Hi, today we're talking about customer
service offers in your business and the
impact on your distribution network
My name is Rob O'Byrne from Logistics
Bureau, and again, I have today with
me Matt Stedman, one of our senior staff,
and in fact,
Matt, we probably worked on customer
service issues, network design for
15 years?
Long time. I'm thinking back to some of
the first projects we did together.
So if you've been watching this video series,
you'll know that this is number four.
Number one, we talked about the concept
of understanding customer value,
designing the service offer, and so on,
and then we talked about customer value
specifically, then we talked about designing the
service office specifically, now we're
going to talk about the implications on
your distribution network.
So,
some people might be watching this and saying,
"Well if we understand the service offer is
order now and you get your product in 4 hours,
doesn't that simply mean that we have to
have all of our product within four
hours of all of our customers and that tells
us where to put the branches, surely?"
- If it was that simple, Rob.
- If it was that simple,
we'd be out of business but...
- Exactly right.
- Okay.
- We'd be out of business.
- So why isn't it that simple?
- Well, because I think in designing the
customer service offer to start with,
you know, the best practice is to
have a sets, subsets of alternative
service offers, and then testing it with design
around each one of those alternatives to
understand what the costs and the resources are
which go into a network
to deliver that level of service.
So,
you may find that, that, you know,
a same-day, 4-hour service offer,
might cost 20 million dollars,
whereas a next day service offer
is half that cost.
- Okay, good point.
And when we're looking at the
distribution network,
I think one of the things, one of the traps
that people fall into is that sometimes,
the network grows up
historically, you know,
through acquisition or
range extension or something like that,
and it's the lack of appreciation
that what drives the shape
your distribution network is actually
your customer service offer,
and it doesn't necessarily
have to be that all
of the products flow through your
distribution network, does it?
- That's true.
Absolutely.
I think the thing about CSO and
the implications on network design
is that it's not and
should never be a one-size-fits-all.
There will be parts of your customer
base that genuinely, I must say, may need
same-day service.
There might be products
of your customer base which are high
value, and can only be centralised because,
you know, it's inexpensive
- Now, that's true.
- It's an expensive game, to have inventory
all over the network.
So,
you know there is the new ones you hear of,
the various alternative CSOs,
and network design.
- I think that's something that
a lot of businesses miss,
is that you've got
look at that customer service offer not
just from a customer perspective.
So you've got different types of customers,
different industries, they have different service
requirements. You know, everybody's got
customers who are quite happy to wait a week for a
product, but there are other segments
where you might need something today,
or next day, but the same applies to the
products. So some products are generally
needed quite urgently whereas others,
you know, can be just like a
replenishment style product, and I think
where people get it wrong, they design
the network to deliver this highest level
of service to all customers, and for all
products, which becomes extremely costly
- Absolutely.
Many business go broke
doing it.
Unfortunately.
- In fact.
We won't go there but yeah, we
have experienced of a couple of
industries where that has happened
sadly, so I think just to recap,
we've been talking about customer
service, the implications on your business.
You need to understand what
costs the customers want and what they value,
you need to very carefully design your
customer service offer and have that
well communicated both externally and
internally, and then use that to design
or redesign your distribution network,
so that you're offering the appropriate
level of customer service, and I think
that's the key, the appropriate level at the
lowest possible price.
- It's almost like
you're offering the service you design,
you know?
That's what the game here is.
- Yes.
- You design it.
- You design it, yes.
Rather than it just happens.
- Exactly.
- That's it.
- Exactly.
- So,
I hope you got some tips from that,
we'll put the links to the other videos below,
and there's lots more in topics around this
subject on the Logistics Bureau blog.
We'll talk to you soon.