📘 Chapter 2: Customer Service

🎯 LEARNING OUTCOMES

At the end of this unit, the student should be able to:

 Understand what customer service means in the logistics context

 Explain and apply the elements of customer service

 Explain and apply the critical dimensions of customer service

 Discuss the process of developing a customer service strategy

 Develop and justify relevant measures for gauging customer service

performance

🔹 CUSTOMER SERVICE

Customer service has the potential to provide the distinctive difference between
competing firms’ offerings.

 This differentiation potential is important considering the declining power

of the brand.

 Satisfactory customer service is a direct output of the logistics

function, which ensures that the market offering is available to the customer
at:

o the right place

o and at the right time.

🔹 THE ESSENCE OF CUSTOMER SERVICE

Who is the customer?

 A customer is the party that patronises an organisation by purchasing its

products or services.

From a logistics perspective:

 The customer is any person at the receiving end of a delivery, and this
customer can exist internally or externally to the organisation.

✅ Both internal and external customers must be provided with replicated, timely,
and accurate delivery.

📊 Example illustrated:

Department A → Department E

This represents internal customer service between departments.

🔹 ELEMENTS OF CUSTOMER SERVICE

Refer to Figure 2.1: Elements of Customer Service

These include:

 Policies that create a climate for satisfactory customer service.

  The physical distribution of the product and the exceeding of customer
expectations.

 Customer service activities occur:

Before the transaction (Pre-transaction)

This relates to a company’s policies regarding customer service. These policies must
be in place before a company can successfully implement its customer service
activities.

The pre-transaction phase is the creation of the service platform to serve the
customer, so as to build credibility in the market and rate a good image among
existing and prospective customers.

These elements establish a climate for good customer service.

During the transaction (Transaction)

Customer service during the transaction phase is associated with routine tasks
performed in the logistics supply chain and these tasks result in the physical
distribution of the products to the customer. These are the customer service elements
that are in place that allow the customer to make a purchase or receive a service.

After the transaction (Post-transaction)

The post-transaction elements are in place to provide some support for the product
while it’s in use.

This phase relates primarily to customer satisfaction and building a long-term

relationship with the customer. The post-transaction elements of customer service
support the product or service after the customer has received it.

🔹 ADDITIONAL INFORMATION (NOT IN TEXTBOOK – FOR TEST AND EXAM

PURPOSES)

🔸 Pre-Transaction Elements:

1. Statement of policy

o A written declaration outlining the company’s customer service standards

and commitments.

o It sets the tone for service quality and guides staff behaviour and
decision-making.
 o Example:
“We pledge to respond to every customer inquiry within 24 hours and
ensure all interactions are conducted with respect and clarity.”

2. Customer acknowledgement

o The process of confirming receipt of a customer’s inquiry or request.

o This reassures customers that their communication has been received

and is being attended to.

o Example:
After submitting an online form, the customer receives:
“Thank you for reaching out. We have received your message and will get
back to you shortly.”

3. Organisational structure

o The arrangement of roles and responsibilities within the customer

service team.

o A clear structure ensures customer issues are handled efficiently and

escalated appropriately.

o Example:
A company has a tiered support system — frontline agents handle
basic queries, and complex issues go to specialist teams.

4. Capacity flexibility

o The ability to adjust resources and processes to handle fluctuations

in customer demand or unforeseen events (e.g., strikes, shortages,
natural calamities).

o Example:
During a promotional event, extra representatives are hired to maintain
fast response times.

5. Technical services

o The use of technology such as CRM systems, chatbots, and helpdesk

software to manage customer interactions.

o These tools help with efficient communication and data tracking.

o Example:
An AI-driven chatbot answers FAQs instantly and refers complex
questions to human agents.

🔸 Transaction Elements:

1. Stockout level

o Refers to the frequency or duration a product is unavailable due to

stock shortages.
 o Example:
A retailer closely monitors inventory so that popular items rarely run
out, avoiding customer frustration.

2. Backorder ability

o A backorder is when a product is temporarily unavailable, but a

restock is expected.

o Customers can prepay and receive the item when it becomes available.

o Example:
An electronics store allows customers to order a sold-out laptop and
guarantees future delivery.

3. Order cycle time

o The time between when an order is placed and when it is received by the
customer.

o Example:
A customer orders a book online and receives it within 48 hours — this
indicates a short order cycle time.

4. Trans-shipment

o The process of moving products between locations to meet customer

demand and avoid obsolescence.

o Example:
A product out of stock in one store is shipped from a nearby distribution
centre.

5. System accuracy

o Refers to the reliability and precision of systems showing real-time

inventory and order data.

o Customers expect accurate order tracking and stock availability.

o Example:
An online store prevents overselling by showing real-time product
quantities.

6. Order convenience

o The ease with which a customer can place, modify, and track orders.

o This includes user-friendly websites, payment options, and tracking.

o Example:
A website allows one-click purchasing, various payment methods, and
live tracking.

🔸 Post-Transaction Elements:

1. Installation, warranties, and repairs

 o Services offered after purchase to ensure functionality and
satisfaction.

o Example:
A technician installs a new appliance, a 2-year warranty is issued, and
repair services are available.

2. Product tracking

o Allows customers to monitor delivery progress and location in real-

time.

o Example:
A tracking number lets customers see updates through the company
portal.

3. Customer follow-ups

o Proactive contact post-purchase to check satisfaction, gather feedback,

and solve issues.

o Example:
After delivery, a representative emails to check satisfaction and offer
help.

4. Product packaging

o Refers to presentation and protection of the product during delivery.

o Example:
A company uses sturdy, eco-friendly packaging to reduce damage
and reflect brand values.

5. Product returns

o Policies and procedures allowing returns if the product fails or

disappoints.

o Example:
A retailer offers a 30-day return policy with a simple online process and
full refund/exchange.

🔹 ELEMENTS OF CUSTOMER SERVICE (Continued)

 These relate to the time taken to fulfil an order from placement to delivery.

 They relate to the consistency of a supplier’s deliveries with what customers

expect.

 They relate to the management of order-related information.

 They acknowledge that customers are diverse, and their logistics needs may
differ.
🔹 BASIC CUSTOMER SERVICE DIMENSIONS

Refer to the fundamental elements that contribute to a positive customer

service experience.

1. Inventory availability

o A purchase is impossible if the product or service is not available.

2. Operational performance

o How efficiently supply chain activities are executed.

Includes:

o Speed – Short order cycle time.

o Consistency – The ability to deliver a consistent service level.

o Flexibility – The ability to adapt to customers’ specific needs.

o Recovery – Planning for disruptions and having contingency plans in

place.

3. Service reliability

o The ability and willingness to assure customers that their expectations

will be met.

🔹 CUSTOMER SERVICE STRATEGY

There are four main approaches:

1. Customer strategy based on reaction to stockouts

2. Customer/revenue trade-offs ❌ (excluded for assessment)

3. Customer-product contribution ❌ (excluded for assessment)

4. The customer service audit

🔸 Customer Strategy Based on Reaction to Stockouts

  If customer settles for a substitute, the manufacturer is affected.
example, if a customer goes to Checkers to buy OMO washing powder which is
manufactured by Unilever and there is a stock out. The customer might decide
to buy Ariel washing powder which is manufactured by Proctor and Gamble. In
this case, Unilever loses out on the sale and not the retailer which is checkers in
our example

 If customer insists on a specific product or brand, the retailer is

affected. example, if the customer goes to Checkers to buy OMO and it’s out
of stock, they might go to Pick N Pay or Woolworths to buy OMO, then in our
example Checkers, the retailer, loses the sale and not the manufacturer.

This strategy helps determine where to allocate responsibility and where service
investments should be made.

The way a customer reacts to a stock out depends on

 The nature of the product or brand and

 the degree of knowledge about the product or brand that the customer has

🔸 The Customer Service Audit (Four Stages)

Customer service audits uncover what your company and employees are doing well
and help identify areas of opportunity to improve the customer service experience.
MUST be in correct order.

1. External customer service audit

o Identify what customers expect.

o Determine which components affect their decision to buy.

o Provides insight into:

 The value hierarchy of customer service elements

 The company’s performance rating versus competitors

Customers consider to be important and influences whether they will make repeat
purchases.

order cycles, billing procedures, responses to queries

evaluate how their performance of each component in relation to their competitors.

2. Internal customer service audit

o Review what the company is doing to meet customer service standards.

o Assess:

 How performance is measured

 What standards exist

 To what extent these standards are being met

a chance to identify opportunities to improve customer service levels and to identify

challenges – so in other words, areas the company can improve on.
example just say that Takealot customers value speedy delivery. Takealot can then do
an internal customer audit to determine whether they are meeting this criterion that
customers value.

They can do this by looking at past complaints or interviewing employees who are
responsible to get their perception on whether the company is meeting this criterion.
Additionally, they can ask customers in a survey if they are meeting this criterion.

3. Development of potential solutions

o Compare internal and external audits.

o Identify gaps or areas where performance:

 Falls short,

 Matches, or

 Exceeds expectations.

o Propose solutions to close gaps or improve performance.

4. Establishment of customer service levels

o Develop a system for measuring and monitoring performance.

o This ensures long-term tracking and improvement.

📏 MEASURES OF CUSTOMER SERVICE PERFORMANCE

These are quantifiable indicators of how well customer service is being delivered:

1. Turnaround times – Time to respond to inquiries, calls, or requests.

2. Number of customer complaints – Indicator of dissatisfaction.

3. Queuing time – How long customers wait to receive service.

4. Ratio of timely shipment of orders – Percentage of orders delivered on time.

5. Number of items on backorder – Indicates demand not met due to stockouts.

6. Percentage product availability – Proportion of time products are available

for sale.

7. Order cycle time – Duration from order placement to delivery.

measuring customer service levels will help a company gain a better understanding of
its customers and their expectations