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SCM METRICS -Presentation 3

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SCM METRICS-Presentation 3 BY K.SASHI RAO MANAGEMENT CONSULTANT Process Focus in BPM Processes are the strategic assets of a firm, which need to be understood ... – PowerPoint PPT presentation

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Title: SCM METRICS -Presentation 3


1
SCM METRICS-Presentation 3
  • BY
  • K.SASHI RAO
  • MANAGEMENT CONSULTANT

2
Presentation-3 Coverage
  • Customer Service Value Analysis
  • Alignment of Metrics with Business Strategy
  • IT and Business Process Management

3
Customer Service Value Analysis
4
Customer Value Analysis
  • Involves basic recognition of customers in any
    business activity
  • Serving the customer is fundamental
  • Customer service should add value over lifetime
    ownership and use of a product/service
  • Happy customers dont happen by chance, but by
    deliberate design and effort !!
  • Customer satisfaction is largely built around
    product quality, usage experience and total
    customer service

5
Customer Service
  • Why customer service ?
  • Distance between seller and buyer
  • Distance between customer and supplier
  • Organization purpose lies outside the business
  • Customer service differences- goods and services

6
Product Gap Model
Consumer
Past Product Experience
Word of mouth communication
Product Needs
Received Product
Gap 5
Delivered Product

Marketer
External Communication To consumers
Gap 4
Product Delivery (including pre-and
post-contacts)
Gap 3
Translation of perception Into product quality
specifications
Gap 1
Gap 2
.
Management perception of Consumer product
expectations
7
Customer Service
  • A set of activities to make buying experience
    rewarding
  • Very important dimension of offered
    products/services
  • Value added services to gain competitive
    advantage
  • Building customer loyalty and attracting new
    customers
  • Base for all customer relationship programs

8
Defining Customer Service
  • As a set of activities and programs designed and
    implemented to make the buying and owning
    experience memorable
  • As a complex set of activities involving all
    areas of the business which combine to deliver
    and invoice the product in a fashion that is
    perceived to be satisfactory by the customer, and
    which advances the companys objectives( La
    londe Bernard. J)
  • Customer service is not just a function or an
    activity. It is a philosophy and an attitude

9
Customer Service- Link to Business Strategy
  • Provides time utility to supplied product/service
  • Provides place utility to delivered
    product/service
  • Provides product utility thro the delivered
    physical package of ordered product/service
  • Overall transactional experience

10
Customer (Dis-Service)
  • Customer dissatisfaction
  • Non- conformance to agreed deal
  • Gap between product promise and performance
  • Variable service/delivery standards
  • Customer expectations unmet
  • Steady deterioration/ increasing complaints
  • Lack of/Inadequate level of responsiveness

11
Customer Service Phases
  • Pre-transaction Phase
  • Transaction Phase
  • Post- transaction Phase

12
Customer Service- Pre-transaction Phase(1)
  • Creating service organization
  • Setting service standards
  • Structuring service components
  • Building customer knowledge
  • Evolving systems design

13
Customer Service- Pre-transaction Phase(2)
  • Awareness creation
  • Accessibility
  • Customer- interfacing systems and processes
  • Inducements/incentives to bring potential buyer
    closer to actual buying

14
Customer Service Phases-Transaction Phase(1)
  • Order fulfillment reliability
  • Delivery consistency
  • Order convenience
  • Order postponement
  • Product substitutes

15
Customer Service Phases-Transaction Phase(2)
  • User-friendly ordering process
  • Order acceptance with firm supply commitment
  • Ongoing information on order execution/delivery
    status
  • Proper dispatch/invoice/quality documentation

16
Customer Service- Post-transaction Phase
  • Order Status Information
  • Product Receiving and Documentation
  • Installation, Commissioning Trials , Performance
    Guarantees
  • Customer Complaints/Claims/Returns
  • Customer/User Education Training

17
Customer Service-Measurement
  • All such phases involve many processes
  • These need to be measured for performance using
    suitable metrics/criteria
  • These would cover
  • Product Performance Aspects
  • Distribution Aspects
  • Commercial/Trading Aspects

18
Customer Service- Product Aspects
  • Conformance to agreed specifications/placed
    orders
  • Product Performance in use
  • Warranty Clauses/conditions
  • Guarantee Clauses/conditions
  • Repair/Replacement Provisions

19
Customer Service Attributes- Distribution Aspects
  • Delivery commitment and consistency
  • Delivery frequency
  • Order process time
  • Stock availability to supply at all times
  • Flexibility to meet any changed requirements

20
Customer Service Attributes- Commercial/Trading
Aspects
  • Credit facility vs. advances/
  • Credit period/terms and conditions
  • Stock financing- supplier managed inventory
  • Service support- scope and period
  • Handling convenience
  • Offering more competitive terms

21
Customer Service- Service Quality
  • Competence- customer information
  • Reliability-promised delivery in place, time and
    quality
  • Responsiveness- customer communications,
    complaint handling
  • Transaction security- confidentiality of customer
    info and transactions
  • Trustworthiness- policies on returns, warranty,
    keeping commitments
  • Information update -on order/complaint processing
    status
  • Also refer to Service Quality Measurement in
    Presentation 2 of this course

22
Typical Customer Service Metrics
  • compliance to quality/delivery/responsiveness
    criteria
  • Meeting customer inventory needs by measuring (a)
    stock-out frequency/probability (b) fill rate to
    measure impact of stock-outs over time ( c)
    full order deliveries
  • Time taken to meet 20 extra order quantities
  • Operational metrics like (a) on-time full
    delivery (b) delivery consistency over time
  • Overall key is to make all performance criteria
    measurable and capable of monitoring, preferably
    on on-line, real-time basis
  • Other service quality dimensions/metrics covered
    in Presentation 2 of this course

23
Customer Retention/Loyalty
  • Satisfied customers will be repeat customers,
    while unhappy ones are lost to competition
  • Bad customer experiences travel faster than good
    ones
  • Retaining customers more important than winning
    new customers
  • Value added services are key to building
    customer loyalty e.g. valet car parking,
    assistance with shopping bags
  • Relationship marketing new mantra- sustained
    thro special membership offers, discounts et al
  • Superior SCM metrics leads to added customer
    value

24
Customer Service- Value Added Logistical Services
  • Basic purpose to add superior value to customers
  • Move from customer satisfaction to customer
    delight( but at what cost ?)
  • Operate seamlessly as part of customers supply
    chain e.g. multilevel supply chains
  • Making logistics the key business process to win
    and retain customers

25
Metrics Alignment with Business Strategy
26
Supply Chain Strategy and Business Strategy
  • Any organizations business strategy is driven by
    its growth objectives
  • Ultimately, this means to achieve a certain ROI
    and/or ROA
  • Supply chain strategy should follow from business
    strategy
  • For instance, market penetration objective could
    suggest lower prices or more warehouses/stock-poin
    ts conversely, profitability focus could mean
    closing unprofitable warehouse locations or
    raising prices
  • Offering superior value to customers( eg, by
    bundling of goods/services) costs more money so
    should we only satisfy customers or delight
    them ? ?

27
Customer Service and Cost Trade-offs(1)
  • Customers always want more for less
  • Want more variety and quicker delivery but at
    lower prices
  • Trade-off between customer service level and
    associated costs will need to be made
  • All SC processes and decisions will lose their
    competitiveness if not aligned with business
    strategy
  • Challenge always is to see how to improve
    performance on both cost and service fronts

28
Customer Service and Cost Trade-offs(2)
  • Increasing competition driven by demanding
    customers, forces firms to make supply chain
    innovations and initiatives
  • Such chosen moves will need to improve one or
    both of cost and service elements
  • Well managed firms identify and develop external
    market opportunities and internal SC capabilities
    to be mutually consistent
  • Business strategies determine the level at which
    SC efficiency point( cost-benefit) to operate

29
Supply Chain Trade- offs
High
Cost
Revenue
Maximum Profit
Cost/ Revenue
Profit Contribution
Low
High
Low
Service Level
30
IT and Business Process Management
31
IT Role in SCM Metrics(1)
  • Proper information flow is fundamental to all
    good SC
  • IT plays a crucial role in first capturing all
    transactions data across the SC
  • SC data accuracy and transparency are the major
    pluses that IT brings into it and their absence
    its major flaw !
  • Major IT tools used in SCM are ERP, EDI,
    E-commerce, CPFR amongst others

32
IT Role in SCM Metrics(2)
  • Demand forecasting, demand-supply management,
    production planning and control and work flow
    management all make good use of IT
  • Physically-enabling technologies like
    GPS/WMS/RFID/Bar-coding used for in material
    tracing and tracking systems use IT
  • Macro-processes in SCM like (a) Supply
    Relationship Management (SRM) (b) Internal SCM
    and ( c) Customer Relationship Management( CRM)
    are now manageable thro IT integration software
  • ITs information capabilities goes beyond SC
    transactions providing tracking and monitoring
    features and also analytical functionalities of
    SCM metrics

33
Business Process Management (BPM)
  • BPM is a management approach focused on aligning
    all aspects of an organization to its
    customer/client needs
  • It is holistic as promotes overall
    effectiveness and efficiency of all operations
  • It is meant to encourage innovation, creativity,
    flexibility and integration to use modern
    evolving technologies
  • Focus on process orientation and process
    optimization rather than having a traditional
    functional hierarchical approach

34
Process Focus in BPM
  • Processes are the strategic assets of a firm,
    which need to be understood, mapped, managed and
    improved to deliver value-added products/services
  • The process approach enables it to be supported
    thro information and technology to ensure
    viability even in times of constant change
  • It makes possible the integration of a change
    capability covering both technology and human
    process dimensions as found in SCM operations

35
BPM Life-Cycle
  • Design- identification of existing processes
    and designing desirable processes
  • Modeling- theoretical design and modeling to
    consider all variables/their combinations and
    doing sensitivity analysis/alternative scenario
    building to study their impact/consequences
  • Execution- translating the developed models thro
    systems/software to generate outputs/reports for
    action
  • Monitoring- tracking of performance
    measures/metrics to serve as dashboards
  • Optimization- retrieving and interpreting
    performance data to identify bottlenecks, problem
    areas and opportunities for cost savings and/or
    service improvements
  • Process improvements and optimization are all
    finally meant to add to overall business value

36
BPM components
  • Process engine- robust platform for modeling and
    executing process-based applications including
    business rules/algorithms
  • Business analytics- to identify business issues
    and trends as dashboards for needed actions
  • Content management- system for storing and
    securing electronic documents, files and images
  • Collaboration tools- remove communication
    barriers thro discussion forums, dynamic
    workspaces and message boards

37
BPM and IT integration
  • Managing end-to-end customer-facing processes
  • Consolidating data and increasing visibility and
    access to associated data/information
  • Increasing flexibility and functionality of
    current data and data infrastructure
  • Integrating with existing systems and leveraging
    their data service capability
  • Establishing a common language/platform for
    business- IT alignment
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