Customer service

Customer service is a big part of supply chain management. This is customer service provided to the final customer, as well as to the retail stores. The end customers know that stock changes rapidly at Zara, so they know to come to the stores more often than going to competitors to see the new styles. They also know to buy what they like when they see it rather than waiting since the product might not be there when they come back. Customer service is not a high priority for Zara, and they even take the approach that their clothes are meant to be worn 10 times and then replaced. This is communicated to the customers so there are fewer issues regarding complaints about quality and with customers trying to order in specific items.

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There are less post-transaction issues with complain handling and returns/reverse logistics (Zara only has around a 1% return rate at its stores). As for customer service to the retail chains, they are a part of Zara so it is internal customer service. These are transactional in nature and have to do with stock-outs, cycle time, convenience, accuracy and information. Being part of Zara, they know that stock-outs are normal, cycle time for the various flows will be short, and the system provides for convenience, accuracy and constant flow of information. However, being that Zara does not place much importance on customer service, it can not really be considered a strength of the supply chain, other than the fact that they do not have to spend much time or resources on this function.

The strength in Zara’s supply chain lies in the management of logistics. When logistics is outsourced to 3PLs, companies risk losing control over the flow of products and materials, risk losing providers due to business failure, and can lead to conflicting objectives within the shipper’s organization. Zara avoids all these problems by keeping the logistics in-house. They still have to worry about inbound logistics of purchasing and obtaining undyed fabric from the external market, and of coordinating shipments from their textile fabrication facilities, but this is minor. With the majority of the logistics being in-house, they do not have to worry about impacting any other supply chains but their own. Their competition would need to be very careful making any changes to their supply chain due to the impacts it would have on their suppliers, sources, 3PLs and 4PLs.

The outbound logistics are also kept in-house, so Zara has control over its shipments and DCs. This increases their flexibility in determining how much to ship by truck and by air, as well as the frequency of those shipments. They are not tied into a specific delivery schedule and can adjust the quantity being shipped very quickly to ensure the right products are getting to the places where they are needed the most. The garments flowed through the supply chain quickly, moving from the factories to the DCs to the stories without stopping. This implies that they probably make some use of cross-docking and break-bulking at the DCs to take the shipments from the factories and prepare them for shipment to their various retail stores.

When looking at logistics, we need to look at price, products, promotion and place. Zara is not as concerned with the price aspect of the transportation and inventory costs. They have set modes of transportation (by truck and by air), and adjust shipment quantities based on demand. There are very little inventory costs since they do not need to warehouse the products. For the product, this is the packaging of the product which would impact the storage, handling and transportation of the products. The products are put on hangers and boxed at the DCs for easy transport to the stores. Since the products already have price tags and hangers, it is relatively quick and easy to display the products when they arrive at the stores.

Marketing and logistics normally need to be synchronized in order to determine the impact marketing plans and promotions will have on inventory and production. Zara only spends 0.3% of revenue on marketing activities versus the typical 3%-4% spent by competitors. Very little marketing is done due to their business strategy, so marketing has little impact on logistics. Place refers to the distribution system and strategy and as to how to configure the system. Zara located their main DCs close to their factories, and planned their system to react to smaller but many orders.

Zara also uses more of a make-to-order strategy rather than a make-to-stock system. Most of their production is determined by the orders and customer demand, rather than producing large quantities to maintain stock levels. The exception to this is for their basic items, which are basically made to stock. Due to these factors, there is not must use for postponement. The factories only produce what is ordered, inventories are almost nonexistent and there are not many intermediaries between the plants and the stores. Therefore, postponement is not really viable for Zara.

The business aims of supply chain management are to reduce inventory and production costs, have a responsive and efficient supply chain, provide better customer service, and earn higher rates of return. Zara is able to accomplish all of these goals, which indicates that they have a strong supply chain and are able to manage the critical supply chain elements efficiently and effectively. They were able to optimize the strategic, tactical and operations functions of the supply chain to work with their business strategy. Is the Zara strategy applicable to most of the retail and fashion sector? Why or why not?

The Zara strategy would not applicable to most of the retail and fashion sector. Most retailers spend a large amount of capital on inventory management and forecasting. Retailers and the fashion sector tend to have very long lead times and forecast demand well in advance of the upcoming season. They tend to use a push strategy, choosing their products for the upcoming season, producing large quantities of them, and pushing them out to the stores.

Traditional retailers will change their stock by around 20 percent once the season has started, and use replenishment to keep the stores stocked. The result is higher inventory and warehousing costs, but customers can expect that the inventories will not change much of the season. They are almost guaranteed that if they like a certain style that it will either be in stock or be restocked in the near future.

Customer Service

We will be working on one of the ‘magic ingredients’ that make organizations successful-?a quality customer service system-?and learning how it an be managed. We will use a case study, Cricketer’s, to look at how to develop skills in managing quality customer service. When you are a customer you may be buying something for yourself, or on behalf of an organization. Either way, you have your own expectations about the service you’ll receive_ An Important way to contribute to organizational success is to see others in the organization as internal customers-?find out exactly what they need and try to give it to them.

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By using this approach the needs of the organization’s external customers can be delivered much better. If individual expectations of customer service were always clear for organizations, It would be easy to Just give people exactly what they want Of it was economically possible). Unfortunately organizations often don’t know what we-?the customers-?need, and we soon become dissatisfied when we don’t get It. Consequently you-?the customer-?may spend much time changing organizations in search of the ‘holy grail’ of service. This is inefficient for both organizations and customers.

To improve the situation, organizations need to ask us what we need and how we need It, and we must play our part by telling them. The complicating factor in all of this Is that we are all deferent in our needs and we place different emphases on different things. Organizations which have a good reputation for customer service focus on what are considered to be the universal needs of people. These include a need to be acknowledged, a need to be recognized as an individual, and a desire to complete the transaction in minimum time.

One way around this dilemma of having different needs is for organizations to specifically define who their average customer is, ‘e identify parameters such as age, gender, Income levels, geographic location etc. Once the average customer Is Identified the organization needs to access a sample of O NEWS DIET 2008 people who fit the parameters and question them regarding their needs and expectations. Organizations can also train customer service representatives (Cars) in the skills of finding out customer needs and provide a convenient way for employees to record this information.

That is what the module is about-? developing a plan to provide customer service that meets the needs of customers. Customers -? who are they? Consider this simple definition of customer: a person or business buying goods and services. The definition suggests that the customer is outside the organization but many of us now view customers differently. Consider this description of customers: people, groups or organizations who use the goods and services that you produce or create. Traditionally we have thought of customers as those who are outside the organization ‘e the buyers of the goods and services provided.

However, many people have customers who are inside their organization. The customers of an accounts clerk can include the sales department and the IT section. The customer of a production team can be the team that further processes what they produce. So it can be argued that we all have customers in our Jobs that are both internal and external. Of course, some people rarely have contact with their organization’s external customers. Nevertheless, their efforts must be directed to producing the goods and services that will satisfy the needs of the customers.

Organizations must identify their external customers IEEE those businesses and people buying their products and services, directly or indirectly. For example, your products may be sold to a retailer who sells it to a final user. Both are your customers. Employees must be encouraged o identify their internal and external customers-?the people inside and outside the organization who depend on them for products, services and information. Exceeding or meeting customer needs You may have heard the term exceeding customer needs.

If you go to a restaurant and you are given a tasty dessert, or after dinner cheese plate free 4 of charge, you will most probably feel surprised and delighted and remember the experience. You’re also more likely to return. The question is-?did the restaurant have to do this to get you to come back? After a month or so the owner of the saturate may find the other restaurants in the same area doing similar things, impacting profits across the market. It is not an easy decision to exceed customer on intangible benefits, like ensuring that the staff know the name of regular customers, speedy service and so on.

Competing on price is not a good choice generally, unless you set out to be a high volume, low cost producer. Imagine the delight of car owners if the petrol companies decided to compete on price! They are much too smart to do this but do have periods where they go through the motions of price competition. This is well illustrated by the battle between the combination of giants Coles and Shell versus Woolworth and Caltech, with sales dockets allowing discounts of 4 cents per litter at each petrol station. (Note how the $0. 04/L discount is exactly matched between each of the two mega coalitions.

The bottom line is that you should always look for ways to delight customers by ways other than offering direct discounts, unless that is your game plan and you are big enough to survive a price war. The importance of customer service The bottom line is that it costs you much more to get new customer than to keep an existing one. Returning customers buy more at any one time, they cost you less to service because they know their way around and so on. And you can keep them by meeting their expectations. Think about two places where you buy.

One is a place where you have been many times before. Staff probably recognize you and may even know your name. They know what you normally buy and you know all of the tricks of the trade in this place. Now compare it with a place where you have not been before. The experience is very different. Being social animals most of us like to be recognized and, even if the products are the same as a competitor’s across the street, we will go jack to where we are recognized. Of course you must believe that the whole experience is better than that which a competitor might offer.

However, the following scenario provides food for thought about loyalty and competition: Joe and his partner, Bill, were working in the electrical contracting industry. Bill used to buy all of their supplies from an organization that specialized in supplying to tradesmen. Of course, he had to know what he wanted, and he did know, and that was all part of the special experience-?he felt like someone in that place, an identity. Bill knew where everything was, picked it out and brought it to the counter (before the days of self-service this was a privilege).

Most of the customers did that and would engage in a friendly banter between one another and the staff while Bill and the other customers were doing their work for them. One day Bill changed his buying habits forever with a simple observation. He saw fluorescent fittings in a large chain store down the road for half the price they were paying for them at the trade supplier. That was too much of a gap to resist. Even the warm and fuzzy feeling was not enough to maintain Bill and Joey’s buying loyalty. Businesses must always be on the look out for what competitors are offering so they don’t get behind.

The technical term for this is benchmarking (against competitors). In actual fact, organizations need to benchmark against organizations other than direct competitors since levels of service become generally accepted across all industries. So how far should we go to meet or even exceed customer needs and expectations? In the earlier example, the customer received the dessert free. The organization missed out on $5. 00 revenue ($3. 50 profit). Multiply this by all the customers in a year and this could be a significant amount of money.

Competitors may have to offer the same if they are to compete, so now everybody is suffering reduced profit, to the extent that some places go out of business and the customer is left with fewer choices than before. A decision to exceed customer expectations must be carefully thought out, since it affects more than Just your business. The general rule is to first meet customer expectations and then to provide a small surprise, something the customer may place a value on but is relatively inexpensive for the organization.

Fortune cookies in a Chinese restaurant were an example but, as with any things, they are now part of customer’s expectations, so Chinese restaurants need to look to other strategies to provide that surprise. A customer service strategy If we are to manage a quality customer service programmer, we will be managing towards a plan to attain quality service. That plan will have a strategy behind it, so let’s discuss how a strategy and a plan to produce a quality system are related. A strategy is a plan of how something is going to be accomplished.

Before you can have a strategy you have to be sure of what you would like to accomplish-?an objective, a clear direction. A strategy is not a detailed plan about who will do what and when, but a general scheme to achieve an objective. 6 For example, a commander in an army may decide that he has to sacrifice some lives in order to gain ground during a battle. If he avoided this fact, he would lose ground, be overrun and place many more lives at risk. His strategy in this case includes loss of lives-?that is the general direction.

The name of the units of soldiers is unknown while formulating the strategy-?that detail will be in the battle plan. Business is not as cutthroat as this commander’s plan but organizations do need a strategy to meet customer needs, or they’ll find their customers drifting to competitors. What strategy do you think McDonald’s has? Certainly one component of that strategy would be to serve the customer within a specific time period, so all their procedures in the kitchen and elsewhere would reflect this. It also has a ‘cleanliness’ component to its strategy and, more often than not, tables are spotless.

The strategy does not include the names of the people who will clean the tables (but the daily work plan would). Its strategy also includes trying to get customers involved in the clean-up by providing a very easy disposal system. The more control customers get (involvement in the Activity 1 Try to visit a few supermarkets and work out what strategy you think each supermarket has? Do they vary in any significant way from their competitors, such as Woolworth, Laid, Franklins and so on? Why do you go to one or the other?

Is your particular reason for going included in the strategy? Suggested response one strategy may be selling brand names that are similar rather than to sell ‘no brand’ products selling more diverse products egg computer products stocking a wide range of goods rather than a small range plus generic brands Quality service We hear the term, quality service, a lot from sellers in relation to their products. It almost seems that when they can’t tell you exactly why it is quality, they use the term ‘quality, hoping you’ll interpret it in a way that makes you the happiest.

When would you say that something was ‘poor quality? There can be many reasons-?you feel disappointed, because the product or service has not lived up to your expectations. 7 We may buy a ticket to a concert and have a seat that is quite uncomfortable. While it didn’t ruin the evening, the quality of the experience was not up to your expectations. Who you blame may vary a lot-?it may be the seat manufacturer, the promoter of the concert, or the owner of the facility but it will, in some way, influence your dealings with that organization, and what you tell your friends.

Tangible and intangible products Some organizations produce a physical or tangible product, such as a Sony Walkway, or Pewter’s Ice cream. Other organizations sell a service, such as Ticket which sells tickets to entertainment events. A hairdresser, on the other hand, sells a haircut or an image, which is an intangible product. Customers find much greater variation in revive and quality when they are buying a pure service, such as a ride in a train, where it can be incredibly crowded one day and comfortable the next.

That is where the real challenge lies-?in giving customers a consistent service. If your ‘pod stops working and is still under warranty, it is not difficult to replace it, but try ‘replacing a concert by an artist you adore and who seldom tours, where the performance was marred by being seated too far away through a ticketing error. Intangible products can’t be touched and stored in a warehouse and may only exist at one point in time, such as a concert. Activity 2 Words that describe the type of product from the above list How easy would it be to provide a consistent quality in this product? Difficult, K, Easy) A new dress An ocean cruise A university degree Coke 8 Choose the words to describe the above products from this list: tangible, intangible, a service, a physical product. Buying experience Product description Easy) K as products can be inspected before they leave the manufacturer. Difficult because of uncontrollable variables such as the weather and other passengers that you come in contact with. The crew may also vary from day to day. Less difficult than or the ocean cruise.

The main variability would arise from individual differences and Nuns have always had a big problem getting to this level of customer service. It would be very easy to provide consistency in this product. In fact, sales depend heavily on consistency. Tangible and a physical product Intangible and a service A nun degree Intangible and a service Tangible and a physical product So far we’ve discussed the strategy and quality aspects of customer service. There is a big Jump from knowing what these are to actually managing them in an organization so we need to explore that managerial level in some detail.

Managing Managers achieve objectives through other people. This means that you, as a manager, don’t do it yourself, you get others to do the work, with your help and guidance. Sometimes it looks easier to do yourself but you should resist because staff need to develop these skills as well. 9 Some organizations, such as the largest oil company in the world, believe that managers should be able to manage in areas where they have no training or experience. They believe that management does not require technical knowledge in the area.

Management is what we like to think of as a generic skill, one that can be seed in any place at any time (similar to customer service). Activity 3 Do you agree with the above statement about management not requiring technical skills to be a good manager in an area? Suppose you have been appointed as a manager of a team which repairs photocopiers-?do you think you would be a better manager with or without having been a photocopier repair person? Have you seen any successes or failures within organizations that require this of their managers?

No experience as a repair person Advantage Not constrained by previous ways of working-?more open to suggestions for improvement You cannot weigh up suggestions for improvement with no background of your own Experience as a repair person More credibility with workers because you can Judge ideas etc Because you have your own opinion you are less inclined to discuss it with others, reducing communication and increasing the chance of mistakes Disadvantage You are more likely to see more failures than successes but this depends on whether one is working in a technical area where technical knowledge plays a bigger role in adopt the Exxon policy of appointing managers with little or no technical experience. 10 Customer service management at Cricketer’s

We will explore approaches to developing a quality customer service system through the experience of Delving, a customer service officer at Cricketer’s, an Australian business that has two retail outlets in Sydney selling all sorts of equipment and clothing associated with playing cricket. We’ll learn from the challenges Delving faces as she works through the steps to develop a quality customer service system in the company. The take-over Delving, a customer service officer at Cricketer’s, was getting tired of apologizing to customers almost every day and she was either looking for a change in the way Cricketer’s was run or she would soon be changing Jobs. Delving reported to Mike, the Customer Service Manager.

What Delving did not know was that Cricketer’s was on the verge of being taken over by Spoilsports, a large US based corporation that sold Cricketer’s products, and that she would be thrust into a quickly changing environment where she would have to learn to swim fast. Karen, a Spoilsports executive, announced the takeover to Cricketer’s staff: As you know, Cricketer’s has had a few problems of late, particularly in the area of customer service. We like to hint that at Spoilsports we built our reputation not only on our products but also our responsiveness to customer needs. I guess you are all wondering what a US company would know about cricket, or about Australians for that matter? Well you, our employees, are the ones who are going to help us in that area.

We also have extensive business experience in sporting goods that will help you. Karen also announced that Mike was moving on with the change of ownership. He had been planning the move for a while and didn’t feel that upset about the change. Karen was not sure if he was moving on himself or was ‘pushed’. In either case she endured about the impact of the change of management. She understood that in order to achieve significant change, organizations sometimes have to re-deploy or replace key staff. Mike may have decided not to stay with the new owner or maybe he was made an offer to leave, that he found hard to refuse. This can have an unsettling effect on staff, sometimes for the worse and sometimes for the better. 1 Karen offered Delving the Job of Managing Customer Service on a thirteenth probationary basis. Delving accepted the offer since she had no alternative plan. A specialist store like Cricketer’s sells cricket equipment and clothing but so do argue stores such as K Mart. It would not be unusual to find the same or a similar piece of equipment in K-Mart or Big W cheaper than it is at Cricketer’s. This being the case Cricketer’s would have no customers if it was unable to offer a different type of service from the ‘K-marts’ of the world. However, Cricketer’s carries a broad range of equipment, they may even order equipment in for a customer, their staff are experienced in sales and in the game of cricket and so on.

Such things allow them to charge higher prices commensurate with their level of customer service. How will Delving learn to manage customer service? Cricketer’s) Because Delving didn’t have any formal training in customer service Karen arranged a trainer to coach her on a weekly basis. The trainer, named Hung, had considerable experience in retailing sports equipment in Australia and other parts of the world. He could also give Delving accreditation in customer service and she would receive a bonus if she successfully completed her training within the three-month period. Karen asked Delving to put together a rough outline of what she would like to do in the customer service area with Humans assistance.

To have a chance of success in this Job Delving old need training in two areas: what has to be done to develop a quality customer service system how to install that system and provide ongoing management. How can Delving change the culture at Cricketer’s? Delving found Hung to be an excellent trainer-?he didn’t presume too much and challenged her every now and then. He asked her for her opinion of customer service at Cricketer’s: Customer service is quite poor here and it makes me feel embarrassed telling customers we haven’t got something in stock, usually because we forgot to order it. We get no support from upper management, even if we wanted to be more focused on the customer. My first impressions of Spoilsports are quite positive.

Already you and I have been allocated a whole morning to focus on our customer service. Under the previous management we barely had time to plan our lunch, let 12 alone plan the management of the place. I really think that if we can improve in customer service we’ll survive. Delving told Hung that changing the way people deal with customers was a must: You know, it’s not going to be easy to get to where you want to go. Organizations have a factor that most people ignore or try to hide from that’s called organizational culture. The way it works is this. When something happens in an organization, it may be something quite normal or something unusual, people have a spontaneous reaction to it.

New ideas are often looked down upon in some organizations, even Delving explained that it was like that at Cricketer’s-?when customers come in and ask for something unusual, you could see the people serving them roll their eyes in disgust when customers’ back is turned. The automatic reaction here is to not go out of your way for anybody, whether they work for the company or they are external customers. It tends to give you a negative feeling and you wonder why you should eave it thrust on you. Social pressures to conform in the workplace are strong and hard to ignore. In addition, I think you can count on a lot more support from management but we must remember that these automatic thought patterns associated with organizational culture are very hard to change.

People have to unlearn these behaviors that they have been practicing for years. It’s almost like learning to walk again in a new way. Hung explained that customer service is not only about the customers who walk in off the street. We also have to keep in mind the fact that many people have internal customers and may or may not have external customers as well. For example, when your boss asks you to do something you try to find out exactly what they want so you can give this internal customer good service. Not everyone in the organization is like this. Often you get to know people who you serve internally so well that you take them for granted and don’t treat their requests formally enough.

The rules of customers service are pretty well the same for both internal and external customers -?find out what they want and try to give it to them. If Delving can improve internal customer service then service to external customers ill improve as well so it is vital to get the message across to everyone in Cricketer’s. Organizational culture People have personality and organizations have culture. Just as one’s personality is reasonably consistent over time, an organization’s culture also 13 tends to be consistent. The culture of an organization is the accepted way of doing things and this is reflected in the automatic thinking pattern of employees in regard to situations that arise.

For example, if the organization is thinking of employing another person the automatic thinking pattern may be to try to hire someone with he specific industry experience, rather than a new employee from another industry. There are advantages and disadvantages to both approaches but the automatic response could exclude new possibilities and perspectives. You can probably see how this automatic thinking pattern would impact an attempt to change the level of customer service. It is very hard to unlearn practices so those of the past persist as seen in the following scenario: Rick went too hardware store in Broken Hill in 1970. It didn’t have what he wanted-?staff told him so and that was that. No hint of ‘maybe