Page 66 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 3: Customer Accommodation

Speed Notes

Performance-cycle speed is the elapsed time from when an order is placed until shipment
arrival. Such commitment must be viewed from a customer’s perspective. The time required for
performance-cycle completion can be very different depending on logistical system design.
Given today’s high level of communication and transportation technology, order cycles can be
as short as a few hours or as long as several weeks or months.
Of course, the highest commitment to both inventory availability and operational speed is
customer inventory consignment. In consignment arrangements, the product is inventoried at a
customer’s business establishment in anticipation of need. While consignment may be ideal
from a customer’s perspective, it can be an expensive way for a supplier to do business.
Consignment arrangements are typically limited to critical items that can result in significant
loss in efficiency or effectiveness if they are not available exactly when required, such as machine
parts and emergency medical supplies. Typical consignment situations are found in business-to-
business marketing and the health care industry.

Did u know? The decision for a supplier to consign as contrasted to a customer holding
safety stock is often a reflection of the relative power in a business relationship.
The more typical business arrangement is for a supplier’s delivery commitment to be based on
customers’ expectations in terms of performance-cycle speed. In critical situations, service can
be performed in a few hours by special delivery from a local warehouse or on an overnight basis
using highly reliable transportation services. Usually, the business relationship is formed around
performance-cycle expectations that facilitate efficient logistical operations while meeting
customer requirements. In order words, not all customers need or want maximum speed if it
results in an increase in price or effective logistics cost.
Performance-cycle timing has a direct relationship to inventory requirements. Typically, the
faster the planned performance, the lower the level of inventory investment required by
customers. This relationship between performance time and customer inventory investment is
at the heart of time-based logistics arrangements reliability.

Consistency

While speed of service is critical, most logistical managers place greater emphasis on consistency.
Consistency refers to a firm’s ability to perform at the expected delivery time over a large
number of performance cycles. Failure to be consistent translates directly into customers needing
to carry extra safety stock to protect against possible late delivery. Whereas availability is
concerned with the ability to ship products when required and performance-cycle speed is
concerned with the commitment to complete all work requirements necessary to deliver specific
orders at a prescribed time, consistency deals with compliance to delivery commitments over
time. The issue of consistency is fundamental to logistical operations.

Flexibility

Operational flexibility refers to a firm’s ability to handle extraordinary customer service requests.
A firm’s logistical competency is directly related to how well unexpected circumstances are
handled. Typical events requiring flexible operations are as follow:

1. Modifications in basic service arrangements such as onetime changes in ship-to destinations
2. Support of unique sales and marketing programs

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