BANGLADESH UNIVERSITY OF TEXTILES
MBA in Textiles
Course Name: Textile & RMG SupplyDemand Chain Management (M304)
Course Teacher
Md.Ahsan Habib
M.Sc in Textile Mgt (Sweden), B.Sc in Textile Engg. (BUTex)
Assistant Professor & Head,
Dept. of Textile Engineering Management
Bangladesh University of Textiles.
Md.Ahsan Habib,Asistant Prof.
Dept of TEM, BUTex
Chapter-2
Putting the end-customer first
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Supply chain vs. marketing
• Marketing is the philosophy that integrates the
disparate activities and functions that take place
within the network.
• Satisfied customers are seen as the only source of
profit, growth and security.
(Doyle, 1994)
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Who is the Customer?
• Customer are people who use or consume the
product.
• Customer are individuals or business who buy the
product, meaning that they acquire it and pay for
it.
There are two types of customer:
1. Business Customer: Who represent the focal
firm’s immediate trading environment.(B2B)
2. End-Customer: Who represent the ultimate
customer for the network as a whole.(B2C)
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Rising customer expectations
• Better levels of general education
• Better ability to discern between alternative
products
• Exposure to more lifestyle issues in the media.
These expectation have led to customers not
only aspiring to more desirable products, they
are also demanding much better levels of
service to be associated with those products.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Demand Profiling
• Marketing people want to forecast demand in order to
plan broad goals such a allocating the sales force,
setting the sales goals, promotions planning and
advertising campaigns. But logistics people need to
know how many to deliver, where and when to do so,
for each SKU in the product range and for each
channel-not just for the range as whole. The aim is to
combine forces and produce the most accurate profile
of future demand.
• It is impossible to predict the future with uncertainty,
so it is necessary to forecast what will happen.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Segmentation
Segmentation describes how a given market might be broken
up into different groups of customers with similar needs.
•
•
•
•
There are many possible ways in which markets can be
segmented. Including;
ƒDemographic: Such as age, sex and education;
ƒGeographic: Such as urban, type of house and region.
ƒTechnical: the use that customers are going to make of a
product;
ƒBehavioral: such as spending pattern and frequency of
purchase.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
The important characteristics of segments:
 Measureable: variable that can be easily
identified and measured;
Economically viable: capable of producing the
contribution that justifies the effort and cost
of marketing;
Accessible: geographically or in terms of
media communications.
Actionable: can be attracted and served
effectively.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
The Marketing Mix
• The marketing mix is the set of marketing decisions
that is made to implement position strategy (target
market segments and differential advantages) and to
achieve the associated marketing and financial goals.
• The marketing mix has been popularly termed the ‘4
Ps’
 Product: range, sizes, presentation and packaging,
design and performance;
 Price: list price, discounts, geographical pricing,
payment terms;
 Promotion: sales force, advertising, consumer
promotion, trade promotion, direct marketing;
 Place: channel selection, market coverage, distribution
system, dealer support.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
• Logistics contributes fundamentally to the
‘place’ decision, as well as supporting
‘product’ and ‘promotion’ decision.
• In order to achieve the goal of ‘the right
product in the right place at the right time’,
logistics systems and processes need to be
designed to support products in the
marketplace.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Comparison between Consumer and Industrial Marketing
Consumer
Industrial
Customers
Many, widely dispersed
Few, concentrated
Market
Consumers directly served Derived demand Industrial
by retailers and distributors chain, long and complex
Buying behaviour
Individual and family
decision
Group decision
Formal procedures
High buying power
Product
Standard
Positioned on emotional
and perceptual factors
Technical complexity
Specialization important
Customized.
Price
High unit price
Take it or leave it
Low unit price
Tender and negotiation
Standard items from price
list
Promotion
Mass media advertising
Role of brand
Emphasis on personal
selling,
Reputation important
Established retail chain
Direct
Made to Order
Place
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
Stock availability
BUTex
Customer Value
• In today’s customer driven market, it is not the product
or service itself that matters most, but the perceived
value to the customer of the entire relationship with a
company. The way companies measure the quality of
their product and service has evolved from internal
quality assurance to external customer satisfaction and
from there to customer value.
• The currents emphasis on customer value goes a step
further by establishing the reasons a customer chooses
one company's product over another’s and looking at
the entire range of product, services, and intangibles
that constitute the company's image and brand.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
The dimensions of customer value
•
•
•
•
•
Conformance to requirement
Product selection
Price and brand
Value-added services
Relationships and experience
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Conformance to requirement:
The ability to offer what the customer wants and needs is a basic
requirement to which supply chain management contributes by
creating availability and selection.
If the product demand is predictable as in functional items, efficient
supply chain is suitable. Such as- diapers, soup, or milk etc.
For high-variability demand items, responsive supply chain is
suitable. Example- Zara fashion
Zara is part of inditex. Zara success is due to conformance to a
system that is built on three principles:
1.
2.
3.
Closing the communication Loop.
Sticking to a rhythm across the supply chain.
Leveraging capital assets to increase supply chain flexibility.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
• Product selection: Product variety options; styles, colors and
shapes selection.
• Price and Brand: Commodity and Sophisticated product get
advantages at price but consumer and fashion product focusing
on price reduction or brand building and responsive supply
chain.
• Value added service: such as support and maintenance.
– Commoditization of products
– Closer to customer
– Increase in information technology
• Relationships and Experience: Connection between the firm and
customer through development of a relationship.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Quality of Service
Customer
Supplier
Service
Specification
Gap 1
Gap 2
Service
Delivery
Expected
Service
Gap 3
Gap 4
Fig: Simplified service quality gap model
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Perceived
Service
• Gap 1: refers to different between customer
expectations and how these have been
developed into a service speciation by the
supplier.
• Gap 2: refers to differences between how the
specification was drawn up and how it was
delivered.
• Gap 3: refers to differences between what
customer expected and what he or she perceived
was delivered.
• Gap 4: refers to differences between how
supplier and customer perceived the service
delivery.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Customer Loyalty
• Customer Satisfaction is what people think of usquality of service, value for money.
• Customer loyalty is how long we keep a customer.
The benefits of loyal customer :
Generate long-term revenue streams (high lifetime
values);
Tend to buy more than new customers;
Tend to increase spending over time;
May be willing to pay premium prices;
Provide cost savings compared with attracting new
customers.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
• The logistics challenge is to support the
development of customer loyalty by
designing and delivering quality of
service.
• Quality of the service is ‘ essential for
excellent market performance on an
enduring basis’. Supporting product
availability through such means as
channel selection, market coverage,
distribution systems and dealer support
all helps to nourish customer loyalty.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Customer loyalty
Service
Quality
Product
Quality
Perceived
Value
Customer
Loyalty
Price
Relatively easy for competitors to imitate
Key driver of customer loyalty
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
• ‘Perceived value’ or value disciplines; A development
of the service quality- product quality- price model is
that of value disciplines. Generic value disciplines can
be followed:
 Operation excellence: superb operations and
execution-focus is on efficiency, streamlining
operations, supply chain management and low price.
 Product leadership: The focus is on development,
innovation, design, time-to-market and high margins in
a short timeframe.
 Customer intimacy: Leaders excel in customer
attention and customer service. It focus on customer
relationship management.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Relationship marketing and customer
relationship management (CRM)
• A development of customer intimacy is
relationship marketing. The aim to develop longterm, loyal customers through ‘ bonding’ with
them. This development can be take place at
three levels:
• Financial incentives: such as frequent flyer
schemes and reward cards.
• Social and financial bonds:
• Structural bonds: Such as IT system- electronic
hand cuffs.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Fig: Customer relationship management: bow tie and diamond
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Case Study: ‘Batman’
Everglo Battery Manufacturer
Field
Product
Knowledge
Delivery
And
Installation
Warranty
Parts
and
service
Customer
training
Basic
Product
Quality
Charts
assurance
advice
Features
24-hours, no-nonsense
back-up
‘Black box’
That gives power for life
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Figure: Adding value
by quality of service
Customer Value Measure
• 1. Service Level measure.
• 2. Customer satisfaction measure.
• 3. Supply chain performance measure
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Service Level measure:
Service level is the typical measure used to quantify a
company's market performance. Service level is usually
related to the ability to satisfy a customer ‘s delivery
date, for instance, the percent of all orders sent of or
before the promised delivery date.
Ability to succeed many company invest heavily in
decision-support systems that allow them to quote
delivery dates accurately by analyzing information from
the entire supply chain.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Selected service level measurements in retail supply chain
Inventory
/availability
Physical and accounting correspondence: number of orders with mistakes divided by
the total number of orders in the warehouse in the same period of time.
Stock turnover: quantity delivered or shipped divided by the average stock in the
warehouse in the same period of time.
Stockout: number of orders out of stock divided by the total number of orders placed
in the same period of time.
Flexibility
Flexibility: Number of special/urgent/unexpected orders confirmed to the customer
divided by the total number of special/urgent/unexpected orders required by the
customer multiplied by 100 in the same period of time.
Service care
Punctuality: number of orders delivered on time divided by the total number of orders
delivered multiplied by 100 in the same period of time.
Regularity: number of orders delivered with a no of delay/advance divided by the
total number of orders delivered multiplied by 100 in the same period of time.
Completeness: number of full orders delivered divided by the total number of orders
delivered multiplied by 100 in the same period of time.
Correctness: number of orders with mistakes dispatched divided by the total number
of orders dispatched multiplied by 100 in the same period of time.
Harmfulness: number of damaged orders dispatched in a period divided by the total
number of orders dispatched multiplied by 100 in the same period of time.
Habib,Asst. Prof. Dept. of TMBS,
Delay: number of Md.Ahsan
days of delay
multiplied
by 100.
BUTex
Supply conditions
Delivery frequency: number of orders delivered in a certain period of
time.
Skipped quantity: quantity shipped in a certain period of time or
quantity dispatched for each shipment.
Presentation: method of packaging and of shipment, alignment with
customer process.
Lead time
Total order cycle time: occurring from the arrival of a customer order
to the receipt of goods or cycle time of the single activities ( order
transmission, order processing, order composition, order transfer to
the production plant, article production, warehouse delivery, final
delivery to the customer)
Response time: to order tracking requests, etc.
Marketing
Range completeness, information on products and selling assistance
Order management
Documents management (invoice and orders), client contacts and
order advancement state, etc.
After sales
Speed response; to back order, claims management, use assistance
and payment management, fulfillment of warranty conditions, etc.
E-information
Web site completeness, ease of making orders by network and data
transmission security, etc.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Customer satisfaction: Customer satisfaction
surveys are used to measure sales department
and personnel performance as well as to
provide feedback for necessary improvements
in products and services.
Customer loyalty is easier to measure that customer
satisfaction
 Repurchasing of customer from internal database.
Customer defections.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex
Supply chain performance
Supply chain operation model (SCOR) is developed by ‘The Supply
chain Council’. It is used for analyzing the current state of a
company’s processes and its goals, quantifying operational
performance, and comparing it to benchmark data.
Md.Ahsan Habib,Asst. Prof. Dept. of TMBS,
BUTex