Customer Servcie Value In The Supply Chain

CAN CUSTOMER SERVICE IN THE FREIGHT INDUSTRY ADD VALUE IN THE SUPPLY CHAIN?

In any industry or organisation, good customer service makes good business sense. Customer service differs from customer satisfaction. Customer service can be seen as the action required to achieve customer satisfaction (Kotler et al. 1998, Ferrer 2007). Good customer service doesn't always guarantee satisfaction however indifferent customer service will almost certainly impact negatively on customer satisfaction and consequently on the business bottom line.

It is a well documented fact that attracting new customers costs more than retaining existing ones and keeping them happy (Kotler et al. 1998). More importantly, wooing back dissatisfied customers can be well nigh impossible, irrespective of cost (Kotler et al. 1998). This essay will seek to highlight how the customer service function within the freight service industry can indeed add significant value to the supply chain in order to meet expectations of customers.

Key strategic customer service elements that providers need to take into consideration to raise customer satisfaction are many. Whilst there are some specific elements at operational level that are unique to freight companies, at a strategic level, the elements that denote best practice customer service can be applied across all industries and organisations (Kotler et al. 1998).

LaLonde & Zinszer (1998 cited by Rutner & Langley 2000) describe the three main components of customer service as satisfying customer's needs, measuring customer service performance and firm-wide commitment. Zhang, Vonderembse & Lim (2005) note such things as the need to integrate planning and operations, develop partnerships and maintain continuous improvement, as does Bagchi (1997).

Murphy, Douglas and Wood (2004) include concepts such as professionalism, understanding, confidentiality, transparency, responsiveness and continuous innovation and improvement. Other abstract elements identified were flexibility, anticipating demand, integrity, reliability, quality, timeliness, cost, customisation and commitment to service that is consistent over time (Murphy, Donald & Wood 2004; Kotler et al 1998; Soosay, Hyland & Bretherton n.d.). Whilst all these words conjure up a "big-picture" view of good customer service, they don't actually explain what it is. For example, when a customer wants understanding, what does that look like? What are they really asking for? In fact, what they are looking for is the behaviour that evidences understanding - listening, being polite, checking information and finding an acceptable solution for the customer.

Whilst it would be impossible, within the word limit constraints of this essay, to go into the details of every behaviour that a freight service provider needs to perform to denote good customer service, studies indicate that activities such as collecting customer information in the form of feedback, surveys, shopping behaviours and the like, planning and forecasting future demand, being flexible and providing superior service all contribute to maintaining effectiveness at operational level leading to better service and ultimately, satisfied customers. (Soosay, Hyland & Bretherton n.d.). Logistics flexibility in particular may have a direct impact on customer satisfaction according to Zhang, Vonderembse & Lim (2005). The implication for managers is that by developing a service with logistics flexibility, thereby enabling fast replenishment and rapid delivery, firms can achieve increased customer satisfaction (Zhang, Vonderembse & Lim 2005; AT Kearney 1994).

In Australia, freight service providers range from local urban carriers to large scale global organisations using a variety of modes from single to multi-modal in delivering their service (Government of South Australia, n.d.). The discussion in this essay will generally relate to large-scale organisations. Fig. 1 illustrates various supply chain configurations. A freight service provider is likely to be involved at various points along the entire chain. Regardless of the complexity of the supply chain, the customer is a vital part of the whole (Murphy, Donald & Wood 2004).

Figure 1. Different Supply Chain Constructs

Source: John T. Mentzer et al., "Defining Supply Chain Management," Journal of Business Logistics, Vol.22, No.2, 2001,pp. 1-25 Adapted from Paul R. Murphy, JR. Donald, F. Wood, "Contemporary Logistics", 8th edn.,2004, p.37

Figure 2 below shows the contrast between two marketing management concepts. The selling concept focuses on customer conquest - gaining profit through sales with little concern about the buyer. On the other hand, the marketing concept has customer needs as its focus (Kotler et al. 1998). According to Kotler et al. (1998) by producing what consumers want, firms will satisfy them and make profits.

Figure 2: The selling and marketing concepts contrasted

Source: Kotler et al. 1998 Marketing 4th edn. p. 19

The literature indicates that the ability to provide a reliable, quality service can be used as a critical asset with customers constantly sending the message that delivering on customer service and producing that 'something extra' is worth the added cost (Strategic Design + Development 2004). It can also discourage the search for a cheaper alternative and consequently a lost customer (Strategic design + Development 2004).

Further research indicates that if providers can more closely align the services they provide with customer objectives, there is substantial room for adding value thereby exceeding customer expectations and ultimately increasing customer satisfaction (Power & Moosa 2006). Significantly, research indicates that the prominent focus from customers is the desire for the provision of more innovative solutions rather than a generic one-size-fits-all mentality (Power & Moosa 2006). This would appear to support the use of a marketing concept with its focus on customers and customer service rather than a sales one as the way forward to gaining competitive advantage.

Interestingly the Queensland, Victorian, South Australian and Commonwealth governments have all commissioned reports specific to transport and logistics supply in recent years that all have a customer focus. Research, innovation and investment are identified as central to economic competitiveness (Qld Government 2004; SA Government n.d.; Vic Government 2006).

As part of their report, the Victorian government is currently fostering research into new TDL (transport, distribution and

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