Discussion Question

66 The Little Black Book of Supply Chains

Opening Vignette: The Birthday Telescope

What does bad customer service look like? In supply chains, good customer service

starts with ‘Did I get my stuff?’ Bad customer service seems never to end. It means,

primarily, that I didn’t get my stuff. This story comes from a friend, Bob Faigel, who was

trying to buy a telescope for his son’s birthday in May 2021.

He wanted a Dobsonian Reflector Telescope (DRT) for over $800. Two vendors were

involved, Oceanside Photo & Telescope, LLC (OTP) and High Point Scientific. High Point

Scientific is “the absolute best place to buy your telescope, binoculars, microscope, and any

astronomy needs,” Bob said.

So, what’s the difference? Bob’s story gets to the major points. Bob and his son

researched the best model for a month. The DRT seemed to be the best available beginner’s

model. It would let the son see deep-sky objects, nebulas, stars, and galaxies.

They placed the order with OPT on March 23, 2021. They anticipated some COVID-

19 pandemic supply chain disruptions, so it was no surprise when they received an email

response to their order: there may be a delay of 2–3 months from the manufacturer, Orion.

That meant the product might arrive just in time for the birthday.

They heard nothing more for a month. So, Bob emailed the company. At no point in this

sequence did OPT initiate contact. Here’s the abbreviated version of OTP’s responses over

several months.

April 20. “Your order has been processed, and as I mentioned in our earlier cor-

respondence that scope is backordered from the manufacturer. I have reached

out to the manufacturer for an update and at this time the ETD (estimated time

for delivery) to OTP is Early June. Please keep in mind that this date is subject to

change due and should I be notified of a change I will let you know. Once again,

thanks for choosing OTP.”

May 21, 2021, email from OTP Corporate Customer Support:

Hello Bob, thank you for reaching out to us!

Regarding your order, the manufacturer has informed us they expect to ship

your order to us approximately August 2021. Due to delays with receiving raw

materials for production, manufacturers have been struggling to keep up with

production which has caused delays with shipping times. Please keep in mind

that this is an estimate, and they can change this time frame due to the effects of

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Customer Service and Customer Responsiveness in Supply Chains

COVID-19. Again, we sincerely apologize for the delay with your order, and we

appreciate your patience with us in these extraordinary times. Please let us know

if you have any additional questions or concerns.

Thank you.”

June: No correspondence.

July: No correspondence

August 5: Email from customer to company. No response from OTP.

August 19: “Sorry for the delays on this. I just looked at this item and the current

date from Orion is Expected Ship Date: September 23, 2021, these dates seem

to keep moving, especially with Orion and their jobs. It has been getting slightly

better lately so I’m hopeful they are able to stick to this date but there is always

a chance it could move again.”

“August 20, 2021, from the Director, eCommerce & Customer Service

Hi, Bob...I know this is frustrating and I’m sorry about that. Unfortunately, we

are at the mercy of the manufacturer and due to continued delays in production,

the backorder dates are constantly changing, and we have no way of knowing

that they’ve changed until a customer like yourself asks us about a specific SKU

(stock keeping unit or individual item). That’s how quickly things are changing

with these dates. I’m going to have my buyer reach out to our manufacturer’s

representative and get an update directly on your specific scope to try and get

a more exact date for you. We normally get a response in a couple of days so I

should have something early next week for you. Again, I’m very sorry about the

delays on this.”

September 1, 2021, from the Director, eCommerce & Customer Service

Hi Bob...I just checked the status again and Orion has moved the date from 9/23

to 10/3 now. I know this is not optimal but just so you know that we aren’t making

this up.”

68 The Little Black Book of Supply Chains

October 1, 2021, from the Customer Success Team Lead to me

Hello Bob, Thank you again for shopping with OTP. Unfortunately, Orion

changed the expected lead time on the back ordered item ... They are saying they

expect to ship to OTP mid to late October. Once the item does come in then it will

ship, and you will receive tracking info. Yours kindly,

November 1, 2021, from the Customer Success Team Lead to me

Hello Bob, our supplier is saying that they expect to be able to ship middle of

November. Once the product comes in then your order will ship, and you will

receive tracking info. Yours kindly

December 17, 2021 @ 10:01 AM

Your order has been canceled. The order was canceled because we did not have

enough stock to fulfill your order and your payment has been refunded. If you

have any questions, please call or email us via our website.”

In the end, on December 18, Bob’s son found another vendor, High Point Scientific,

with the same telescope. They purchased the telescope on December 19, 2021. They were

told they would get the new telescope by Monday, December 27, and it arrived as they said.

Bob remarked,” the service has been fantastic with proactive conversations from High Point

Scientific and responses to questions in a timely fashion.”

Introduction

As the opening vignette suggests, customer service plays a major role in keeping and satisfy-

ing customers along the supply chain. Bob and his son were dissatisfied with OPT, but OPT

had to be dissatisfied with the manufacturer, Orion, as well. OPT could have done several

things to keep Bob as a customer. They could have told him sooner that they could not fill the

order. They could have initiated contact about the order. OPT missed most of the standards

that we would apply to customer service in a supply chain. The main point is that they did not

deliver the goods, let alone deliver them on time.

This chapter discusses the processes that tie marketing and supply chains, the customer

service function. We look at how these processes work, what they cost, and how to manage

them.

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Customer Service and Customer Responsiveness in Supply Chains

Customer Service

Definition

When defining customer service for logistics, we need to consider two perspectives. First, we

see the perspective of the buyer and user. Often, the two are not the same person. For example,

in the opening vignette, most of the communications took place between the father and the

company, not the son. The son would be the primary user. These two groups experience the

company through the products and services it provides. Second, we see an organizational

function on the border between the supply chain and marketing. Marketing makes promises

to customers. Supply chains keep those promises. The customer service function tracks the

process of orders, inquiries, and performance.

So, we define customer service as the interaction between the organization and its buy-

ers and users. The people who work in customer service need contact with the order process,

but they also need empathy. The customer may not always be correct, but they are customers.

They need to be heard, even when they are wrong. Customer service representatives need

to give reliable information, follow up on promises like “We’ll call you back,” and know the

product, the service, and the processes. This requirement goes throughout the supply chain.

Activity

As an activity, customer service communicates with customers about orders. The customer

service representatives should be able to tell you what you will receive and when you might

receive it. So, we return to our definition: customer service interacts with a seller’s buyers

and users.

Performance Level

If you are measuring the performance of the firm’s customer service function, you need to

contact customers. You may need to survey customers or ask for ratings of customer service

representatives. Some firms overdo these measures. If a customer service representative gets

a nine on a ten-point scale, they contact the customer again to see what is wrong. But custom-

ers may start giving tens, so they won’t be bothered by further interaction over what they see

as a good rating. It’s okay for a company to ask for more information, but they shouldn’t nag

electronically. Their constant contact may damage customer service perceptions more than

any minor failings on the part of a customer service representative.

70 The Little Black Book of Supply Chains

Corporate Philosophy

For customer service to play a role in corporate philosophy, several elements need to be

present. First, a company needs to have a well-defined customer service mix. It starts with

capacity availability. It answers the questions: How much stock will you keep on hand

for immediate sale? And how much capacity will be available to provide customers with

services? These are both capacity questions. They restrict how many customers you can

serve or sell to.

Second, a company needs a clear order cycle for each product. At times, circumstances

may disrupt these cycles, but they should still be defined. Otherwise, you have no way to

analyze a disruption. The information about orders and order cycles should be part of training

for customer service representatives.

Third, the company needs to decide how it will deal with malfunctions, disruptions,

and customer-driven emergencies. These may call for resilience, agility, and robustness.

Lean supply chains sound good until they fail under the pressure of sudden changes like

COVID19 or wars that involve oil-producing nations. The company also needs some policy

on expediting. Will they expedite a shipment? Will they do so only when they are at fault or

at a customer’s request? Expediting shipments adds to costs and disrupts normal operations.

The same issue arises in services. Are there people who can move ahead in line? Disney lets

customers buy passes that allow them into expedited lines. How many passes can they sell

before that line becomes as slow and cumbersome as the original line?

Fourth, the company needs a policy on post-sales support. If the product or service ends

with the sales transaction, the customer needs to know that. It’s part of the value proposition,

what people pay to get.

These policies need to be in writing. The written policies should be available to cus-

tomers. They should appear in more places than the customer agreement. Customers often

click ‘agree’ on documents they haven’t read. Such vital information should be visible to

all—before the transaction takes place. Know what your customers assume. If you plan to

offer something outside those assumptions, you need to call the customer’s attention to it.

During the transaction, customers should know where the product is in the order cycle

and when it will arrive. This requirement applies to business and government customers but

also consumers. Amazon is good at keeping customers posted on delivery status. Other firms

need to follow their example.

The company also needs to explain to customers what happens after the sale. They

need to know if a refrigerator comes with installation or if that is an extra charge. They need

to know how to return or dispose of products and how to file claims or register complaints.

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Customer Service and Customer Responsiveness in Supply Chains

Importance of Customer Service in Logistics and Supply Chains

We suggested that customer service is measured indirectly through stock or capacity avail-

ability. For some industries, stock needs to be available now, as soon as the customer senses

a need. You don’t place many orders for a single tube of toothpaste, and you probably won’t

wait for it. You either buy another toothpaste or go to another store to search for your preferred

brand. If you buy another brand, you cost the manufacturer of the first brand a sale. If you go

to another store, you cost the retailer a sale. If you buy the same brand but a different mixture

or flavor, you distort the manufacturer’s information about preferred toothpaste. They might

make more of the wrong ones.

Stockouts can cost you sales or customers. The cost of a lost sale is easily calculated,

but the data are not readily available in many cases. Customers don’t always tell you when

they change suppliers or stop buying your product. They do it without saying anything. So,

you don’t know when that happens.

The same applies to lost customers. They don’t always tell you that they are leaving.

They just leave. We have the financial models to calculate the value of a lost customer. We

could project sales for seven years and use a net-present-value model to estimate the cost of

lost sales. The formula is not that complicated, but we may not have reliable data to support

the calculations.

This lack of information is the primary reason for measuring customer service indi-

rectly. We use measures like in-stock percentage or on-time delivery. These are immediate

measures. A long-term measure is customer retention rate. You look at your list of customers

year over year and see how many of them stay with you. Keep in mind that this is a strategic

measure that may involve more than logistics and supply chain management.

It is much easier to measure the cost of a backorder or expedited order. You can get the

information and calculate the differences in costs to your organization. If you had to pay $40

extra for expedited shipping, you add that to customer service costs.

Most customers understand that service failures will happen. Shipments will be delayed

or products damaged in transit. Then, the measures of customer service change. You measure

the time it takes to resolve the customer’s problem. You measure the percentage of problems

that are fixed.

At the heart of customer service are communication and the management of expecta-

tions. A key element in the opening vignette is Bob’s frustration with the lack of communica-

tion from the seller about his son’s telescope. He initiated communications throughout the

frustrating transaction. OTP should have told him sooner that their order was unlikely to

arrive on time or at all. Instead, Bob had to extract the information from them.

72 The Little Black Book of Supply Chains

Given that he was buying a beginner’s telescope for his son, it’s likely that he will buy

more telescopes and related equipment later. But it’s unlikely that he’ll buy from them. They

lost a customer.

Trade-Offs in Service Offerings

Keep in mind that some firms choose to stock out or run out of inventory to meet customer

demand for goods. Their view is that a lengthy list of backorders is good. It represents a form

of job security. There’s always another order to work on. The customer must wait for the

product.

This policy won’t work for toothpaste, but it works for marble monuments and head-

stones. It works for creative art, special models of cars, and a variety of high-end luxury

goods. For some goods, consumers and business customers will wait.

A key distinction is between ‘out of stock’ and ‘back ordered.’ Out of stock means that

there is no inventory and no planned date for the inventory to be replenished or shipped. Back

ordered means that the item is currently out of stock, but there are plans to replenish the stock.

There may even be a planned shipping date.

One of the authors has ordered a collection of comic strips, Pogo, from Amazon. It’s a

paired set of Volumes 7 and 8 of the daily comic strip collection. He was fond of the comic

strip as a child. So far, the order has been delayed from December 2021 to October 2022. It’s a

supply chain problem created in part by increased demand, but not increased demand for Pogo

comic collections. That would be a surprise since the strip ceased publication in the 1970s.

Instead, it’s a shortage of paper.

Publishers of hardback books must compete for printing paper with Amazon and every-

one else who uses paper. Think of all the boxes Amazon may have left on your porch and

your neighbor’s porch. The pressure is on the pulp paper industry, the core material for a wide

range of paper products (Seidlinger, 2022). So, supply chain issues outside the publishing

industry have caused delays in publishing hardbound books. The author will have to wait for

his comic strip collections. Maybe he will have them before the second edition of this book

comes out!

This circumstance is a matter of capacity deep in the supply chain. Product shortages

in Tier 3 suppliers affect service levels for consumers. Sellers must deal with complex trade-

offs. You can pay higher prices. You can wait. You can add capacity for communicating with

your customers. These measures may still leave you missing your customer service targets

because your supply chains have been disrupted by your suppliers’ suppliers’ supply chain.

Okay, that’s a bit much, but that seems to be the situation as of this writing, not just in paper

supply chains but in many.

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Customer Service and Customer Responsiveness in Supply Chains

The Seven R’s and Customer Service

The goals of supply chain performance in customer service are sometimes described and

subsequently measured in terms of some number of ‘rights’—the right product in the right

quantity, in the right place, at the right time, in the right condition, with the right documenta-

tion, and at the right price. The number of Rs varies from writer to writer. A company should

examine its operation to see which Rs it wants to measure. The effectiveness of your supply

chain—its level of customer service—can be disrupted through any of these rights. “Out of

stock” is not the right product or any other rights. The supply chain situation that we see as of

this writing will correct itself. Supply chains have adjusted to disruptions before.

Agility, Resilience, and Robustness and Customer Service

Supply chains are sometimes described as resilient or agile. Less often, they are described as

robust. Each term describes the way the supply chain might respond to a disruption.

We see agile supply chains as reacting quickly to immediate needs. If a publisher needs

paper, this supply chain finds paper and gets it to the publisher. In the case of the book

publishers right now, agility will not serve. There’s a line waiting for paper of all types, and

the pulp suppliers won’t allow cutting ahead in the queue. A resilient supply chain may lose

its ability to serve its customers temporarily but recovers in a short time and begins to serve

its customers again. We expect the paper supply chain to heal and for paper suppliers to be

resilient.

A robust supply chain continues through disruption. It can serve customers in circum-

stances where others cannot. We argue that all three are circumstantial and conditional. It

depends on the disruption.

If a truckload of supplies turned over, an agile supply chain might find a way to expe-

dite a shipment from another supplier. If a supplier’s plant explodes or burns down, a resilient

supply chain would find a new supplier in short order. A robust supply chain would continue

to ship regardless of changes.

The concepts overlap. A robust channel must be resilient and agile. However, an agile

supply chain may not be robust. It fails to survive a long-term disruption. Consequently,

customer service fails. Resilient supply chains create a conceptual problem. If a supply chain

is resilient, it comes back. If it doesn’t come back, then it wasn’t resilient in the first place.

Customer Experience (CX)

We have dwelt on the issue of data quality several times. We approach that issue again here.

The opening vignette sets up OTP as the villain in the piece. They did several things wrong,

but they were also likely out of touch with their supplier. They may even have been the victim

74 The Little Black Book of Supply Chains

of poor customer service. The supplier may have misled them about product availability. They

could have responded better on behalf of Bob, keeping him from having the same negative

experience that they had.

Data and information quality affect the customer experience. You cannot tell your cus-

tomers what you do not know. You must use the information that you have. If your supplier

gave you bad data, the chances are good that you will pass it on to your customers.

CX ties closely to supply chain management. We now see mass customization. Cus-

tomers can go online to configure cars to their specifications, with some constraints. A Ford

will still be Ford, for example. But consumers increasingly want personalized or customized

products. Their interactions with the consumer-facing seller are affected by conditions further

back in the supply chain. Even Tier 2 and Tier 3 suppliers need to be aware of consumer

expectations and requirements.

Part of CX then becomes giving consumers access to supply chain truths. The con-

sumer-facing seller needs to offer transparency throughout the supply chain. Consumers will

tolerate problems if they can see the reality of them. It’s about trust in the company and the

information it provides. The supply chain has become critical to CX (Esser and Greenberg,

2022).

References and Other Resources

References

Esser, S. and Paul Greenberg. (January 20, 2022). ZDNet. The Supply Chain: Critical to customer

experience. https://www.zdnet.com/article/the-supply-chain-critical-to-customer-experience/

Seidlinger, M. Looking for Answers to Paper Shortages (February 24, 2022) Publishers Weekly.

https://www.publishersweekly.com/pw/by-topic/industry-news/manufacturing/article/88607-

looking-for-answers-to-paper-shortages.html

Links

https://www.publishersweekly.com/pw/by-topic/industry-news/manufacturing/article/88607-

looking-for-answers-to-paper-shortages.html