: service marketers should prioritise client retention since it is less expensive than customer acquisition. A satisfied consumer will also contribute significantly to the bottom line through favourable referrals and repeat purchases throughout his or her lifetime.

Levels of Retention Strategies

• Financial bonds are formed through favourable pricing and incentives;
• Social bonds through personal and long-lasting relationships;
• customization bonds through mass customization, feed-forward, and anticipation;
• Structural bonds through joint involvement and integrated systems.

3.2 Customer Service

Marketing determines the best logistical performance. The main strategic challenge is determining the combination of services and desired format to support and encourage profitable transactions.

Although most senior managers believe customer service is crucial, they find it difficult to articulate precisely what it is and does. The two most popular meanings are that they are easy to conduct business with and attentive to customers’ demands. While such broad generalisations have qualitative appeal, it is difficult to comprehend what “easy to do business with” implies for businesses that interact with many consumers regularly. A working definition of customer service is required before developing a strategy.

LaLonde and Zinszer investigated three perspectives on customer service:

(1) as an activity,

(2) in terms of performance levels, and

(3) as a management philosophy.

Viewing customer service as an activity implies that it can be managed. Thinking about customer service in terms of performance levels is valid as long as it can be correctly monitored. The concept of customer service as a management philosophy highlights the significance of customer-focused marketing. Understanding what is involved in excellent customer service requires understanding all three dimensions.

A comprehensive definition of customer service should incorporate features from all three perspectives.

Customer service is a cost-effective method of bringing considerable value-added benefits to the supply chain.

Providing outstanding customer service appears to add value for all members of the supply chain. As a result, a customer service programme must define and prioritise all tasks necessary to meet operational goals. A customer service programme must also include performance evaluation measures. Goal achievement and relevancy must be used to assess performance. The fundamental question in developing a customer service strategy remains: Is the expense of accomplishing the specified service goals a sound investment, and if so, for which customers? Finally, providing something more to critical consumers than high-level basic service is conceivable. Value-added services are those that go above and beyond the fundamentals. Value-added services, by definition, are unique to specific consumers and extend beyond a company’s standard service programme.

3.2.1 Basic Service Capability

Customer service has three critical elements: availability, performance, and dependability. These characteristics are now addressed in greater depth. Numerous research studies have investigated the relative value of the three service qualities in various business contexts. The overall conclusion is that all three characteristics of service are critical. However, a specific service attribute may be more or less necessary depending on the marketing situation.

3.2.2 Availability

The ability to have inventory when a consumer requests it is called availability. There are several techniques to obtain availability. Stocking inventories in anticipation of customer orders is the most typical approach. One of the fundamental concerns in logistics system design is the optimum number, location, and stocking policies of warehouses. An inventory stocking strategy is typically based on predicted requirements. It may include differential stocking techniques for certain goods based on sales popularity, the relevance of the specific item to the overall product line, profitability, and the value of the merchandise.

A company’s safety stock policy is an integral part of availability. Safety stock exists to accept forecast mistakes and cushion supply delays during base stock replenishment. Generally, the larger the safety stock required, the greater the desire to defend against out-of-stocks. As a result, a high commitment to safety stock often indicates a more significant average inventory. Safety stock can account for more than half of a company’s average inventory in high-variance conditions.

It should be evident that obtaining high levels of constant inventory availability involves far more planning than allocating goods to warehouses based on sales estimates. The objective is to maintain high levels of inventory availability for selected or core customers while keeping overall stock and facility investment to a minimum. Such stringent performance necessitates the comprehensive integration of all logistical resources and specific targets for availability commitments to particular clients. Exact inventory availability plans are not created or handled on an “average” basis. As a result, availability is determined by three performance indicators: stockout frequency, fill rate, and orders shipped complete. These three metrics assess a company’s ability to meet specific client inventory requirements.

3.2.3 Stockouts Frequency

The frequency of stockouts is the likelihood of a stockout occurring. In other words, this metric reflects if a product is ready for client use. When demand exceeds product availability, a stockout occurs. The frequency of stockouts measures how frequently demand for a given product exceeds availability. The sum of all stockouts across all items indicates how well a company is positioned to meet fundamental service commitments. This metric ignores the reality that some goods may be more crucial than others regarding availability. However, stockout frequency is an excellent place to start determining inventory availability.

3.2.4 Fill Rate

The fill rate measures the impact of stockouts over time. Just because a product is out of stock does not necessarily mean a customer requirement is going unfulfilled. Before a stockout affects service performance, it is required to confront a client requirement. Then, it’s time to determine why the product isn’t available and how many units the customer wants. Customer service objectives often specify fill rate performance. A company’s track record in meeting client requirements can be measured by measuring the amount of stockouts. For instance, if a buyer wants 50 items and only 47 are available, the order fill rate is 94 percent (47/50).

The basic approach for efficiently measuring fill rate is examining performance over a given period, including several customer orders. As a result, fill rate performance can be calculated for a single customer or any combination of customers or business segments.

Fill rate can also distinguish the degree of service provided on specific products. In the previous scenario, if all 50 products were vital, an order fill percentage of 94% may result in a stockout in the customer’s business, causing significant discontent. However, if most of the 50 products were relatively slow movers, a fill rate of 94 per cent might be enough. The customer may be willing to accept a backorder or even reorder the short items. A company can select vital products with excellent fill rates based on client requirements. To meet client expectations, fill rate tactics can then be established. The frequency of stockouts and the fill rate are determined by client order behaviour. For example, if a company places regular replenishment orders for tiny quantities, the likelihood of stockouts will grow due to shipment variability. In other words, each replenishment order has an equal probability of being delayed in delivery.

Thus, more stockouts will occur as the quantity of orders affecting safety stock increases. Conversely, if a company placed fewer major replenishment orders, the possible stockout frequency would be lower, and the predicted fill rate would be higher.

3.2.5 Orders Shipped Complete

Orders are shipped completely to measure the time a firm has the entire inventory ordered by a customer. It is the most stringent measure since it considers full availability an acceptable performance standard. Orders supplied entirely specify the potential times when customers will receive perfect orders, assuming that all other aspects of performance are flawless.

These three availability criteria work together to determine how well a company’s inventory strategy meets customer expectations. They also serve as the foundation for selecting the right level of availability to include in a company’s primary service platform.

3.2.6 Operational Performance

The performance cycle was positioned as the logistical and operational structure. The mission, the type of customer being served, differential performance cycles, and the degree of operational variability experienced across time are all factors to consider. Operational measures specify the expected performance cycle in terms of

(1) speed,

(2) consistency,

(3) flexibility, and

(4) malfunction/recovery. Operational performance requires a logistical commitment to expected performance time and acceptable deviation.

Speed

Performance-cycle speed is the elapsed time between placing an order and receiving the shipment. Such dedication must be evaluated through the customer’s eyes. The time required to complete a performance cycle can vary greatly depending on the logistical system design. Thanks to today’s advanced communication and transportation technology, order cycles can be as short as a few hours or as lengthy as several weeks or months.

Customer inventory consignment, of course, represents the highest level of commitment to both inventory availability and operating speed. The commodity is inventoried at a customer’s business establishment in anticipation of necessity in consignment agreements. While consignment may be excellent for a customer, it can be costly for a supplier to do business. Consignment arrangements are often limited to essential products that, if not supplied precisely when needed, can result in severe loss of efficiency or effectiveness, such as machine components and emergency medical supplies. Business-to-business marketing and the healthcare industry are two examples of typical consignment circumstances.

The more common business arrangement is for a supplier’s delivery guarantee based on customers’ performance-cycle speed expectations. In emergencies, service can be provided in hours via customised delivery from a nearby warehouse or overnight via extremely dependable transportation services. Typically, business relationships are built around performance-cycle standards, allowing efficient logistical operations while meeting client needs. To put it another way, not all clients want or desire maximal speed if it increases in price or effective logistics cost.

The time of performance cycles is directly related to inventory requirements. Typically, the less inventory investment clients require, the faster the expected performance. This link between performance time and customer inventory investment is the basis of the dependability of time-based logistics solutions.

Consistency

While speed of service is essential, most logistical managers place a higher value on consistency. Consistency refers to a company’s ability to produce on time over many performance cycles—failure to remain consistent results in consumers carrying extra safety stock to protect against possible late delivery. Whereas availability is concerned with the capacity to ship items when needed, and performance-cycle speed is concerned with the commitment to complete all work necessary to deliver specific orders on time, consistency is concerned with long-term compliance with delivery obligations. The issue of consistency is critical in logistical operations.

Flexibility

The ability of a company to meet unusual customer service requirements is referred to as operational flexibility. The ability of a company to handle unexpected circumstances is strongly tied to its logistical proficiency. The following are examples of typical incidents that necessitate flexible operations:

• Adjustments in basic service arrangements, such as one-time changes in ship-to-locations
• Assistance with one-of-a-kind sales and marketing campaigns
• New product launches
• Product discontinuation
• Supply disruption
• Product recall
• Service level customization for individual markets or customers
• Product modification or customisation occurs while the product is in the logistics system, such as pricing, mixing, or packing.

The ability to be adaptable is, in many ways, the heart of logistical brilliance. A company’s overall logistical competency is generally determined by its ability to “go the extra mile” when necessary to meet a critical customer requirement.

Malfunction/Recovery

Mistakes will happen no matter how well-oiled a company’s logistics organisation is. It is challenging to meet service requirements constantly in all types of operational conditions. Programs can sometimes be set up to prevent or accommodate particular scenarios, hence preventing malfunction. Such exceptional commitments must be limited to justifiable circumstances. In terms of the basic service programme, the objective is to anticipate malfunctions or service failures and to have contingency measures in place to ensure recovery. As a result, the primary service programme provides a high degree of service while acknowledging that no programme is fail-safe. When service failures occur, the customer service programme should have contingency plans outlining the estimated recovery time and monitoring compliance.

The key to logistics quality is dependability. The ability to meet anticipated inventory availability and operational performance requirements is a key quality concern in logistics. Beyond service standards, quality compliance entails the ability and willingness to provide accurate customer information about logistical operations and order status on time. According to research, a company’s ability to provide accurate information is one of the most important measures of customer service competency. Customers increasingly indicate that advanced details on the contents and timing of a purchase are more critical than complete order fulfilment. Surprises irritate customers! Customers can usually adjust to a stockout or late delivery scenario provided they are given sufficient notice.

In addition to service reliance, ongoing improvement is a significant component of service quality. Like other managers within the company, Logistical managers are concerned with reaching operational goals with as few glitches as feasible.

3.2.7 Service Reliability 

Service reliability concerns a company’s capacity to conduct all order-related tasks and provide customers with crucial information about logistical operations and status. Aside from availability and operational performance, dependability attributes may include shipments arriving damage-free, invoices being correct and error-free, shipments being sent to the proper destinations, and the precise amount of merchandise ordered being included in the shipment. While these and countless more factors of overall reliability are complex, the point is that customers want suppliers to manage a wide range of business matters regularly. Furthermore, service reliability entails the capacity and willingness to offer correct information to customers about operations and order status. According to research, a company’s capacity to give accurate information is one of the most essential characteristics of a solid service programme. Customers increasingly indicate that advanced notification of difficulties, such as unfinished orders, is more important than the whole order itself. Customers despise surprises! Customers may adjust to a partial or late delivery if given advance notice.

3.2.8 The Perfect Order

The ultimate in logistics service is to do everything correctly and correctly the first time. It is not enough to provide a complete order but to do so late. Delivering a complete order on time is also insufficient if the invoice is wrong or the product is damaged throughout the handling and transportation process. Previously, most logistics managers evaluated customer service performance in terms of several independent measures: fill rates were assessed against a fill standard; on-time delivery was evaluated as a percentage of deliveries made on time relative to a standard; damage rates were evaluated relative to a damage standard; and so on. Total service performance was deemed sufficient when each measure was acceptable compared to the standard.

However, logistics and supply chain executives have recently begun to focus on zero-defect or six-sigma performance. Logistics procedures have been exposed to the same scrutiny as manufacturing and other processes in the firm as an extension of Total Quality Management (TQM) activities within enterprises. It was realised that if standards for customer service components are created independently, even if performance meets standards on each independent measure, many customers may experience order-related problems.

For example, suppose orders are shipped complete, on time, damage-free, and with correct documentation on average. In that case, the probability that any order will be delivered with no defects is approximately 88.5 percent. This is because the likelihood of any failure occurring in combination with any other failure is .97 x .97 x .97 x .97. The inverse is that some problem will exist on up to 11.5 percent of all orders.

The idea behind the perfect order is that it should be delivered completely, on time, at the correct place, in flawless shape, and with full and accurate documentation. Each of these different pieces must meet the requirements of the consumer. Thus, entire delivery refers to the delivery of all products requested by the client, on time refers to the delivery of products on the date and time specified by the customer, and so on. In other words, total order cycle performance must be executed flawlessly – availability and operational performance must be flawless, and all support activities must be completed precisely as promised to the customer. While it may not be possible to provide zero defects as a standard service plan to all clients, such high-level performance may be available on a selected basis.

3.3 Customer Satisfaction

Customer satisfaction is the degree to which a product or service meets or exceeds the customer’s expectations. Logistics exists to meet customers’ needs by facilitating critical manufacturing and marketing operations. The most difficult service obligation is to enable client success. A success programme and its associated commitments, by definition, focus on long-term business relationships with high growth potential and a high probability of achieving the desired results.

3.3.1 Measurement of Customer Satisfaction

Service marketers encounter numerous obstacles because of the fundamental difference between service and goods. They constantly face challenges in understanding customer needs and expectations from service, dealing with different types and varieties of people—internal and external customers—and delivery issues, and keeping promises made to customers.

The most exciting aspect, however, is quality measurement and monitoring. Some questions about service quality have yet to be answered definitively:

1. How can service quality be defined and improved when the product is intangible and non-standardised?
2. How can new services be efficiently planned and tested when the service is mainly intangible?
3. How can the service provider be optimistic that its communication was effective, consistent, and relevant, mainly when its other marketing channels also communicate? This is especially true regarding the providers’ involvement in the service transaction.

The following are the different operational objectives that logistics assists in reaching and so maximising customer happiness and success:

Rapid Response: Rapid response refers to a company’s ability to meet customer service needs promptly. Information technology has expanded the capacity to postpone logistical operations until the last feasible moment and provide essential merchandise quickly. As a result, excess inventories previously stocked in anticipation of customer requirements are no longer necessary. The capacity to respond soon transforms the operational focus from an anticipatory posture focused on planning and inventory stocking to responding to customer requirements on a shipment-by-shipment basis. In a time-based system, inventory is often not transferred. There is minimal tolerance for operational failures until client requirements are known and performance is committed.

Minimal Variance: Variance is an unexpected event that degrades system performance. Any facet of logistics operations can cause variation. Delays in receiving client orders, unforeseen manufacturing disruptions, items arriving damaged to a customer’s location, or delivery to an erroneous place. These cause a temporal lag in operations that must be rectified. The potential for variance reduction applies to both internal and external operations. A logistics system’s operational zones are vulnerable to potential variation. The old answer was maintaining a safe stock inventory or using high-cost premium transportation to accommodate fluctuation. Given their expense and associated risk, these approaches have been replaced by leveraging information technology to establish positive logistical control. Variances are minimised to the extent that logistical productivity improves due to cost-effective operations. As a result, minimising variation is a fundamental goal of overall logistical performance.

Minimum Inventory: Assets, commitment, and relative turn velocity are all used to achieve the goal of the lowest variance. Total commitment refers to the monetary worth of inventory distributed throughout the logistical system. Turn velocity is the rate at which inventory is consumed over time. High turn rates and availability indicate that inventory assets are being used effectively. The goal is to reduce inventory deployment to the lowest possible level while meeting customer service standards to obtain the lowest overall logistics cost. As managers aim to reduce inventory holding, zero inventories have become increasingly significant. The reality of system reengineering is that operational faults do not become apparent until inventories are reduced to the bare minimum.

Inventories can provide a better return on investment When they result in economies of scale in manufacturing or procurement. The goal is to minimise and manage inventory to the lowest possible level while attaining the intended operating goal. To achieve this goal, the logistics system architecture should govern commitment and turn velocity for the entire company, not just each business site.

Consolidated Movement: Transportation is the most essential logistical cost. Transportation cost is directly proportional to the type of goods, cargo size, and distance. Premium-service logistical systems rely on high-speed, small-shipment transportation. Premium transportation is usually expensive. It is preferable to accomplish movement consolidation to reduce transportation costs. The lower the transportation cost per unit, the greater the overall package and the longer the distance travelled. Creative programmes for grouping small shipments for combined transit are required. Working arrangements extending outside the total supply chain are necessary for these programmes.

Quality Improvement: Another logistical goal is to seek constant quality improvement. Total Quality Management (TQM) has become a significant industry commitment. One key factor contributing to logistics is total devotion to TQM. Logistics adds value if a product fails or service promises are broken. Once risen, logistical costs cannot be reversed. When quality fails, logistical performance must usually be reversed and then redone. Logistics must meet the necessary quality standards. The difficulty of achieving zero defects and the fact that logistical operations must often be completed throughout a large geographical area all day and night exemplify logistical performance. The fact that most logistical labour is conducted under the supervisor’s vision exemplifies the difficulty of quality. Reworking a customer’s purchase due to an inaccurate shipment or in-transit damage is more expensive than doing it correctly the first time. Logistics is a critical component of establishing and maintaining continuous TQM improvement.

Life-cycle Support: Life-cycle support is the ultimate logistical goal. Few things are sold without assurance that the product will perform as stated over time. The regular flow of value-added inventory to customers must be reversed. Product recall is a critical competency due to more stringent quality requirements, product expiration dates, and liability for dangerous consequences. Return logistics needs are also a result of increasing legislation restricting the disposal of beverage containers and packaging materials and encouraging their recycling. When there is a possible health liability, the most crucial feature of reverse logistical operations is the necessity for absolute control. A recall campaign is related to a maximum customer service approach that must be carried out at any cost. The operational needs of reverse logistics range from low total-cost solutions, such as returning bottles for recycling, to high-performance solutions for essential recalls.

The significance of service support logistics varies according to the product and buyer. This is especially true for companies that sell consumer goods or industrial equipment. Commitment to life-cycle support is a problematic operational requirement and one of the most expensive aspects of logistical operations. A logistics system’s life-cycle support capabilities must be carefully built. Due to global attention to environmental concerns, reverse logistical competency necessitates the ability to recycle ingredients and packaging materials.

Logistical service is measured using the following criteria:

Availability: Having enough inventory to regularly meet the customer’s material or product requirements is referred to as availability.

Operational Performance: The time it takes from receiving an order to delivering it is called operational performance. Delivery speed and consistency are essential aspects of operational performance. A company’s operational performance can be judged by its adaptability in addressing unique and unexpected client requests.

Service Reliability: Service reliability concerns the quality characteristics of logistics. Management must be committed to continual improvement if logistics performance is to consistently fulfil customer expectations.

3.3.2 Customer Satisfaction Model

This model might assist a company that wants to improve service quality by focusing on its strategies and operations. It can be used to uncover and identify service delivery and design areas that may be lacking in quality and to measure and monitor service quality.

The customer’s perception of service quality. There is no other way to understand or administer. Because service is intangible, the only way to measure quality in service is to measure the customer’s anticipation before receiving service and his perception after the experience, i.e. the service encounter. The difference between the two is a measure of service quality. The wider the difference, the poorer the firm’s service quality; the shorter the gap, the better the firm’s service quality; i.e., the firm matches the customer’s expectations… so far! Because consumer expectations are constantly rising, so must service quality.

the measurement of customers’ (in this example, students’) expectations before service delivery (before admission), the measurement of perception of the experience following service contact (after admission, during the 2-year course, and after gathering), thus assessing the difference between the two

The model claims two kinds of gaps:

The Customer Gap is the difference between what customers expect and what they perceive. In other words, this is the gap in service quality as perceived by customers. Customers form expectations due to receiving external cues from various sources, ranging from those controlled by the company to social influences. These will serve as the foundation for his future references for his military experience. For all practical reasons, the customer’s perceptions indicate the service as obtained because what we perceive is what we experience. Everything is based on perceptions.

External stimuli controlled by the company include service product/offer, price, advertising, promotions, displays, outlets, etc.

Word-of-mouth communications and reference groups are examples of social influences as external stimuli. Other drivers of expectations are personal needs and the buyer’s experience.

The customer gap represents the gap between actual performance and the customer’s impression of the service. Customers make many subjective assessments. Previous experiences may have influenced them and altered their perception of quality. For example, a customer may be satisfied with a particular restaurant, yet his most recent encounter there (due to a new waiter) may have left him dissatisfied, washing away years of joyful memories all at once.

An organisation’s responsiveness to satisfy the customer’s expectations is fundamental to service excellence. The perceived service quality is used to assess service performance. A service’s quality is comprised of two components:

The result of the service operations procedure is technical quality.

Functional quality concerns the process, particularly the contact between the client and the service provider.

These two aspects introduce a significant amount of subjectivity into the service process.

Any service business would want to close the gap between what is expected and what the customer receives. To them, this would be vitally necessary to establish a long-term relationship with the customer and keep him. However, to close the Customer Gap, another gap must be closed: the Provider Gap.

The Provider Deficit: There are four supplier gaps, which together account for the Customer Gap. These are the shortcomings of the service firm. The provider gap (also known as the Company Gap) must be closed to narrow the customer gap. The four provider gaps are as follows:

Gap-1: Customer expectation vs. management perception.

Top management’s failure to perceive what the client wants is the primary reason a company cannot meet a customer’s expectations. A perceptual curtain of ignorance, hubris, or criminal neglect has blinded the company.

Gap-1 can emerge for various reasons, including insufficient marketing research, a lack of upward communication within the organisation, a lack of attention to relationship building (a “don’t care” mentality), and so on.

Gap-2: Management perception against service quality expectation.

This gap is generated during the service product design process and the establishment of service quality requirements during service transactions. In the design process, this gap emerges while translating management’s notion of customer expectations into design specifications. Managers would establish service quality criteria based on the client’s requirements – a risky assumption. The ramifications of this gap include that even if the firm has a crystal-clear knowledge and grasp of the customer’s expectations, there is still the possibility of misinterpretation, resulting in the establishment of incorrect specifications, service designs, and standards.

For example, a bank may claim that clients prefer customer-friendly engagement, yet the standard is computerization, which is impersonal and neutral. There is no human interaction to back up the concept of ‘friendliness.’

Gap-2 can exist for various causes, including failure to connect service design to service positioning, an unsystematic new-service development process, a lack of customer-defined service standards, and a formal procedure for setting service quality targets.

Gap-3: Service quality criteria versus service delivery.

This occurs at the service provider level when there is a mismatch between the specified service standards and those supplied to the clients. This is most likely the bane of all public-sector institutions, including banks, insurance firms, hotels, travel agencies, and hospitals. The management’s perception and service design criteria could be correct and flawless. However, if the interacting service provider falls short of the established requirements during service delivery, the consumer will perceive the company is underperforming. This is especially crucial for a firm that relies on individuals to complete the last transaction. To put it mildly, public sector banks may have the best design specifications set by the Reserve Bank of India; however, late-arriving staff, corrupt employees (the Harshad Mehta scam of misuse of Portfolio Management Funds and the internal document mess-up in State Bank of India) would result in significant gaps in quality!

Some of the causes of Gap-3 are ineffective recruitment, role ambiguity, role conflict, lack of empowerment, control, and poor teamwork, failure to match supply and demand (in a retail store, there would be peak crowds in the evenings and slack demand in the afternoons, but employee strengths would be the same), customers not cooperating or failing to live up to their roles (lack of knowledge and responsibilities), channel conflicts, and so on.

Gap-4: Service delivery – external customer communications.

This is primarily a communication problem. The gap is the discrepancy between the aim and capabilities of service delivery and what is communicated to customers. Over-hyped communication raises the customer’s expectations, and his service quality and delivery benchmarks skyrocket. The firm will find it challenging to match the expectations, and there will be a gap. The tragedy is that the buyers would have been satisfied without the hype. They return, though, with recollections of disappointment and are truly dissatisfied. This is due to the firm’s lack of communication. For example, Doordarshan, the much-maligned state TV broadcaster, might announce a particular programme, say an interview with Mr. Amitabh Bachchan, to be shown at 7 p.m., only to fail at that time, causing tremendous disappointment. Despite an apology – even if it were forthcoming – the viewers would curse and refuse to forgive DD.

The following factors contribute to Gap-4: a lack of cohesiveness in marketing communications; a lack of a robust internal marketing programme; a failure to meet customers’ expectations through communications; over-promising in advertising and personal selling; insufficient horizontal communication between sales and operations; differences in policies and procedures across branches, and so on.

What is more significant after investigating methods and techniques of assessing service quality is to identify any relationship, linear or otherwise, between service quality and marketing. This would go a long way toward emphasising the significance and usefulness of measuring service quality. We have developed the following relationships: customer retention and cost reduction (the ‘leaking bucket hypothesis’), customer satisfaction and loyalty, customer loyalty and profitability (the ‘service-profit chain’), customer retention, and customer net present value. Relationships between service quality and profits, service quality and marketing, and service quality and customer service must still be established.

If the premise is correct, and there is proof of any linear relationship between the variables, customer service should become one of the most important instruments for service marketing.

3.4 Customer Success

Some businesses have realised in recent years that an additional commitment may be made to get a true competitive advantage through logistical performance. This commitment is founded on the realisation that a company’s capacity to grow and expand market share depends on its ability to recruit and retain the most successful consumers in the industry. The key to customer-focused marketing is for the business to leverage its performance skills to improve the success of those consumers. This emphasis on customer success demonstrates a significant commitment to accommodating customers.

Firms generally evaluate their customer service performance regarding how well specific internal standards are met. The customer satisfaction platform is based on the notion that consumers have performance expectations and that the only way to assure customer satisfaction is to measure their views of performance concerning those expectations.

Customer success turns the attention away from expectations and onto the customers’ actual needs. While customer criteria are the foundation for expectations, they are different. Requirements are routinely reduced into expectations due to views of previous performance, word-of-mouth, or statements from the firm itself. This helps to explain why simply meeting expectations may not result in satisfied customers.

For example, customers may be content with a 98 percent fill rate. Still, a 100 percent fill rate on specific items or components may be required for the company to execute its strategy successfully.

3.4.1 Achieving Customer Success

A customer success programme entails a detailed grasp of specific client requirements and a commitment to long-term commercial partnerships with significant development and profitability potential. Such a commitment cannot likely be provided to all potential clients. It necessitates rigorous collaboration between enterprises and customers to understand requirements, internal processes, the competitive environment, and anything else required for the client to be successful in its competitive arena. Furthermore, a business must know how to leverage its skills to improve customer performance.

A customer success programme necessitates a thorough supply chain perspective from logistics executives. The typical objective of basic service and satisfaction programmes is for the company to try to meet the standards and expectations of next-destination customers, whether they are consumers, industrial end users, intermediate or even internal customers. Typically, how such customers interact with their consumers is not considered a concern. Logistics leaders must shift their focus according to a supply chain viewpoint and a customer success programme. They must comprehend the whole supply chain and the various levels of customers within that supply chain and establish plans to guarantee that next-destination consumers fulfil the customers’ criteria farther down the supply chain. If all supply chain members embrace this viewpoint, then everyone benefits.

Collaborating between suppliers and consumers to identify potential paths to success may result in the most significant breakthroughs in rethinking supply chain operations. Such arrangements are not conceivable without considerable information interchange between businesses to permit an in-depth understanding of requirements and capabilities. However, one significant way many companies have responded to customer success problems is by developing value-added services.

3.4.2 Value-Added Services

The concept of value-added service represents a significant advancement in customer success. By definition, value-added services are one-of-a-kind or specific operations businesses might collaborate on to improve their efficiency and effectiveness. Value-added services contribute to customer success. Generalising all conceivable value-added services is impossible because they are often consumer-customised. When a company commits to providing value-added solutions to large customers, it quickly becomes involved in customised or bespoke logistics. It is doing unusual things to help specific consumers reach their goals.

One example of adding value to a primary product is IBM’s capacity to manufacture and deliver customised personal computers and networks to specific customers. Firms can give unique product packages, construct customised unit loads, price products, offer unique information services, provide vendor-managed inventory service, make particular shipping arrangements, and so on in a logistical context to improve client success. Some value-added services agreed upon by buyers and sellers involve integrated service providers well-positioned to supply such services. Transportation carriers, warehouse firms, and other professionals may get intimately involved in the supply chain to make such value-added activities a reality. A few examples of how they might work inside a particular supply chain to provide value-added services are sufficient now.

Whether private or third-party, warehouses can be used for various customisation tasks.

For example, a retail customer may want a one-of-a-kind palletization solution to support its cross-dock activities and suit the specific product requirements of its distinct store units.

Each store requires a different quantity of a particular product to ensure in-stock performance while committing to the least amount of inventory. In another case, first-aid kits of many distinct things are constructed in the warehouse when orders come in to fit the precise configuration specific consumers need. It is also usual for warehouses to offer pick-price repack services to manufacturers to fit the particular product combinations requested by various clients.

REVIEW QUESTIONS:

1. How does logistics contribute to enhancing customer satisfaction?
2. What are the methods for measuring the level of logistical service?
3. Define availability in logistics customer service and provide examples of monitoring a firm’s availability performance.
4. Compare and contrast speed, consistency, and flexibility as operational performance activities. In what situations is one activity more critical than others?
5. What are value-added services in logistics, and why are they essential in a customer success program?
6. Explain how marketing identifies the appropriate logistical performance.
7. Discuss the operational measures that specify the expected performance cycle.
8. How do you measure customer satisfaction?
9. Highlight the Model of Customer Satisfaction.
10. How do you achieve Customer Success?