Customer Service & Relationships

1. Customer Service & Relationships

2. What is Customer Service? • No easy way to define • May view Customer Service in 3 ways • As an activity • A task that is performed to satisfy customer needs • Order processing, billing & invoicing, product returns, claims handling • As a performance measure • Success in achieving goals • % of orders delivered on time, time to complete orders • As a philosophy • Firm-wide commitment to customer satisfaction • A focus on quality

3. Customer Service • The ability of logistics management to satisfy users in terms of • Time • Dependability • Communication • Convenience

4. Aspects of Customer Service • Time • Reduced order cycle time • Dependability • The reliability of the service encounter • Consistent order cycles • Safe delivery • Complete delivery

5. Aspects of Customer Service • Communication • Two-way exchange of information • Complete information exchange • Convenience • The ease of doing business with the other party • Must assess extent to which the customer(s) is (are) willing to pay for this ease

6. Customer Service Objectives • Should be • Specific • Measurable • Achievable • Cost-effective • MUST take the customer’s viewpoint into account • Benchmarking • Comparing performance to the competition’s performance

7. Performance Measures • ALWAYS stated from the view point of the customer • 2 key components • Measures used before shipping to customer • Measures used after shipping to customer

8. Pre-Shipment Performance Measures • Product Availability • % availability in base units (order, product, dollars) • Order Cycle Time • Time from order placement to order receipt • Speed and consistency • Distribution System Flexibility • Response time to special requests

9. Pre-Shipment Performance Measures • Distribution System Information • Speed, accuracy, & message detail of response • Distribution System Malfunction • Response and recovery time requirements • Post-sale Product Support • Technical information, spare parts, equipment modification • Response time, quality of response

10. Post-Shipment Measures • Orders received on time • Orders received complete • Orders received damage free • Orders filled accurately • Orders billed accurately

11. Implementing Customer Service Standards • Set standards • Must be realistic but high enough for competitive advantage • Focus on quality • Communicate with customers • Set standards with customer input • Communicate standards with customers • Control procedures • For measuring, monitoring, and controlling • Amend or discontinue standards as appropriate

12. Types of Buyer/Seller Relationships • Arm’s Length Relationships • Type I Partnerships • Type II Partnerships • Type III Partnerships • Joint Ventures • Vertical Integration

13. Arm’s Length Relationships • Last for single transaction • No commitments made for future transactions • Price is the most typical deciding factor • Can minimize risk to both carrier & shipper • May not result in lowest price for shipper • Appropriate when carrier’s service offerings are considered commodities or standard

14. Type I Partnership • Short-term contractual relationship (typical, 1 yr) • Requires little investment on part of either party • Limited scope of activities • Similar to arm’s length relationship except • Longer-termed • May include guarantees by both parties • I.e., shipper may guarantee minimum volume • I.e., carrier may guarantee delivery times, or minimum portion of fleet dedicated to shipper

15. Type II Partnership • Contractual relationship • Generally longer-termed than Type I’s (typical, 2 – 5 years) • May require investment by either party • Scope of activities generally larger

16. Type III Partnership • Not normally governed by contract • No formal endpoint to relationship • Assets used in relationship may be jointly owned • Shared scope of activities is substantial • In essence, carrier performs all transportation services needed by shipper • Shipper is only client of carrier in most cases

17. Joint Venture • Similar to Type III • New firm is created with investments from both parties • Focus is for each party to benefit from the other party’s expertise • Example • Encompass JV b/n American Airlines and CSX Railroad • created to develop global booking & tracking system for freight movements

18. Vertical Integration • Essentially, the use of private fleets • Firm requiring transportation services fulfills this need internally

19. Third-Parties • Company that supplies/coordinates logistics functions across multiple links in the logistics supply chain. • Essentially, a third-party acts as the link between the • Seller/shipper • Buyer/receiver

20. Benefits of Using Third-Parties • Lower costs • Improved Expertise/Market Knowledge & Access to Data • Improved Operational Efficiency • Improved Customer Service • Ability to Focus on Core Business • Greater Flexibility

21. Third-Party Contracts:Suggested Minimum Contents • Identify the parties • Commit shipper to tender shipments • Commit carrier to transport shipments • Contain contract rate or rates for the transportation services to be provided • Assign vehicles for continuing time or provide that the service is designed to meet shipper’s distinct needs • Retain by carrier while in effect and for minimum of 3 years thereafter

22. Common Sections Found in Third-Party Contracts • Disclosure of Goods • Describes nature of the product being shipped • Special handling or temperature requirements, nature of hazard (if any) and value • Responsibility for Goods • Routing, Mode, and Method of Operation • Term, Termination, & Modification

23. Common Sections Found in Third-Party Contracts • Volume Requirements • Scope of Operation • Performance Standards • Transit time, pick-up/delivery, damage rates, billing accuracy • Operational Standards – Indemnification • Put at end of contract • Force Majeure • If one of the parties is in breach due to Acts of God, or force of nature, protects the party so affected

24. Common Sections Found in Third-Party Contracts • Billing and Payment • ALWAYS include listing of prices and charges levied by the third party in the body of the contract • Refer to other documents or tariffs may be confusing, and in some cases, illegal • Applicable Law • Assignability • Used if third-party unable to meet its vehicle requirements

25. Common Sections Found in Third-Party Contracts • Breach of Contract • Defines what constitutes breach, process to be used to rectify breach, and process for termination • Consider including “incentives to improve or comply” rather than just “punish” • Dispute Resolution • Arbitration • Confidentiality