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Chapter 3 Outbound LogisticsCustomer Accommodation Marketing and Logistics Objective Marketing: Allocate resources to the marketing mix in such a manner as to maximize the long-term profitability of the firm. Logistics: Minimize Total Costs given the customer service objective where: Total Costs = Transportation Costs + Warehousing Costs + Order Processing and Information Costs + Lot Quantity Costs + Inventory Carrying Costs Definition of Customer Service Customer service is a process for providing significant value-added benefits to the supply chain in a cost-effective way. -- LaLonde This definition illustrates the trend to think of customer service as a process-focused orientation that includes supply chain management concepts. Customer-Focused Marketing Supply Chain Service Outputs Four generic service outputs necessary to accommodate customer requirements: Spatial convenience: access to its products in a larger number of places Lot size: Number of units to be purchased in each transaction Waiting time Product variety and assortment Customer Service Availability: the capacity to have inventory when it is desired by customer Stockout frequency: the probability that a stockout will occur. Fill rate: measures the magnitude or impact of stockouts over time. Order shipped complete: a measure of the times that a firm has all the inventory ordered by a customer. Basic Service Capability Operation Performance Speed: performance cycle speed is the elapsed time from when an order is placed until shipment arrival. Consistency: refers to a firm’s ability to perform at the expected delivery time over a large number of performance cycle. Flexibility: operational flexibility refers to handle extraordinary customer service requires. Malfunction/Recovery: when service failures occur, the customer service program should have contingency plans that identify expected recovery and measure compliance. Increasing Customer Expectations(Shrinking service window) The
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