PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Chapter 9Building External

Relationships

9-1

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

IntroductionLearning OutcomesAfter this lesson, you should be able to:• Understand the different approaches to customer

service• Recognise the range of business relationships

available and that all are equally valid• Structure a customer base to segment customer

service• Approach customer service based on the premise

that 100 per cent service is uneconomic for a business, therefore problems will occur

• Consider the basis for a customer service organisation.

9-2

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Business Type and Customer ServiceA range of relationships• Different approaches from the buyer to the seller and

from the seller to the buyer.• Business relationships will develop particular

attributes that have similarities and therefore can be grouped into types, such as: Alliance Arms length Cooperative Consortium Project-based Imposed.

(See Figure 9.1 for further examples and explanations for range of relationships)

9-3

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Segmentation

• Once there is an agreement to undertake a buy and sell transaction, three factors that guide the future relationship between a buyer and seller:1. Relationships are holistic – total experience also

involves logistics, financial and information issues.2. All customers are not the same – range of customers

requires different services therefore customers must be segmented, based on a reasonable business criterion.

3. Customers define service differently from suppliers – customers should be involved in defining the service they require.

9-4

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Segmentation• Due to higher value of business per customer,

commercial/industrial environment is more likely to segment customers by the type and level of services provided (and their price or cost).

• Segmentation can be based on various factors, including: the ‘importance’ of the customer (how much they spend

or strategic importance) the response time required following a service call from

a customer the ‘cost to serve’ the distribution channel used the type of product purchased.

9-5

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service SegmentationCustomer service experience• Theoretically impossible to have 100 per cent

customer service for delivery of product.• High customer service levels – increased costs

(such as the cost of holding inventory) without a commensurate increase in sales.

• Organisation will try and opt for a balance (although often not calculated) where sales are maximised at the ‘optimum’ cost level.

• If customer service is not to be maintained at a 100 per cent level – department should be staffed with people who are capable and trained to resolve the inevitable challenges.

9-6

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus

• Customer service needs to be structured with recognition of a number of aspects:1. Develop a customer service culture for the organisation.2. Understand the services your customers require—do

not assume.3. Have a holistic view of the services offered.4. Establish customer service standards.5. Measure customer service performance.

9-7

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus1. Develop a customer service culture for the

organisation• Only about four consumers in every 100 actually

complain about the product or service.• Those who do not complain tell up to 13 family

members, friends and acquaintances about their negative experience.

• ‘Moments of truth’ – each ‘moment’ lasts a short amount of time; this is when a perception of the company is formed.

• Multiple ‘moments of truth’ experiences in business-to-business relationships.

9-8

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus2. Understand the services your customers

require• Understanding the value that customers assign to

different elements of the service package offered by a supplier is difficult.

• In a commercial or industrial environment, the ‘customer’ can be many people, for example: the engineer who initially specified the equipment the purchasing specialist who undertook the commercial

negotiations to buy the equipment the operations person who uses the equipment the maintenance person who approves the support visits the accounts staff who authorise payments under the

maintenance contract.

9-9

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus

2. Understand the services your customers require

• Three ways to determine whether customers are satisfied with our service:1. Formal customer research (best conducted by an

independent research firm), which requires time, effort and money

2. Informal sales force survey3. Informal customer feedback.

9-10

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus

3. A holistic view of customer serviceCustomer experience• Expectations as a customer of a company:

Empathy – Staff should be courteous, attentive to the issues and willing to be helpful.

Knowledge – Staff need to be knowledgeable about the products and the business and understand their company’s systems.

Dependability – Customers want what was promised.

9-11

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus4. Establish customer service standards• Customer service activities can be grouped into several

categories through the order cycle – these categories can be the basis for establishing operating standards of performance.

• Examples of categories upon which to base service standards are: convenience of placing an order—direct, through a sales

representative or via a website order status enquiry; response capability, direct or via a

website consistency and reliability of delivery to customers using invoicing procedures and accuracy of invoices documentation requirements flexibility (printed or computer).

9-12

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Customer Service Organisation Focus

5. Measure customer service performance• Companies must measure their success in terms

of the promises made to customers and not adopt a ‘tick the box’ approach.

• Overall fulfilment measures are necessary to identify that customer service is being achieved.

• Measures (or metrics) will not reflect activities of just one department, group or team, but will incorporate the activities of all staff who have customer responsibilities.

9-13

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Being more than a Supplier of Products

• Enterprises in the product services sector are able to provide additional services that are typically based in an after-sales environment, such as: preventative maintenance

o repairso supply of service partso retrofitting of upgraded moduleso refurbishment and disposal with recyclingo services on competitors’ equipment located at the

customer’s premises.

9-14

PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd

Relationship Management

• Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) – IT approaches to integrating data and information, to better relate with customers and suppliers through an enhanced information capability.

• In a business-to-business environment there is often an expectation of a repeat purchase – customer’s or seller’s details are recorded in the following ways: credit check as a due diligence review so that undertaking

business transactions will not deliver unwanted surprises purchase orders and invoices issued (and recorded) by each

party.

9-15