MBA in Textiles Course Name: Textile & RMG Supply- Demand Chain Management (M304) Course Teacher...

Md.Ahsan Habib,Asistant Prof. Dept of TEM, BUTex

MBA in TextilesCourse Name: Textile & RMG Supply-Demand Chain Management (M304)

Course TeacherMd.Ahsan Habib

M.Sc in Textile Mgt (Sweden), B.Sc in Textile Engg. (BUTex)

Assistant Professor & Head, Dept. of Textile Engineering Management

Bangladesh University of Textiles.

BANGLADESH UNIVERSITY OF TEXTILES

Md.Ahsan Habib,Asst. Prof. Dept. of TMBS, BUTex

Chapter-2Putting the end-customer first


Supply chain vs. marketing

• Marketing is the philosophy that integrates the disparate activities and functions that take place within the network.

• Satisfied customers are seen as the only source of profit, growth and security.

(Doyle, 1994)


Who is the Customer?

• Customer are people who use or consume the product.

• Customer are individuals or business who buy the product, meaning that they acquire it and pay for it.

There are two types of customer:1. Business Customer: Who represent the focal firm’s

immediate trading environment.(B2B)2. End-Customer: Who represent the ultimate

customer for the network as a whole.(B2C)


Rising customer expectations

• Better levels of general education• Better ability to discern between alternative

products• Exposure to more lifestyle issues in the media.

These expectation have led to customers not only aspiring to more desirable products, they are also demanding much better levels of service to be associated with those products.


Demand Profiling

• Marketing people want to forecast demand in order to plan broad goals such a allocating the sales force, setting the sales goals, promotions planning and advertising campaigns. But logistics people need to know how many to deliver, where and when to do so, for each SKU in the product range and for each channel-not just for the range as whole. The aim is to combine forces and produce the most accurate profile of future demand.

• It is impossible to predict the future with uncertainty, so it is necessary to forecast what will happen.


Segmentation

Segmentation describes how a given market might be broken up into different groups of customers with similar needs.

There are many possible ways in which markets can be

segmented. Including; • Demographic: Such as age, sex and education;�• Geographic: Such as urban, type of house and region.�• Technical: the use that customers are going to make of a �

product; • Behavioral: such as spending pattern and frequency of purchase. �


The important characteristics of segments:

Measureable: variable that can be easily identified and measured;

Economically viable: capable of producing the contribution that justifies the effort and cost of marketing;

Accessible: geographically or in terms of media communications.

Actionable: can be attracted and served effectively.


The Marketing Mix• The marketing mix is the set of marketing decisions that

is made to implement position strategy (target market segments and differential advantages) and to achieve the associated marketing and financial goals.

• The marketing mix has been popularly termed the ‘4 Ps’ Product: range, sizes, presentation and packaging, design

and performance; Price: list price, discounts, geographical pricing, payment

terms; Promotion: sales force, advertising, consumer

promotion, trade promotion, direct marketing; Place: channel selection, market coverage, distribution

system, dealer support.


• Logistics contributes fundamentally to the ‘place’ decision, as well as supporting ‘product’ and ‘promotion’ decision.

• In order to achieve the goal of ‘the right product in the right place at the right time’, logistics systems and processes need to be designed to support products in the marketplace.


Comparison between Consumer and Industrial MarketingConsumer Industrial

Customers Many, widely dispersed Few, concentrated

Market Consumers directly served by retailers and distributors

Derived demand Industrial chain, long and complex

Buying behaviour Individual and family decision

Group decisionFormal proceduresHigh buying power

Product StandardPositioned on emotional and perceptual factors

Technical complexitySpecialization importantCustomized.

Price High unit priceTake it or leave it

Low unit priceTender and negotiationStandard items from price list

Promotion Mass media advertisingRole of brand

Emphasis on personal selling,Reputation important

Place Established retail chainStock availabilitySeasonality

DirectMade to OrderStandard items in stock.


Customer Value

• In today’s customer driven market, it is not the product or service itself that matters most, but the perceived value to the customer of the entire relationship with a company. The way companies measure the quality of their product and service has evolved from internal quality assurance to external customer satisfaction and from there to customer value.

• The currents emphasis on customer value goes a step further by establishing the reasons a customer chooses one company's product over another’s and looking at the entire range of product, services, and intangibles that constitute the company's image and brand.


The dimensions of customer value

• Conformance to requirement• Product selection• Price and brand• Value-added services• Relationships and experience


Conformance to requirement:The ability to offer what the customer wants and needs is a basic requirement to which supply chain management contributes by creating availability and selection.

If the product demand is predictable as in functional items, efficient supply chain is suitable. Such as- diapers, soup, or milk etc.

For high-variability demand items, responsive supply chain is suitable. Example- Zara fashion

Zara is part of inditex. Zara success is due to conformance to a system that is built on three principles:

1. Closing the communication Loop.2. Sticking to a rhythm across the supply chain.3. Leveraging capital assets to increase supply chain flexibility.


• Product selection: Product variety options; styles, colors and shapes selection.

• Price and Brand: Commodity and Sophisticated product get advantages at price but consumer and fashion product focusing on price reduction or brand building and responsive supply chain.

• Value added service: such as support and maintenance.

– Commoditization of products– Closer to customer– Increase in information technology

• Relationships and Experience: Connection between the firm and customer through development of a relationship.


Quality of Service

Service Specification

Expected Service

Service Delivery

Perceived Service

Supplier Customer

Gap 3

Gap 4

Gap 2

Gap 1

Fig: Simplified service quality gap model


• Gap 1: refers to different between customer expectations and how these have been developed into a service speciation by the supplier.

• Gap 2: refers to differences between how the specification was drawn up and how it was delivered.

• Gap 3: refers to differences between what customer expected and what he or she perceived was delivered.

• Gap 4: refers to differences between how supplier and customer perceived the service delivery.


Customer Loyalty

• Customer Satisfaction is what people think of us- quality of service, value for money.

• Customer loyalty is how long we keep a customer.

The benefits of loyal customer :Generate long-term revenue streams (high lifetime values);Tend to buy more than new customers;Tend to increase spending over time;May be willing to pay premium prices;Provide cost savings compared with attracting new

customers.


• The logistics challenge is to support the development of customer loyalty by designing and delivering quality of service.

• Quality of the service is ‘ essential for excellent market performance on an enduring basis’. Supporting product availability through such means as channel selection, market coverage, distribution systems and dealer support all helps to nourish customer loyalty.


Customer loyalty

Service Quality

Perceived Value

Customer Loyalty

Price

Product Quality

Relatively easy for competitors to imitate

Key driver of customer loyalty


• ‘Perceived value’ or value disciplines; A development of the service quality- product quality- price model is that of value disciplines. Generic value disciplines can be followed:

Operation excellence: superb operations and execution-focus is on efficiency, streamlining operations, supply chain management and low price.

Product leadership: The focus is on development, innovation, design, time-to-market and high margins in a short timeframe.

Customer intimacy: Leaders excel in customer attention and customer service. It focus on customer relationship management.


Relationship marketing and customer relationship management (CRM)

• A development of customer intimacy is relationship marketing. The aim to develop long-term, loyal customers through ‘ bonding’ with them. This development can be take place at three levels:

• Financial incentives: such as frequent flyer schemes and reward cards.

• Social and financial bonds: • Structural bonds: Such as IT system- electronic hand

cuffs.


Fig: Customer relationship management: bow tie and diamond


Basic Product

Warranty

Parts and

service

Quality assurance

Features

Chartsadvice

Delivery And

Installation

Field Product

Knowledge

Customertraining

24-hours, no-nonsense back-up

‘Black box’That gives power for life Figure: Adding value

by quality of service

Case Study: ‘Batman’ Everglo Battery Manufacturer


Customer Value Measure

• 1. Service Level measure. • 2. Customer satisfaction measure.• 3. Supply chain performance measure


Service Level measure:Service level is the typical measure used to quantify a company's market performance. Service level is usually related to the ability to satisfy a customer ‘s delivery date, for instance, the percent of all orders sent of or before the promised delivery date.

Ability to succeed many company invest heavily in decision-support systems that allow them to quote delivery dates accurately by analyzing information from the entire supply chain.


Selected service level measurements in retail supply chainInventory /availability

Physical and accounting correspondence: number of orders with mistakes divided by the total number of orders in the warehouse in the same period of time.Stock turnover: quantity delivered or shipped divided by the average stock in the warehouse in the same period of time.

Stockout: number of orders out of stock divided by the total number of orders placed in the same period of time.

Flexibility Flexibility: Number of special/urgent/unexpected orders confirmed to the customer divided by the total number of special/urgent/unexpected orders required by the customer multiplied by 100 in the same period of time.

Service care Punctuality: number of orders delivered on time divided by the total number of orders delivered multiplied by 100 in the same period of time.Regularity: number of orders delivered with a no of delay/advance divided by the total number of orders delivered multiplied by 100 in the same period of time.Completeness: number of full orders delivered divided by the total number of orders delivered multiplied by 100 in the same period of time.

Correctness: number of orders with mistakes dispatched divided by the total number of orders dispatched multiplied by 100 in the same period of time.

Harmfulness: number of damaged orders dispatched in a period divided by the total number of orders dispatched multiplied by 100 in the same period of time.

Delay: number of days of delay multiplied by 100.


Supply conditions Delivery frequency: number of orders delivered in a certain period of time.Skipped quantity: quantity shipped in a certain period of time or quantity dispatched for each shipment.Presentation: method of packaging and of shipment, alignment with customer process.

Lead time Total order cycle time: occurring from the arrival of a customer order to the receipt of goods or cycle time of the single activities ( order transmission, order processing, order composition, order transfer to the production plant, article production, warehouse delivery, final delivery to the customer)Response time: to order tracking requests, etc.

Marketing Range completeness, information on products and selling assistance

Order management Documents management (invoice and orders), client contacts and order advancement state, etc.

After sales Speed response; to back order, claims management, use assistance and payment management, fulfillment of warranty conditions, etc.

E-information Web site completeness, ease of making orders by network and data transmission security, etc.


Customer satisfaction: Customer satisfaction surveys are used to measure sales department and personnel performance as well as to provide feedback for necessary improvements in products and services.

Customer loyalty is easier to measure that customer satisfaction

Repurchasing of customer from internal database.Customer defections.


Supply chain performance Supply chain operation model (SCOR) is developed by ‘The Supply

chain Council’. It is used for analyzing the current state of a company’s processes and its goals, quantifying operational performance, and comparing it to benchmark data.

MBA in Textiles Course Name: Textile & RMG Supply- Demand Chain Management (M304) Course Teacher...

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