Logistics is crucial to every business - but it is not an end unto itself. In fact, the most successful organizations are those that can leverage their logistics capabilities to provide customers with exactly what they want - and expect - while, at the same time, creating and maintaining a competitive advantage wherever possible. However, this will require a good understanding of how to use both the real - and perceived - benefits of logistics to enhance the organization’s customer service capabilities, as well as its overall competitive market position.

What is Logistics? Logistics World defines logistics as “having the right thing, at the right place, at the right time”. Webster’s Dictionary defines it as “the procurement, maintenance, distribution, and replacement of personnel and materiel”. The Indian Institute of Materials Management (IIMM) defines it as “forming the system that ensures the delivery of the product in the entire supply pipeline”, and the Council of Supply Chain Management Professionals (CSCMP) defines it as “the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements”.

These are all good definitions, but what is logistics? Really? Is it moving the right things, to the right place, at the right time? Nothing more than procurement, maintenance, distribution & replacement? A system for the entire supply pipeline? Or, simply a process that conforms to customer requirements? Well, the short answer is: it’s all of these, tied together into an all-encompassing process. As such, we prefer to define logistics as “a process and tool for moving goods, services and information between the supplier and its customers, resulting in increased customer satisfaction and competitive performance.”

Effective Logistics Can Improve Customer Satisfaction and Competitive Advantage Satisfaction occurs when logistics services meet or exceed customer expectations. Customers care more about having their product, service and support requirements met, and much less about how you do it. What customers really want is to have their voices heard - and then, to have something done about it; i.e., they want to see results.

Logistics performance is really about the 2 Q’s: Quantity & Quality:

• For Quantity, it is about the delivery fulfillment rate; a low fulfillment rate implies a high volume of complaints and a long list of dissatisfied customers. Quantity is, in fact, the basic requirement. • For Quality, it is about the order to be delivered within the agreed time window, and the overall responsiveness of the organization, etc. Quality comprises the extra values that ultimately impress the customers and keep them loyal to the enterprise.

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Many companies use logistics as a market differentiator. The intent is to keep customers so satisfied with their services, that they remain loyal, repurchasing the product and/or service again, and again, and again. However, customer satisfaction may be viewed either as transaction-specific or cumulative: In the former, the emphasis is on the customer’s evaluation of a specific product/service transaction (i.e., product sale, service event, part order, etc.). However, in the latter, the evaluation is based on the customer’s total purchase and usage experience with the company’s products, services and support over time (i.e., the “total customer experience”). Firms that also integrate new technologies, such as remote diagnostics, predictive diagnostics, connected services, etc., into their logistics offerings are generally more likely to establish and maintain strong customer relationships over time as a result of their technology-enhanced capabilities.

The Logistics/Customer Satisfaction Connection Past market research has shown that customers believe the following logistics-related attributes to be of the greatest importance:

• Availability of the product/parts • On-time delivery/improved reliability • Completeness/accuracy of orders • Products/parts arriving undamaged and according to spec • Efficient and frequent communications • Reduced inventory levels/paperwork • Value-added service and support (e.g., inventory management/planning, etc.) • Ability to place/track orders via the Internet

However, for there to truly be a “bond”, or “partnership”, between the provider and its customers, there must first be the following shared attributes:

• Mutually high expectations for the success of the partnership • Mutual loyalty (at least, at the beginning) • Framework/capability for technical data/information exchange (e.g., EDI) • Willingness to share risks/provide assistance in critical situations • Willingness to negotiate/mediate differences of opinion/interpretation • Use of joint provider/user task forces/teams • Two-way, frequent communications and feedback channels • Joint performance monitoring and tracking (i.e., against pre-set goals)

Using Logistics to Build Competitive Performance Staying ahead of the logistics/customer service curve requires the following:

1. Listening to, and capturing, the “voice of the customer”; knowing what delights and pains the customer, and maintaining an ongoing dialogue.
2. Thinking ahead of the customer; anticipating its wants and needs before it even does itself.
3. Realizing you cannot build a wall around your customer; and never assuming that just because your company is already embedded in the customer, they’ll stay with you forever.
4. Appealing to your customers on both an intellectual and emotional level; making them think they made a good choice and they feel good about it.
5. Cherishing your good reputation and doing everything you can to keep it strong.

The more you know about your customers, the more responsive you can be to their logistics needs and requirements. Being a partner with your customers will allow you to be the kind of responsive and interactive logistics provider that they are seeking - and one upon which they feel they can ultimately rely on for “total customer support”.

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Bill Pollock
Bill Pollock is President & Principal Consulting Analyst at Strategies For GrowthSM (SFGSM), the independent research analyst and consulting firm he founded in 1992. Bill is a prolific author and speaker on all things service, and a long-time contributor to Field Service Digital. For more information, Bill may be reached at (610) 399-9717, or via email at wkp@s4growth.com. Bill’s blog is accessible at www.PollockOnService.com and via Twitter at www.twitter.com/SFGOnService.