Make Your Customers Work for You: Increase Customer Service, Decrease Supply Chain Costs

Spend Matters welcomes a guest post from the University of San Francisco's online program, which offers an online masters certificate in supply chain management, and sustainable supply chain management.

Within the current economic conditions, many businesses are preserving profits with aggressive cost cutting, which tend to focus on customer service (despite its importance). According to a recent Manufacturing Insights survey of 800 companies, over 70 percent of responding businesses said that their most important business objective is to increase customer loyalty and satisfaction, yet customer service rarely wins the battle against the supply chain mandate to reduce costs. Optimistically, a company may plan these service cuts to be temporary, with intentions to restore its customer service levels as the economy recovers. But, in many cases, the damage will have been done and may require more than just a return to original levels to correct.

Customer service is typically treated as a cost center without considering ways in which it can be used to attract new customers, build customer loyalty, and create a competitive advantage. While customer service does entail upfront costs, these costs can be more than offset with a well-planned and executed service strategy.

How Customer Service Works as a Cost Savings Strategy
People buy products or services to help them solve a problem -- therefore, every product and service essentially provides customer service -- which is how a customer derives value. This concept is part of what has become known as a service dominant logic. Because most businesses do not manage customer service as closely as other supply chain functions, it represents an excellent opportunity for potential cost reductions and sales growth.

Creating positive customer experiences across all stages of a product's lifecycle drives higher satisfaction among current customers, which builds customer loyalty. Loyal customers then recruit new customers with powerful word-of-mouth recommendations. Achieving excellence in customer service can also help establish and build upon a brand identity for a company. This can not only foster customer loyalty -- it can create competitive advantages as customers seek brands they have identified with.

Incorporating Customer Service into the Supply Chain
Incorporating flexibility and responsiveness into the supply chain can increase customer satisfaction. Serving customers at the highest level of effectiveness means far more than being responsive, it means being anticipatory. One way to do this is through the use of service-oriented architecture (SOA), which integrates business service components to balance demand and supply and optimize customer service and inventory levels. This, in turn, can enable companies to more rapidly respond to market and operational changes, including customer preferences and service needs.

Reverse Logistics as a Customer Service Practice
An effective reverse logistics program, which encompasses product returns and any other after-market supply chain issues, is another key customer service component in the supply chain. There is a strong connection between returns and customer retention. The ease or difficulty a customer encounters with returns can build or destroy their long-term relationship with a company. By following returns management best practices, companies can satisfy the operational aspects of returns and manage any customer retention issues.

Other benefits of a well-designed reverse logistics program include reduced inventory cost and increased operational efficiency and accuracy. By spending money upfront to develop reverse logistics, companies can establish customer service best practices throughout a product's lifetime, reduce spending and boost revenue at the same time.

Using Employee Training and Retention to Improve Service and Cut Costs
Employee training and retention as a customer service strategy can also yield dividends. Training and development should be viewed as an investment in a company's future. Not only does it help build experienced teams, it also helps reduce turnover and the expenses related to recruiting. Building experienced teams leads to improved productivity, accuracy, efficiency, and quality of work. These improvements can help generate greater customer satisfaction as well as decreased supply chain costs.

- The University of San Francisco's Online Program

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