Chapter 2 Putting the end-customer first

1. Chapter 2Putting the end-customer first

2. The marketing perspective Segmentation Quality of service Setting logistics priorities Content

3. What are the marketing implications for logistics strategy? 1 The marketing perspective • Key issue

4. The marketing perspective • Marketing is a philosophy that integrates the disparate activities and functions that take place within the network. Satisfied [end] customers are seen as the only source of profit, growth and security. (Doyle,1994)

5. Customer The challenge Increased sales and market shares Strong brand Increased productivity Short lead times The marketing perspective The Challenge…

6. The battleground is the customer’s wallet. The victors will be those that can order their entire organization around the challenges of getting cheaper more profitable and more loyal customers. It’s an age of expert buyers. Customers are becoming ever more critical and demanding. Customers know that they can play the market and are placing higher and higher demands on suppliers to give them what they want – and immediately. The marketing perspective

7. business customer Vs. end-customer consumer Vs. customer The marketing perspective • Two pairs of concepts B2C B2B B2B B2B

8. 1 2 3 better ability to discern between alternative products Exposure to more lifestyle issue in the media better levels of general education The marketing perspective • Rising customers expectation

9. Industry structure Buyer-supplier relationship internet Purchasing, SCM and NPD The marketing perspective • The information revolution

10. The marketing perspective Segmentation Quality of service Setting logistics priorities Content

11. What is segmentation, and what are its implications to logistics strategy? 1 Segmentation • Key issue

12. Segmentation • Market can be segmented in many ways • Demographic: such as age, gender and education • Geographic: such as urban vs. country, types of house and region • Technical: the use that customers are going to make of a product • Behavioral: such as spending pattern and frequency of purchase A powerful way to bridge marketing and logistics

13. Segmentation Beer market consumer Miller case Consumption 1:8 Light drinker Heavy drinker • female • High level income • Blue-collar • Over 30 years of age • Spend long time on watching TV per day • Sporting.

14. Segmentation • Fragmentation of Markets and Product Variety • Are the requirements of all market segments served identical? • Are the characteristics of all products identical? • Can a single supply chain structure be used for all products / customers? No! A single supply chain will fail different customers on efficiency or responsiveness or both.

15. Segmentation • Activity 1 • Try to compare the segmentation strategies between Dell and Lenovo in computer market. • What logistics strategy should Dell make to fit its market segmentation? So what about Lenovo?

16. Segmentation functional innovative efficient Lenovo responsive Dell

17. The marketing perspective Segmentation Quality of service Setting logistics priorities Content

18. How do customer expectations affect logistics service? 1 How does satisfaction stack up with customer loyalty? 2 Quality of service • Key issues

19. ￥2 Fourth floor ￥3 Third floor ￥6 Second floor ￥10 First floor Quality of service Case: Service of a seafood restaurant

20. supplier customer Gap 1 Service specification Expected service Gap 2 Gap 3 Service delivery Perceived service Gap 4 Quality of service Service is the combination of outcomes and experiences delivered to and received by the end-customer (Johnston and Clark, 2001).

21. Quality of service • Customer loyalty＝Customer satisfaction • Value disciplines • Operational excellence • Product leadership • Customer intimacy • Customer relationship management • Bow tie • Diamond ？ supplier customer supplier customer

22. The marketing perspective Segmentation Quality of service Setting logistics priorities Content

23. How can we set logistics priorities? 1 How do such priorities relate to customer segments? 2 Setting logistics priorities • Key issues

24. Setting logistics priorities Identify the order winners and qualifiers according to customer needs by market segment Priority order winners for each segment Identify gaps in existing logistics capabilities: reinforce strengths and plug weaknesses Using market segments to set logistics priorities

25. Zara case Flag brand of a Spanish apparel manufacturer and retailer group---Inditex The first shop of Zara was built in 1975. Produce and sell the most fashioned apparel, target core is female of 18-35 years. Own loyal customers, regular buyers visit 17 times per year. Rivals of Zara: Gap(USA), Mango(Eupope), Benetton(Italy)

27. Product style • Agile design, not pilot design • Employ many cool hunters • Production system • 50%production at headquarters, 20% imported from low-cost countries (Asia), 30% in other region of Spain or Europe • Spare production capacity: production is always lower than forecasted sales • Global sourcing cloth materials.Half of materials are naturally colored, and then dyed and painted in a subsidiary of Inditex. This cycle only spends about one week. • Zara’s production system only covers the elements with scale economy, such as dyeing, cutting, labeling, and packing. The processes of labor-intensive are usually operated by hundreds of sub-contractors.

28. Logistics • Receiving orders with a high frequency and small volume, shop managers keep direct contact with headquarters. • Each delivery runs within 48 hours. Goods are transported by land-carriage (less than 24 hrs) or by air (more than 24 hrs). • Two distribution centers are located in Spain. All items are labeled and priced at distribution center, and then delivered by third-party logistics firms.