• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

Card Range To Study



Play button


Play button




Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

134 Cards in this Set

  • Front
  • Back

These became known as Lean Production / Manufacturing & Six Sigma

In1990s, SCM combined:

* Quick response (QR)

* Efficient Consumer Response (ECR)

* JIT -Continuous reduction of waste

* Keiretsu Relationships - Including suppliers

Six Sigma

A quality management process:

§ Use measurement to reduce process variation.

§ Eliminate defects.

* No more than 3.4 parts per million defective.

* Sigma stands for #, standard deviations of the process.

* Originated at Motorola in 1970s.

* “Zero defects”.

Two Aspects to Six Sigma Methodology

1) Use of technical tools

* Statistical quality control.

* Seven tools of quality.

2) People involvement:

* All employees responsible to ID quality problems.

* All employees trained to use technical tools.

Six Sigma- 5 step plan (DMAIC)

*Methodology to identify & eliminate causes of quality problems

1) Define: The quality problem of the process.

2) Measure: The current performance of the process .

3) Analyze: Analyze root cause of quality problem.

4) Improve: Improve process by eliminating root cause.

5) Control: Control process ensure continued improvement.

Lean Six Sigma Supply Chain

* Lean: Creates customer value throughefficient use of resources

-Lean Production


- Respect for People

* Six Sigma: Identifies root causes of problemsusing quality control tools

- Process Capability


- Statistical Quality

Characterization Monitoring Systems (DMAIC)

* Characterization Monitoring Systems

- Define: What problem needs to be solved?

- Measure: What is the capability of theprocess?

- Analyze:When and where do defects occur?

Optimization Controlling Systems

* Optimization Controlling Systems

- Improve: How can process capability be Six Sigma? What are vital factors?

- Control: What control can be put in place to sustain the gain?

Impact of Six Sigma on Supply Chain

* Suppliers

- Lower costs due to efficient systems.

- Shorter lead times.

- Lower safety stock.

* Operations

- Proper cycle time calculation ensures production according to customer demand.

- Uniform work flow

- Pull production
* Logistics

- Optimization models to select routes.

- Warehouse design changes reduce waste.

The Push System

Traditional approach:

- Supply chains work as “push”systems

- Inventory carried to cover up problems

The Pull System approach

* Each stage in SC requests quantities needed from the previous stage.

* No excess inventory generated.

* Reduced inventory exposes problems.

Respect for people must exist for an organization to be its best

* Flatter hierarchy than traditional organizations.

* Ordinary workers given great responsibility.

* Supply chain members work together in cross functional teams

Role of workers

Is perform different tasks actively pursuing company goals:

* Worker duties

- Improve production process

- Monitor quality

- Correct quality problems

* Quality circles

- Work in teams

Role of Management

* Creating a cultural change for Lean needs management support

- Provide atmosphere of cooperation.

- Empower workers to take action based on their ideas.

- Develop incentive system for lean behaviors.

Role of Supplier

* Lean can build a long-term supplier relationship span

- Partner with suppliers.

- Improve process quality.

- Information sharing.

- Goal to have single-source suppliers.

Total Quality Management

* An SCM organization improves quality at every level

- Voice of the Customer

- Costs of Quality

- Quality Tools

- ISO 9000

Quality Gurus

* W. Edwards Deming

* Philip Crosby

* Joseph M. Juran

W. Edwards Deming

* Considered the "father" of TQM

* Stressed management's responsibility for quality

* Developed "14 points" to guide companies in quality improvement

Philip Crosby

* Coined phrase "quality is free"as defects are costly

* Introduced concept of zero defects

* Focus on prevention not inspection

Joseph M. Juran

* Defined quality as "fitness for use"

* Developed concept of cost of quality

Deming's Way

1) Create constancy improve product & service.

2) Adopt the new philosophy.

3) Stop dependence on inspection to improve quality.

4) End practice of awarding business based of price.

5) Constantly improve production & service.

6) Institute training on the job.

7) Institute leadership.

8) Drive out fear.

9) Break down barriers between departments.

10) Eliminate slogans.

11) Eliminate quotas.

12) Remove barriers to pride of workmanship.

13) Institute program of self-improvement

14) Put everyone together to accomplish a transformation

Crosby's Way

Four Absolutes of Quality:

1) Definition of quality is conformance to requirements.

2) System of quality is prevention.

3) Performance standard is zero defects.

4) Measure of quality is the price of nonconformance.

Juran's Way

* Quality Planning, identify internal/external customers and needs:

- Develop products satisfying those needs.

- Mangers set goals, priorities, & compare results.

* Quality Control and determine what to control:

- Establish standards of performance.

- Measure performance, interpret the difference, take action.

* Quality Improvement, show need for improvement:

- identify projects for improvement.

- Implement remedies

- Provide control to maintain improvement.

Objectives : Malcolm Baldridge Nat Quality Award


* Stimulate firms to improve

* Recognize firms for quality achievements

* Establish guidelines so organizations can evaluate improvement & provide guidance to others.

Categories Measured: Malcolm Baldridge Nat Quality Award

Categories Measured

1) Leadership

2) Strategic planning

3) Customer & market focus

4) Information & analysis

5) Human resource focus

6) Process management

7) Business Results

Voice of the Customer (Quality)

* Quality is: Meeting or exceeding customer expectations

* Determine customer wants:

- Focus groups

- Market surveys

- Customer interviews

Cost of Quality

* Prevention cost

* Appraisal costs

* Internal failure costs

* External failure costs

Prevention Cost

* Cost incurred in the prevention of poor quality

* Includes costs of preparing and implementing a quality plan

Appraisal Costs

* Costs incurred in the process of uncovering defects

* Includes testing, evaluating, and inspecting quality

Internal Failure Costs

* Costs of defects before they reach the customer

* Include scrap, rework, and material losses

External Failure Costs

* Costs of failure at customer site

* Includes returns, repairs, and recalls

Seven Tools of Quality Control

* Cause and Effect Diagram

* Flowcharts

* Checklists

* Control Charts

* Scatter Diagrams

* Pareto Analysis

* Histograms

ISO Management Standards

Family of Management Standards

* International Organization for Standardization (ISO):

- located in Switzerland.

- has over 155 member countries.

* ISO9000 and 14000:

- Govern quality and environmental certification standards of production, respectively.

* The ISO 9000 standards were adopted in the US by ANSI and ASQC.

* Increased international trade developed a need.

* Published by International Organization for Standards (ISO) in 1987.

* Concerns measuring and documenting the quality process.

* ISO provides a certification process

Logistics are necessary

* To move goods from suppliers to buyers.

* Finished goods to customers.

* Products- little value to a customer until:

Delivered at right time to correct location

Logistics is

“…that part of supply chain management that plans, implements, and controls theefficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption in order to meet customer requirements.”

Council of Supply Chain Management Professionals (CSCMP)

The Objective of Transportation

* To add support value, service andprofits.

* To provide effective and efficientservice.

* To satisfy customer needs.

Legal Forms of Transportation

Carriers are classified as:

*Common carriers- serve the public at published rates without discrimination.

* Contract carriers- (not bound to serve the public). Serve customers under contractual agreements.

* Exempt carriers –exempt from regulation of services & rates (like produce, livestock, coal).

* Private carrier -not subject to economic regulation -typically company owns the carrier to move their goods.

Modes of Transportation

* Motor Carriers

* General Freight Carriers

* Specialized Carriers

* Rail Carriers

* Air Carriers

* Water Carriers

* Pipeline Carriers

* Intermodal

Motor Carriers

* Most flexible

* Carries 80% of U.S. freight

* Competes w/rail & air for short-to-medium hauls.

1) Less-than-truckload (LTL)

2) Truck-load (TL ) carriers

- Fees are higher

- Move small shipments

General Freight Carriers

* Carry majority of goods shipped

* Common carriers.

Specialized Carriers

* Transport liquid petroleum

* Household goods

* Building materials, etc.

Rail Carriers

* When distance is long heavy and bulky.

* Rail slow and inflexible, however

- Motor carrier for point-to-pointpickup & delivery (trailer-on-flatcar(TOFC).

* Rail companies use each other’s rail cars.

- Keeping track of cars and getting there is a problem.

* Railroad infrastructure and aging equipment are problems.

Air Carriers

* Expensive but fast.

* Air carriers about 5 % of U.S. freight.

- Cannot carry extremely heavy or bulky cargo.

- Light, high value goods over long distances quickly.

- Half of goods by air are freight–only airlines, FedEx DHL etc.

Water Carriers

* Inexpensive, slow & inflexible. Includes inland waterway and coastal.

- Inland waterway for heavy, bulky, low- value materials (coal, grain).

- Competes w/rail & pipeline.

- Paired w/trucks for door-to-doordelivery.

Water Mode (MSC Oscar)

MSC Oscar

* Built and launched in South Korea in 2014

* Cost £93m ($140m)

* Deck is the size of 4 football pitches

* Draught (distance between bottom of hull and waterline) is 50ft (16m)

* Could carry 1.15 million washing machines

* 35 crew members

Pipeline Carriers

* Limited in what they can carry.

* Low maintenance once its running.

* Materials hauled liquid or gaseous

Intermodal Carriers

Intermodal: use multiple modes.

* Rail & motor:

- Point-to-point pickup and delivery

~ Trailer-on-flatcar

~ Container-on-flatcar, (piggy-backservice).

* Water & motor:

- Point to point service for overseas manufacturers.

~ Roll-on-roll-off.

~ Containerships truck trailers and containers.

Transportation Pricing

* Cost of service: Varies based on fixed and variable costs.

* Value of Service Pricing: Priced at what the market will bear.

* Terms of Sale: Includes transportation FOB destination or dock.

* Pricing Negotiation: Since deregulation, negotiating price is common.

* Rate Categories: Rates are classified as: line haul, class, exception, commodity, and miscellaneous rates.

Transportation Security

* Particularly important regarding airline security since Sept. 11 2001.

* Aviation and Transportation Security Act (2001) created Transportation Security Administration (TSA).

* Department of Homeland Security (DHS) (2003) provides overall U.S. security leadership.–Not all measures have improved security

Regulations vs. Deregulations (Pro & Cons)


* Regulation helps assure adequate service throughout the country

* Protects consumers:

- Monopoly pricing

- Safety and liability issues.


* Deregulation encourages competition allows prices to adjust as demand and negotiations dictate.

Transportation industry remains mostly deregulated

Transportation Regulations

* Granger laws (1870s)

- Regulate the RRs.

* Interstate Commerce Act of 1887

- Created the Interstate Commerce Commission (ICC).

* Transportation Act of 1920

- Changes to IC Act.

* Motor Carrier Act of 1935

- Brought motor carriers under ICC control.

* Transportation Act of 1940

- Established ICC control over domestic water transportation.

* Federal Aviation Act of 1958

- Created air traffic & safety regulations & national airport system.

* Department of Transportation Act 1966

-Coordinates all transportation-related matters.

Transportation Degregulations

* Railroad Revitalization & Regulatory Reform Act (1976)

- RRs could change rates w/o ICC approval.

*Airfreight was deregulated in 1977

* Motor carriers deregulated in 1980

-Promote competitive, safe efficient transportation.

* Shipping Act of 1984

- Allowed ocean carriers to pool shipments, assign ports, publish rates, & enter into contracts with shippers.

* ICC Termination Act of 1995 & the Ocean Shipping Reform Act of 1998
- ICC was eliminated and a requirement for ocean carriers to file rates ended.


* Store purchases, WIP, and finished goods.

* Provides faster frequent deliveries & better customer service.

Cross docking

* Receive,breakdown, repackage, & distribute manufacturing or finished products tocustomers warehouse

Consolidation Warehouse

* Collect LTL shipments for transport in TL quantities

Private Warehouses

* Owned by a firm.

* Reduces cost

* Greater control

* Better workforce utilization

* Generate income and tax advantages through leasing of excess capacity and/or asset depreciation.

* Owning a private warehouse represents a financial risk and loss of flexibility.

Public Warehouses

* Owned for profit and contracted out.

* Break-bulk shipments down, items combined into customer orders.

* Repackaging, assembly and storage.

* Incoming and outgoing quality check.

* Material handling, equipment maintenance, and documentation services.

* Flexibility & investment cost savings.

* Lack of control.

Warehouse issues to consider

* As # of warehouses increase, the system becomes more decentralized.

* Responsiveness and delivery service increase.

* Warehousing operating and inventory costs also increase.

* Consider trade-off between costs and customer service.

Risk Pooling

* Relationship between:

- No. of warehouses

- Inventory

- Customer service

Warehouse Location

* Market-positioned close to customers:

- Maximize distribution

- Improve delivery.

* Product positioned close to supply source:

- To collect goods

- Consolidate

* Intermediately positioned midway between supply source and customers.

- When distribution requirements are high and coming from various locations

Lean Warehousing

Emphasis on warehousing to support responsive operations:

* Commitment to customers and service quality.

* Reduced lot sizes and shipping quantities.

* Emphasis on cross docking.

* Increased automation.

* Increased assembly operations.

Third-Party Logistics (3PL)

* Provide reliable & timely delivery.

* Used to large degree by international logistics.

* Favored by small businesses.

* Some outsource all logistics to a lead logistic provider or fourth party logistics provider (4PL).

Other Intermediaries besides 3PL

* Freight forwarder:

- Consolidate LTL shipments into FTL.

* Load or transportation brokers

-Bring shippers and carriers together.

* Shippers’ associations:

- Nonprofit cooperatives which arrange for members’ shipping

* Intermodal marketing companies:

- Buy blocks of rail capacity and sell it to shippers.

Environmental Sustainability (Reverse logistics)

* Reverse logistics aka backhauling:

- A response to reducing carbon emissions

- Ensuring trucks move loaded rather than empty.

Logistic Management Software

* Transportation management systems:

- Used to find best mix of transportation services & pricing.

* Warehouse management:

- Track& control flow of goods from receiving dock to outbound shipment.

- New technologies,such as RFID tags, facilitate tracking.

* Global trade management (GTM) systems

- Provide global visibility, standardization, & documentation of returns, minimizing reverse logistics costs.

International Freight Society (Global Logistics)

* Transportation across national boundaries adds complexity, particularly security.

* Since 9/11 more conflict between U.S. govt. & industry about security & restrictions for inbound shipments.

Global Logistic Intermediaries

* Customs Brokers:

- Move goods through customs & handle documentation.

* International Freight Forwarders:

- Move goods to foreign destination

* Trading Companies:

- Put buyers & sellers together & handle export /import arrangements.

* Non-Vessel-Operating Common Carriers:

- Operate like freight forwarders but use scheduled ocean liners.

Foreign Trade Zones

* Secure sites in U.S. under supervision of U.S. Customs.

* Can offer:

- Storage

- Exporting

- Manufacturing

- Assembly

- Repacking

- Testing Repair services

North American Free Trade Agreement (NAFTA)

(Global Logistics)

* Created in 1994 & removes most barriers to trade & investment among U.S., Canada & Mexico.

Reverse Logistics

* Backwards flow of goods from customers in SC.

* Retail returns range 6% to 40% ofsales.

* Often is an unwanted SC activity.

* Poor reverse logistics can hurt firm.

Green Reverse Logistic Programs

* Designed to return unneeded products for recycling.

* These programs reduce environmental impact on landfills & deal with dangerous contaminants.

Companies Locate Due To

* Facility location is a key to the supply chain strategy.

* Companies locate due to:

- Increased globalization

- Technology

- Transportation

- Open markets.

Location Decisions Involve

* Location matters due to innovation & competition.

* Decisions involve:

- location of the facility

- Its strategic role

- Identifying the markets served

Location Strategies

* Offshore factor:

- Low cost investment & labor costs. Import / acquire local parts then export to customer.

* Source factor:

- Mgmt. involved in supplier selection & production planning.

* Server factor:

- Government incentives, low exchange risk & tariff barriers to reduce taxes &logistics costs.

* Contributor factor:

- Firm is involved in product development and planning, procurement decisions, & developing suppliers.

* Outpost factor:

- Set up in a location within proximity to advanced suppliers, competitors.

* Lead factor:

- Firm is source of innovation & competitive advantage.

Location Factors

1) Regional Trade Agreements (RTA)

2) World Trade Organization (WTO) successor to

3) General Agreement on Tariffs/Trade (GATT).

General Agreement on Tariffs/Trade (GATT)


Functions include:

- Administering agreements,

- Forum for trade negotiations,

- Trade disputes,

- Monitor trade policies,

- Aid for Developing countries

- International organizations.

RTA & the WTO

* European Union (EU): [1950] Set up after the WWII, the EU consists of 27 members

* North American Free Trade Agreement (NAFTA): [1994] among the U.S., Canada, &Mexico

* Southern Common Market (MERCOSUR): [1991] among Argentina, Brazil, Paraguay, &Uruguay

* Association of Southeast Asian Nations (ASEAN): [1967] in SE Asia

* Common Market of Eastern and Southern Africa (COMESA)

12 Pillars of Competitiveness

1) Institutions

2) Infrastructure

3) Macroeconomic stability

4) Health & primary education

5) Higher education & training

6) Goods market efficiency

7) Labor market efficiency

8) Financial market sophistication

9) Technological readiness

10) Market size

11) Business sophistication

12) Innovation

Competitiveness of Nations

(Technology, Politics and Economy, Culture)

* Technology

- Enables global communication

- Bar codes, GPS, EDI, RFID

* Politics and Economy

- Currency fluctuations

- Government regulation &political instability

- Tradeagreements

* Culture

- Consider varying beliefs andbehaviors

Competitiveness of Nations

(Government Taxes and Incentives)

* Levels of government.

* Countries with high tariffs discourage importing goods.

* High tariffs encourage multinational corporations to produce locally.

* Many countries have foreign trade zones (FTZs) where materials are imported duty-free as inputs to production

Competitiveness of Nations

(Currency Stability)

* Impacts business costs & location decisions.

* Exchange rate fluctuation- devaluation in markets can increase costs.

* Brazil had 1000% annual inflation rate.

Competitiveness of Nations

(Environmental Issues)

* Trade liberalization creates need for environmental cooperation

- NAAEC– North American Agreement on Environmental Cooperation

* Coordination on environmental issues mitigates

- Greenhouse gas production & Ozone depletion

- Production of Nitrogen & Sulfur Dioxide

- Deforestation

Competitiveness of Nations

(Access & Proximity to Markets)

– Relocation for access to the market

– Service industry, proximity to customers is critical

Competitiveness of Nations

(Labor Issues)

* Labor availability, productivity, & skill

* Unemployment & underemployment rates

* Wage rates; turnover rates; labor force competitors

* Right-to-work laws

Competitiveness of Nations

(Access to Suppliers & Cost)

* Proximity influences delivery of materials & esupply chain effectiveness.

Competitiveness of Nations

(Utility, Availability & Cost)

* Supply of electricity.

* In heavy industries availability & cost of energy are critical considerations.

* Telecommunication costs dropped dramatically.

•Many organizations have back office operations

•Call centers internationally serve the U.S. market.

Competitiveness of Nations

(Quality of Life Issues)

* Education

* Economy

* NaturalEnvironment

* SocialEnvironment

* Culture/recreation

* Healthcare

* Government/politics

* Mobility

* PublicSafety

Competitiveness of Nations

(Land Availability & Costs)

* Land & construction costs in big cities continue to escalate

* Trend is to locate in the suburbs & rural areas.

The Weighted-Factor Rating Model

(Location Techniques)

* Compares attractiveness of several locations along a number of quantitative & qualitative dimensions.

–Identify the factors

–Assign weights to each factor.

–The weights sum to 1.

–Determine a score for each factor.

–Multiply the factor score by the weight, then sum the weighted scores

–The location with the highest total weighted score is the recommended location.

Online Information for Location Analysis

Websites that provide useful information for use in location analysis:

* www.developmentalliance.com was developed by the InternationalEconomic Development council & Conway Data, Inc.

* www.mappinganalytics.com was developed to aid in site selectionfor a wide array of businesses

Sustainable Development

“developmentthat meets needs of the present without compromising the ability of futuregenerations to meet their own needs”

* Resource ranking and technology innovation are keys to reducing cost and increasing competitiveness

Green Development

“prioritizeswhat its proponents consider to beenvironmental sustainability over economic andcultural considerations”

* UnitedNations Framework Convention on Climate Change (UNFCCC)

Customer Relationship Mgmt

*Delivers products & services

Why- Achieve high levels of customer satisfaction

How- Use automated transactions, communication & talking to customers, understand behavior & needs

Helps- a system to satisfy requirements

CRM's Role in SCM

1) Create methods and develop good suppliers

2) Companies must become & stay good suppliers

3) companies may have to certify suppliers to adequately represent their products

9 Key Components of CRM

1) Segmenting Customers

2) Target Marketing Efforts

3) Relationship Marketing (Permission Mkt)

4) Cross Selling

5) Predicting Customer Behaviors

6) Customer Defection Analysis

7) Customer Value Determination

8) Personalizing Customer Communications

9) Event Based Marketing

Key Components of CRM-

Segmenting Customers

- Group Customers

- Create specialized communications about products

Key Components of CRM-

Target marketing efforts

- email or direct mail

- saves labor & postage, reduces being a nuisance

Key Components of CRM-

Relationship marketing

- aka Permission marketing

- customers select type & time of communication

Key Components of CRM-

Cross Selling

- additional products sold the result of an initial purchase

Key Components of CRM-

predicting customer behaviors

- forecast the likelihood of purchases

Key Components of CRM-

customer defection analysis

- finding methods to retain customers

Key Components of CRM-

customer value determination

verify the customer lifetime value

Key Components of CRM-

personalizing customer communications

- understand customer behaviors & preferences

- clickstream, learn how a customer navigates website

Key Components of CRM-

event based marketing

- offer the right products & services at the right time

Automated Sales Force Tools

*Sales Force Automation (SFA)

- documents field activies, communications with home office, sales history

*Sales Activity Mgmt

- tool offering sales reps a guided for sales activities

*Sales Territory Mgmt

- sales managers obtain info from sales rep's activites

*Lead Mgmt

- sales reps follow prescribed tactics with prospects to close a sale

7 R's Rule

*Performance measures should be designed around satisfying the seven Rs.

1) Having the right product

2) In the right quantity

3) In the right condition

4) At the right place

5) At the right time

6) For the right customer

7) At the right costs

Customer Service Elements

*Pre-transaction elements

- know customer service policies, mission statement, org structure, & system flexibility

*Transaction elements

- during sale include order lead time, processing capabilities, and distribution system accuracy

*Post-transaction elements

- after a sale review warranty repair capabilities, complaint resolution, product returns, & operation info

Call Centers

1) Can categorize calls

2) Determine average resolution time

3) Forecast future demand

4) Improve the overall productivity of the staff

5) Increasing customer satisfaction level

Additional Components of CRM

*Website Self-Service- Act as support mechanism, customer access account info, operating hours, contact info

*Field Service Mgmt- Customers communicate directly with product specialists, a diagnosis can be made quickly

*Measuring Customer Satisfaction- Customers given opportunities to provide feedback

*Customer Privacy Capabilities- Ability to assure privacy & ability to minimize customer harassment

6 Steps to a Successful CRM Program

1) Create the CRM Plan

2) Involve users from Outset

3) Select the right application & provider

4) Integrate Existing CRM applications

5) Establish Performance Measures

6) Providing training for all users

Step 1 of CRM Program: Create the plan

- ID objectives of CRM program

- fit w corporate strategy

- new applications to buy or developed

- integration of legacy systems

- personnel requirements, training, policies, upgrades, maintenance

- costs & time frame for implementation

Step 2 of CRM Program: Involve users from outset

employees must understand how it affects their jobs

- create a project team w members from all affected areas

- test w pilot application

Step 3 of CRM Program: Select right application & provider

determine extent of customization

- compare systems performance, security, reporting capabilities, system availability

- visit trade show, read trade literature, hire consultant

Step 4 of CRM Program: Integrate Existing CRM Applications

- CRM can be a collection of various applications implemented over time

- customer contact system must allow all users to know activities associated w each customer

- centralized database containing all customer info

Step 5 of CRM Program: Establish Performance Measures

- Determine if objectives have been met

- compare actual to planned variance

Step 6 of CRM Program: provide training for all users

- provide basic training then ongoing training

- training helps convince users of the benefits of CRM applications

CRM Issues

1) Customer data privacy

- rules/laws regarding invasion of privacy include Patriot Act in US & Internet Privacy in EU

2) Social Media

- Cultivating virtual communities around product or brand to engage consumers

3) Cloud Computing

- a la carte & on demand offerings accessed via web browser

- changing cost structure of applications

Overview of Service Response Logistics

*Differences between goods & services

- Services cannot be inventoried

- Services are often unique (legal services, insurance policies)

- Services have high customer interaction

- Services are decentralized

Global Service Logistics Issues

*Global services are increasing & managing them involves issues

1) labor, facilities, infrastructure support

2) legal, political issues: laws restricting foreign competitors

3) domestic competitors and economic climate: managers must be aware of local competition & environment

4) identify global customers

Global Service Logistics Strategies

*Cost leadership strategy

*Differentiation strategy

*Focus strategy

Cost leadership strategy

*lowest cost of operation

- requires investment in state-of-the-art equipment along w efforts to control and reduce costs

Differentiation strategy

*ID a product or offering from others, making it more attractive to a target market

- unique services are created when companies listen to customers

Focus strategy

*When a company concentrates resources on entering/expanding narrow market

- serve a niche market better than others

Global Service Logistics Delivery System

*Bundling of attributes

- explicit services (storage)

- supporting facility (bank w drive-up tellers)

- facilitating goods (deposit forms, monthly statements)

- implicit services (security provided, atmosphere in bank, privacy, convenience)

- systems are either mass produced, low customer contact at one end or systems are highly customized, customer contact at the other end

- front of house staff are customer driven

- back of house staff don't contact customers

- system should be audited to assess performance

Service Location & Layout Strategies

*long term monetary impact

*decision should consider relevant factors/ build a decision matrix


*Departmental Layouts to reduce distance traveled

*Departmental layouts to maximize closeness desirability--> rating between dept used to design a layout that maximizes rating for entire office

SCM in Global Service Logistics

*Services require larger labor component than manufactured products

*Services require computers, furniture, office supplies not part of services sold

*Customers have no idea how things get to destination but notice when shipment is late

What is service capacity?

*number of customers per day a firms service system is designed to service

- when demand > capacity, firm turns away customers or hire personnel

- hiring, training, supervising, equipping personnel is costly (75% of ops costs)

- service managers must forecast demand and provide capacity to meet forecast demand

Managing Service Capacity

Capacity Utilization = Actual Customers Served per period / Capacity

*Level demand strategy- capacity stays constant regardless of demand

*Chase demand strategy- capacity varies with demand

When demands > capacity

*Minimize cost of hiring & laying employees off, use following strategies

1) Cross training & sharing employees

2) part time employees

3) technology

4) employee scheduling policy

When capacity > demand

find other uses for capacity

Managing Queue Times

*It is the mgmt of actual waiting time and/or perceived waiting time

ex) arrival customer rate, order customers will be services, avg provider service time

*Models assume customers stay in line (don't exhibit balking)

Characteristics of managing queue times

-time required to complete each service

-queuing models assume infinite length

-queuing configuration can contain single or multiple lines

-describes order in which customers are served

-provided by single or multiple services acting in series or parallel

*Multiple Parallel- multiple channel queuing system

*Multiple Series- multiple phase queuing system

*Single channel most basic

Managing perceived waiting times

*Usually demand > capacity

1) Rule 1 of service: satisfaction = perception - expectation

2) Rule 2 of service: hard to play catch up ball

3) Waiting time mgmt techniques

- keep customers occupied

- start service quickly

- relieve customer anxiety

- keep customers informed

- group customers together

- design a fair waiting system

Managing distribution channels

*Involve new and traditional methods

- eatertainment combines restaurant & entertainment

- entertailing entails retail locations & entertainment

- edutainment (infotainment) combines learning & entertainment to appeal customers for substance along w activity

5 Dimensions of Service Quality

1) Reliability- consistently performing service correctly/dependably

2) Responsiveness- promptly/timely service

3) Assurance- convey trust/confidence to customers

4) Empathy- caring attention to customers

5) Tangibles- physical characteristics of services including facilities and equipment