ACADEMICIA

Volume 2, Issue 7 (July, 2012)

ISSN 2249-7137

Pu b l i s h ed b y : S o u th As i a n Aca d e m i c Re s ea r ch J o u rn a l s

ACADEMICIA:
An International Multidisciplinary Research Journal ROLE OF CUSTOMER SERVICE IN SUPPLY CHAIN MANAGEMENT: A CRITICAL RESEARCH AND THEORETICAL FRAMEWORK
SANJEEV LALHOTRA* *Ph.D Research Scholar, The Business School, University of Jammu, India. ABSTRACT This paper explored the customer service aspect in supply chain management. As firms increase their participation in a global economy, developing an understanding of supply chain management issues and opportunities in a global context becomes increasingly important. This study has been exploring the dimension of Customer service management which includes the customer service strategy and the relationship marketing with the customer of the firms (i.e., B to B). The conceptual method is used to evaluate these dimension which incorporate various finding for these dimension. The study shows the implication of these finding in the small and medium enterprise (SMEs) and presented a framework for purchasing transport services to enable small and medium size enterprises (SMEs) to improve relationships with logistics service providers (LSPs) and enhance their own competitive advantage and profitability. KEYWORDS: SMEs, Supply Chain Management and Customer Service. ______________________________________________________________________________ 1.1 INTRODUCTION Customer service is one of the most encompassing and growing areas of activity in the service sector, frequently cited as an important objective of supply chain management (Mukhopadhyay, 2002). Ellram, LaLonde, & Weber (1989), Lambert & Stock (1993), and Langley & Holocomb (1992) have described customer service as a process, a set of activity or a function to be managed within the firm which include, order processing (invoicing or handling customer complaint), a performance outcome or measure (order fill rates, cycle time & on time delivery), a customer related objective or outcome (customer perception of availability, quality & timeliness), and a South Asian Academic Research Journals http://www.saarj.com

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management philosophy. Supply Chain Management (SCM) is means of maximising efficient use of resources in achieving the supply chain customer service goals. In present scenario where customer retention is key to increase the profitability of the firms, so the different models of SCM are reflections of customer service and it is one of the major driver and thrust of the firms globalization efforts. The aim of SCM is to achieve a balance between goals of high customer service, low inventory investment and low unit cost goals. However, increasing pressures toward global integration, local differentiation, and worldwide innovation require firms to manage toward global efficiency, local responsiveness, and worldwide transfer of knowledge and capability simultaneously. So it is important for the organisation to hold on their SCM through customer service. SMEs are playing important role in the economic growth of any developing countries and particularly in Indian. The SMEs in Jammu and Kashmir is facing problem of resources allocation due to the geographical as well as climatic condition and in these SMEs manager would have to performed dual functionality for their organisation i.e., they are the owner as well as the manager of all function to take care of management of various issue such as inventory, warehousing, transportation, and partnership alliances, customer etc. which become very critical for small and medium enterprises. According to Nooteboom et. al., (1997) the largest cost associated with the logistic activities of SMEs is the transportation process which is repeated many times, throughout the distribution channels. The major outcome of transport is to get product from origin to destination (Grant et. al., 2008). But there are several vital parameters in the process of shipping which are related to customer services .i.e., transport rates and related charges are often the largest logistics cost element. Moreover the transport solutions should be interrelated into the wider supply chain aspect which affects the customer service .i.e., a) transport purchasing and SMEs b) transit times c) transport visibility d) on time delivery. So, this paper conceptually build an important note that the customer service is an operational function or outcome for the small and medium enterprise in Jammu and Kashmir, so that it contributes to the ultimate goal of customer value and satisfaction through the SCM. 1.2 REVIEW OF LITERATURE Rinehart et al. (1989) noted that customer service is the unifying factor for integrating marketing and logistics, and that the performance of both marketing and logistics activities creates the customer service output of the firm. Langley and Holcomb (1992) defined customer service as a process of providing significant value-added benefits to the supply chain in a cost effective way. La Londe and Zinszer (1976) also define customer service as those activities that occur at the interface between the customer and the corporation which enhance or facilitate the sale and use of the corporations product and service. McLaren et al. (2004) demonstrated that an effective use of SCM reduces buffer inventory stocks, reduces lead times, increases sales, coordinates information between internal & external customers and improve customer service. According to Lumsden and Mirzabeiki (2008) the warehouse operations information help to increase the customer service and most valuable information type from the practitioners perspective and this information further provide the benefit share to the supply chain partners. But this intangible value adding aspects of supply chain management are extended from the tangible aspects that measure the success of total supply chain. Zsidisin, Jun, & Adams (2000) described the relationship between information technology and service quality in the dualdirection supply chain. Focus is on the service quality dimensions viz. communication channel intermediaries (which include distribution channel intermediaries, transactional channel South Asian Academic Research Journals http://www.saarj.com

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intermediaries) and nature of customer service quality and is tested through the instrument called SERVQUAL. Transport operations and the logistics triad depends on the supplier, customer and transport carrier and they identified five main categories of uncertainty, namely i.e., from the points of view of the supplier, the customer and the carrier, respectively, the control systems used in the supply chain and external factors (Rodrigues et al., 2008). Harrison, Terry P. (2001) assessed on good supply chain design helps in the relationship between customer & supplier, lowering costs, better coordination and improved customer service. The supply chain performance improved through the relationship and sufficient systems thinking (Holmberg, 2000). Lovelly, Saw & Stimson (2005) has revealed the importance of segmentation both as a part of network design process and as an operational tool and used five dimensions having the characteristics of the product, market, and source, geographical and environmental context. Sastry, Trilochan (1999) assessed the supply chain performance of small firms facing high demand uncertainty and seasonality along with low margins & high working capital requirement improved their ability through the relationship between customer supplier relationship to take advantages of market opportunities. The above literature supports the customer service should be manage in SCM of SMEs and it will impact on value, satisfaction & loyalty of customer towards the firms. Therefore it will help to increase the overall performance of the firms. In this paper the authors tried to build a conceptual framework to measures the customer service and its impact on the operational performance on the satisfaction, value and loyalty through the customer service strategy, customer segmentation, service quality, relationship marketing and financial performance. 1.3 RESEARCH HYPOTHESIS 1.3.1 CUSTOMER SERVICE STRATEGY Consumer service strategy in literature has been considered as a firms marketing effort (Lambert & Stock, 1993) and help firms to establish appropriate customer service policies i.e., (a) understanding customer reactions to product or service failures (customer response to stockout) (b) analyzing cost/revenue trade-offs, (c) Activity-Based Costing (ABC) analysis looking at the most profitable customers, (d) internal and external customer service audits, and (e) a composition matrix (Lambert & Stock, 1993). Therefore it is important to develop appropriate customer service strategies that enhance the firms profitability. H1: Customer service has significant impact on the customer service strategies. 1.3.2 CUSTOMER SEGMENTATION The supply chain, which matches each category, is an efficient supply chain for functional products and a responsive supply chain for innovative products. Christopher and Towill (2002) develop the Fisher theme with particular reference to the garment industry with several examples of failure when the concept has been ignored and success when it has been adopted. They state that pipelines must be carefully matched to market requirements. It is equally clear in the current business environment that quite different pipelines may function alongside each other, each needing appropriate operating and management skills. Lovell, Saw & Stimson (2005) suggested the factor that influence the supply chain segmentation are as under: Product Life South Asian Academic Research Journals http://www.saarj.com

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cycle (Variety within product group, Product type: functional or innovative, Handling characteristics, Shelf life, Physical size and weight, Value, PVD); Market (Demand location/dispersion, Demand level (throughput), Demand variability, Service expectations); Source (Limitations on raw material, Economies of scale, Production flexibility, Lead-time); Geographic and commercial environment (Existing infra-structure, Transport mode availability, Customs/duties/trade areas, Legislation). H2: Customer segmentation has positive relationship with customer service. 1.3.3 SERVICE QUALITY Service quality is a difference between consumers actual experience of the service and their expectation (Dotchin & Oakland, 1993; Parasuraman et al., 1998). In the literature, there has been considerable progress as to how service quality perceptions should be measured. The dimensions of service quality seen as important to customers include both tangible and intangible aspects (Boulding, Kalra, Staelin, & Zeithaml, 1993; Cronin & Taylor, 1992; Parasuraman, Berry, & Zeithaml, 1991). The customer expectation and perception regarding the service process measures (i.e., convenience, flexibility, personalized attention, and information) along with the logistic service process measures such as speed, availability, accuracy, and consistency are important to a customers satisfaction (Mentzer et al., 1989). Bienstock et al, 1997; Mentzer et al., 1989; Mentzer, Flint, & kent, 1999 has extended the concept of service quality into the arena of logistics service quality. H3: Service quality has statistical impact on the customer service. 1.3.4 RELATIONSHIP MARKETING Customer delivery service has been enhanced through the managing relationship. Berry (1995) describes relationship marketing as attracting, maintaining, and in multi-service organizations it helps to enhancing customer relationships, with the objective of securing loyalty to retain existing customers. The key strategy elements in relationship marketing include those of customising relationships to the individual customer, augmenting core service with extra benefits, pricing services to encourage customer (Lambert & Stock, 1993). Supply chain management is a philosophy that synchronises the internal and external capabilities to create market value and focuses supply chain members on finding new ways to create unique and innovative solutions that provide value to customer on a individualized basis (Ross, 1998). H4: Relationship marketing has impact on the customer service. 1.3.5 FINANCIAL PERFORMANCE Customer value and satisfaction are important ingredients in the business success. All departments must work together to create superior value for customers. Each department of the firms can be thought of as a link in the firms value chain (Porter, 1995). Logistic has focused on their time and attention on three core functions of business operations: inventory policy and practice, facilitate location and design, and transportations of materials and products (Ballou, 1993). The basic cost drivers of the supply chain are raw material cost, labour cost, technology, South Asian Academic Research Journals http://www.saarj.com

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primary transport cost, location of manufacture, facility cost , service (product availability), secondary transport cost, secondary service (Product availability), inventory cost, value, demand variability/ service (product availability) ( author name with year ). These help to know about the impact of the cost on the product and service, which further impact the customer value and financial performance. H5: Financial performance of the company has great influence on the customer service. 1.4 IMPLICATION AND SUGGESTION The above literature revealed the most critical issue .i.e., no firms wants to hold inventory in the supply chain. One reason to establish a supply chain is to reduce inventory levels by taking out the redundancies in the supply chain. It is important to note that in most situations the SMEs distributor wants fewer inventories and tries to push it back to the manufacturer. As a result the concept of seller or vendor managed inventory has become a trend in inventory management. The basic feature of the vendor managed inventory is to pushed back inventory to the vendor and it not only help to reduce the cost of vender but also reduce the risk for the other chain member. It will shorten the product life cycles and due to this reduced cycle times emerge a quick response inventory system. And the quick response system in SMEs or in any firms improves customer service because the customer gets the right amount of product when and where it is needed. The SMEs supplier and customer more stressed that customer service is an important aspect of doing business. So, SMEs only remain competitive, if firms implement SCM to improve customer service through increased frequency of reliable product deliveries. This increasing demand on customer service levels is driving partnerships with vendors and suppliers. But in the era of Globalisation, the SMEs of any country perform better only through the effectiveness of the planning and execution of their value chain system. The leading organisation control efficiency and variability in the supply chain through a valuable value chain system or SCM. SCM helps an organisation better appreciate which segments, distribution channels, and value chain configurations will yield the competitive advantage. The value chain strategy helps to maintain these channels through the visibility of the owner or manager of SMEs. The design of the supply network depend upon the subsequent strategic demand in which organisations are now approaching the supply chain as a component-based aggregation of solutions that enable an inbound and outbound perspective. 1.5 FUTURE RESEARCH Efficiency in the SCM enables better competitive advantage by determining strategic advantages and disadvantages of the full range of actions that shape the final offering to the end users. According to the above literature it suggested that the trust and loyalty towards the customer and supplier help to maintain good relationship in future. These trust and loyalty are directly related to the enhanced customer service of the firm. The literature also revealed the different preposition for improving the customer service in the firms. These dimensions become the research hypothesis for further research. The future research helps to validate these research hypotheses by collecting data, analysing and finding that whether they are producing the same result as the literature revealed or something new.

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REFERENCES

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Andreas R. Holter, David B. Grant, Jamer Ritchie, Nigel Shaw (2008), A Framework for Purchasing Transport Services in Small and Medium Size Enterprises, International Journal of Physical Distribution & Logistics Management, Vol. 38 No. 1, pp. 21-38. Ballou, Ronald H. (1993), Reformulating a Logistic Strategy: A Concern for the Past, Present, and Future, International Journal of Physical Distribution and Logistics Management, Vol. 23 No. 5, pp. 30-38. Bhardwaj, Sunil and Bhattacharya, S., (2007), Role of Social Networks in Supply Chain: A Literature Review, The ICFAI Jounal of Supply Chain Management, Vol. 4 No.4, pp. 7-15. Bartlett, Christopher A., & Ghoshal, Sumantra (1998), Managing Across Borders: The Transnational Solution, Boston: Harvard Business School Press. Bienstock, Carol C., Mentzer, John T., & Bird, Monroe Murphy. (1997), Measuring Physical Distribution Service Quality, Journal of the Academy of Marketing Science, Vol. 25 No.1, pp. 31-44. Boulding, William, Kalra, Ajay, Staelin, Richard, & Zeithaml, Valarie. (1993), A Dynamic Process Model of Service Quality: From Expectations to Behavioral Intentions, Journal of Marketing Research, Vol. 30, pp. 7-27. Chary, S.N., (1998), Production and Operations Management, Tata McGraw-Hill Publishing Company Ltd., New Delhi, pp. 1.2-1.3. Chen, I. J. and Paulraj, A., (2004), Understanding Supply Chain Management: Critical Research and Theoretical Framework, International Journal of Production Research, Vol. 42, pp.132-157. Chin-Chun Hsu, Vijay R. Kannan, Keah-Choon Tan and G. Keong Leong(2008), Information Sharing, Buyer-Supplier Relationships, and firm Performance, International Journal of Physical Distribution & Logistics Management, Vol. 38 No. 4, pp. 296-310 Christopher, M. and Towill, D. (2002), Developing Market Specific Supply Chain Strategies, The International Journal of Logistics Management, Vol. 13 No. 1, pp. 1-14. Craig R. Carter and Dale S. Rogers (2008), A Framework of Sustainable Supply Chain Management: Moving Toward New Theory, International Journal of Physical Distribution & Logistics Management, Vol. 38 No. 5, pp. 360-387 Cronin, J.J., and S.A. Taylor (1992), Measuring Service Quality: A Re Examination and Extention, Journal of Marketing, Vol.56, pp.55 68.

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R.K Sinha, and A. Subash Babu (1998), Quality of Customer Service in Supply Chain System: A Diagnostic Study, International Journal of Quality & Reliability Management, Vol. 15 No. 8/9, pp. 844-859. Sastry, Trilochan., (1999), Supply Chain Strategies for Small Firms Facing High Demand Uncertainty and Seasonality, Vikalpa, The Journal for Decision Makers, Vol. 24 No.4, pp. 7-15. Vasco Sanchez Rodrigues, Damian Stantchev, Andrew Potter & Mohamed Naim, and Anthony Whiteing (2008), Establishing a Transport Operation Focused Uncertainty Model for the Supply Chain, International Journal of Physical Distribution & Logistics Management, Vol. 38 No. 5, pp. 388-411. Wong, A., Tjosvold, D. and Zhang, P., (2005), Supply Chain Management for Customer Satisfaction in China: Interdependence and Cooperative Goals, Asia Pacific Journal of Management, Vol. 7 No. 22, pp.179-199. Yemisi A. Bolumole, A. Michael Knemeyer and Douglas M. Lambert (2003), The Customer Service Management Process, International Journal of Logistic Management, Vol.14, pp.15-31. Zachary Williams and Robert Moore (2007), Supply Chain Relationships and Information Capabilities, International Journal of Physical Distribution & Logistics Management, Vol. 37 No. 6, pp. 469-483.

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