PRODUCT AND CUSTOMER SERVICE
PL201
FUNDAMENTAL OF LOGISTICS
MANAGEMENT
PRODUCT
• As all logistical activities and management
revolve around the product, this highlights the
importance of the product. In most cases the
product involved is a physical good. Physical
goods will vary in its physical attributes, weight,
volume and shape. The nature of the product
involved will determine the types and mount of
logistical activities required in order for the
product to reach customers.
PRODUCT CLASSIFICATION
• There are two broad classification of products.
These are consumer products and business
products.
• Consumer products are products that are
directed to ultimate consumers. The range of
products consumed by consumers is very large.
• Business products are products that are directed
to organizations or individuals in order to be
processed further as an output of the
organization or to be resold to another market
PRODUCT CLASSIFICATION
Convenience goods
• goods/services purchased frequently,
• immediately without comparative shopping, eg. banking
services, foodstuffs
• – require wide distribution through many outlets
• – high distribution cost & high customer service level
(availability, accessibility)
• – Soft drink products/cigarettes/public phones
Shopping goods
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– consumers willing to shop and compare price,
quality & performance
– examples: fashion clothes, automobiles, home
furnishings & medical care
– much less stocking points compared with
convenience goods
– lower distribution cost
PRODUCT CLASSIFICATION
Specialty goods
• – consumers willing to expend a substantial effort & often
willing to wait for a significant amount of time
• – Examples: fine foods, custom-made automobiles,
management consulting advice
• – lowest distribution cost, low customer service level
Industrial goods
• good/services used to produce other goods/ services
• Examples: raw materials, components, building,
equipment, business services
PRODUCT LIFE CYCLE
Different distribution strategies for different stages to achieve maximum efficiency
PRODUCT CHARACTERISTICS
Weight-bulk ratio
Value-bulk ratio
Substitutability
Risk Characteristics
PRODUCT CHARACTERISTICS
Weight-bulk ratio
• A measure directly related to transportation and storage
costs
• Products with high weight-bulk(volume) ratio show good
utilization of transportation equipment. (eg.. rolled steel) &
their units costs tend to be low
• Products with low density (eg. potato chips) tends to have
high transportation & handling costs relative to their selling
price
Value-bulk ratio
• Dollar value of products is an important factors in developing
a logistics strategy
• Storage costs are particularly sensitive to value
• Low value -weight products (eg.,coal) have low storage cost
(low inventory carrying cost)but high transportation cost
• High value-weight ratio products (eg. Electronic equipment)
show opposite pattern
PRODUCT CHARACTERISTICS
Substitutability
• High substitutable products - no difference between a firm’s
product and those of competitors (eg. food and drug) and
prone to lost sales
• Logisticians need to plan products distribution (through
transportation & storage choices) according to the degree of
substitutability
Risk Characteristics
• Risk characteristics : – perishability (fruits), flammability
(chemical), value (jewelry), tendency to explode , & ease of
being stolen (pens/watches)
• Transportation and storage costs of products showing high
risk in one of the above characteristics is normally higher.
OBJECTICE OF PACKAGING
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Physical protection – The objects enclosed in the package may require protection
from, among other things, mechanical shock, vibration, electrostatic discharge,
compression, temperature, etc.
Barrier protection – A barrier from oxygen, water vapor, dust, etc., is often
required. Permeation is a critical factor in design. Some packages contain desiccants
or Oxygen absorbers to help extend shelf life. Modified atmospheres or controlled
atmospheres are also maintained in some food packages. Keeping the contents
clean, fresh, sterile and safe for the intended shelf life is a primary function.
Containment or agglomeration – Small objects are typically grouped together in
one package for reasons of efficiency. For example, a single box of 1000 pencils
requires less physical handling than 1000 single pencils. Liquids, powders and
granular materials need containment.
Information transmission – Packages and labels communicate how to use,
transport, recycle, or dispose of the package or product. With pharmaceuticals,
food, medical and chemical products, some types of information are required by
governments. Some packages and labels also are used for track and trace purposes.
Marketing – The packaging and labels can be used by marketers to encourage
potential buyers to purchase the product. Package graphic design and physical
design have been important and constantly evolving phenomenon for several
decades. Marketing communications and graphic design are applied to the surface
of the package and (in many cases) the point of sale display.
A single-serving shampoo packet
OBJECTICE OF PACKAGING
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Security – Packaging can play an important role in reducing the security risks of
shipment. Packages can be made with improved tamper resistance to deter
tampering and also can have tamper-evident features to help indicate tampering.
Packages can be engineered to help reduce the risks of package pilferage: Some
package constructions are more resistant to pilferage and some have pilfer
indicating seals. Packages may include authentication seals and use security
printing to help indicate that the package and contents are not counterfeit.
Packages also can include anti-theft devices, such as dye-packs, RFID tags, or
electronic article surveillance tags that can be activated or detected by devices at
exit points and require specialized tools to deactivate. Using packaging in this way
is a means of loss prevention.
Convenience – Packages can have features that add convenience in distribution,
handling, stacking, display, sale, opening, reclosing, use, dispensing, reuse,
recycling, and ease of disposal
Portion control – Single serving or single dosage packaging has a precise amount
of contents to control usage. Bulk commodities (such as salt) can be divided into
packages that are a more suitable size for individual households. It is also aids the
control of inventory: selling sealed one-liter-bottles of milk, rather than having
people bring their own bottles to fill themselves.
THE OBJECTIVE AND IMPORTANCE
OF PACKAGING
•Facilitate storage and handling
•Promote better utilization of transport
equipment
•Provide product protection
•Promote the sale of the product
•Change the product density
•Facilitate product use
•Provide reuse value for the customer
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Packaging is considered a very important and a very considerate process that mainly affects
almost all activities of a business.
Since packaging deals mainly with designs and the convenience of delivery, it also affects
logistics in a way that boosts the flow of transportation of goods and enhance smooth
delivery of products out from the productivity line to outdoors.
The process of packaging will lead to the distribution of products because it is convenient
and effective both for the customers and the manufacturers themselves.
Also, packaging is one of the most important factors that build up competition between
businesses and it enhances market promotion and advertisement efficiency as well. With this
reason, most products pay for packaging businesses and agencies to design catchy packages
and even slogans that will fit the concepts of their products and will be appropriate for their
specific business.
Image of the product is very important for almost all businesses because it mainly affects
the customers, profits, popularity, and other factors; image of a specific business can bring
them up or down depending on many factors where packaging is one of them.
Packaging affects shipping rates when products are shipped because they look at weight,
material, and amount which affects money in your pockets. The higher the amount and the
heavier the weight of materials, more and more money is needed to pay in order to deliver
objects or items out to other regions or nations. With packaging, these fees than be
minimized; containers and show products are arranged and will help reduce space and
mostly weight of the products in total. With this ability to go out internationally, packaging
enhances more improvements in logistics which then brought up new studies and new
systems like international logistics that we all know today.
Major Roles of Packaging in Logistics
• Logistics is getting wider and wider as competition between businesses
come in. Packaging has become a main factor that affects the customer's
decision in our everyday lives, our modern lives today. Packaging has three
main roles and functions that enhances a great flow of the productivity
and distribution line as well.
1. Storage Support- Packaging as well as how things are packed affects
distribution of the products and their safety.
2. Transport Support- With packages of products arranged in order, it
helps a lot in transportation which then makes a positive effect in both
distribution and finance.
3. Cost Reduction- Rearranging products in packages will help to reduce
costs because it occupies lesser space.
• Anyhow, we all know that logistics and the packaging process are greatly
related in real situations for all businesses. Within the Just-in-Time
concept, time is money; we can all observe and see that there are several
relationships that both packaging and logistics have with each other.
Today, more businesses operate globally and causes competition to rise;
this mainly affects logistics and packaging which enhanced a closer
relationship between them, making them a dual pack when it comes to
managing.
Types of packaging
1. Packaging for retails- For retailers, where they sell products directly to the
customers, design and appearance should be orderly structured, well-planned,
and appropriate for specific products. The designs should be eye-catching,
appropriate, and related to a specific theme. If possible, packaging should
include information about the products that can symbolize positive means of
marketing and is ethical for the social.
2. Packaging for wholesalers- For wholesalers, numbers and quantity of
products are the main points for businesses. When delivering products, the
quantity will determine what type of packaging will be used so that
distribution and transportation of products would be easy and convenient for
everyone. Multiples of 6, 12, and 24 can help make things a lot easier where
these numbers serve as standard values of wholesales quantity. In this case,
packaging affects DC or the distribution of products.
3. Packaging, like repeated many times, affects time, money, space, business
activities, and feed backs. Of course, different types of packaging result in
different effects; some packages for instance, enhance space for more
products to be placed. Packages of products will make delivery easier and
convenient. Now, most products are delivered and transported via airplanes,
ships, and other methods.
PRODUCT PRICING METHODS
Geographic Pricing
Method
Incentives Pricing
Arrangements
F.O.B (FREE ON BOARD) PRICING
• a policy denotes the location at which the
price is effective
• the designated location in the policy is the
location at which the customer takes the title
to the goods
• Example:
– McDonald/Burger King price its foods at
thepoint of retail sale
– IKEA: fob store/ fob destination
ZONE PRICING
• a single price within a geographic area, eg.
postage
SINGLE/UNIFORM PRICING
• a single price for all customers regardless of
location, eg., newspapers
QUANTITY DISCOUNT
• lower per-unit cost for a greater amount of
goods handled in one transaction, eg. soft
drink, rice
• logistics costs, especially transportation costs,
have well-known volume-cost breaks
THE IMPORTANCE OF CUSTOMER
SERVICE
• Higher Costs
– Poor customer service can lead to higher costs for the shipper. If the
transportation company does not communicate with the shipper and
the receiver, the cost for the transportation of the load will increase.
For example, if the transportation company does not advise the
receiver when the truck will arrive, the truck company may incur
overtime costs, which will cut into the profit on the load.
• Lost Business
– The receiver is a customer of the shipper, and the truck company's
customer is the shipper. If there is not adequate communication
between the truck company and the shipper or receiver, the truck
company may not win this business again. A representative from the
truck company must periodically call the shipper or receiver to inform
them of the driver's progress.
• Lost Product
– Trucks have a maximum capacity. If the commodity is too heavy or too
large to fit on one truck, the truck company may have to assign
another truck to carry the overage. If the commodity is highly
perishable, the time needed to get another truck may cause the
commodity to spoil. In this example, customer service must keep all
parties aware of what is needed and work toward getting the proper
trucks needed to transport the load.
RELATE SERVICES AND COSTS
– Order Cycle
• shorter order cycle, less inventory required
– Substitution
• more substitutable product, higher customer service level required
– Inventory Effect
• increase inventory, reduce cost of lost sales
– Transportation Effect
• increase transportation costs, reduce cost of lost sales
AREA OF CUSTOMER SERVICE
Pre-transaction
* Written statement
* Statement in hands of
customer
* Organization structure
* System flexibility
* Technical services
Transaction
Post-transaction
Stockout level
* installation, warranty,
alterations, repairs, parts
* Ability to back order
* Elements of order cycle
* Time
* Transship
* System accuracy
* Order conveniences
* Product Substitution
* Product tracking
* Customer claims,
complaints
*Product packaging
*Temporary replacement
of product during repairs
Elements
Pre transaction elements
Written customer service policy:
documented and well articulated policy
Accessibility:
easy to reach and easy to communicate
Organisational culture:
management focus on customer service and
organisational structure
adaptability to meet customer requirement
System flexibility:
Transaction elements
Order cycle time:
elapsed time between order and delivery
Inventory availability:
percentage of demand met from stock in hand
Order fill rate:
proportion of order filled within the stated lead
time
query response time and exception advise
Order status information:
Post- transaction elements
Availability of spares:
in stock level of service parts
Warranty and product tracing:
warranty handling and product tracing capability
Customer complaint handling:
dealing with complaints and returns
SALES-SERVICES RELATIONSHIP
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Two points methods
Before-after experiments
Game playing
Buyer surveys