LOGISTICS AND SUPPLY CHAIN MANGEMENT

BASIC SERVICE CAPABILITY

CONTENTS

• Introduction to basic service capability • Availability • Performance • Reliability

Basic service capability

Three fundamental dimensions of customer service were identified:• Availability• Performance• ReliabilityThe general conclusion is that all three aspects of service are important. However, a given service attribute may be more or less important depending on the specific marketing situation.

AVAILABILITY

• Availability is the capacity to have inventory when it is desired by a customer.

• Inventory can be classified into two groups: 1. Base stock determined by forecasted requirements and

held to support basic availability, 2. Safety stock to cover demand that exceeds forecasted

volumes and to accommodate unexpected operational variances.

Availability is usually based on the three performance measures they are:• Stock out frequency • Fill rate• Orders shipped complete

These three measures determine a firm's ability to meet specific customer inventory requirements.

OPERATIONAL PERFORMANCE

Operational measures specify the expected performance cycle in terms of (1) Speed(2) Consistency(3) Flexibility (4) Malfunction/recovery

Operational performance involves logistical commitment to expected performance time and acceptable variance.

RELIABILITY

• Logistics quality is all about reliability. A fundamental quality issue in logistics is the ability to comply to levels of planned inventory availability and operational performance.

• The key to achieving logistical quality is measurement. Inventory availability and operational performance are critical in the eyes of customers.

• However, high-level performance can be maintained only by exacting measurement of achievements and failures. Three aspects of measuring service quality are important variables, units, and base.

Measurement Variables

Variables Measurement period

Sales Over time

Orders Over time

Returns Over time

Back-orders Over time/point in time

Stockouts Over time/point in time

Canceled orders Over time

Canceled lines Over time

Back-order recovery Over time

Back-order age Over time/point in time

Short shipments Over time

Damage claims Over time

Number of expedites Over time

Measurement Units

1 Cases 5 Dollars

2 Units 6 Dozens

3 Lines 7 Broken cases

4 Weight 8 Gallons

Measurement Base

1 Overall system level 5 Order level

2 Sales area level 6 Customer level

3 Product group level 7 Broken cases

4 Brand level 8 Gallons

PRESENTED BY:M INDRAJA

15331E0075

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