Improving Customer Service Series – I – Measuring the Availability

Minerva Biven

The primary value of business success is to accommodate customer requirements in a cost effective and efficient way. Although it is agreed that customer service is important, many senior managers find it extremely difficult to explain what it is and how to do it. Customer service, in a logistic view, represents a supplier’s role in fulfilling the marketing concept. To improve the customer service, it is essential to figure out clear standards of performance for each of the activities and measurements related to those standards. In basic customer service program, the focus is typically on whether the supplier is capable of providing the seven rights to its customers: the right amount of the right product at the right time at the right place in the right condition at the right price with the right information. This concept is also true to the interlining industry.

To improve the customer service, careful analysis of competitive performance and customer sensitivity is critical to the process of identifying the attributes in a basic service strategy. The fundamental attributes of basic customer service were identified as availability, operational performance, and service reliability. These attributes will be discussed in a series of articles in detail.

In this article, availability is discussed in detail. Availability is the capacity to provide inventory when a customer needs it. The traditional practice for an interlining supplier for woven interlining, non-woven interlining and fusible interlining is to stock inventory in anticipation of customer orders. An inventory stocking strategy is typically based on not only the forecast demand for products, but also some differential stocking policies for specific items including profitability, popularity, the importance and value of an item.

For an interlining supplier for woven interlining, non-woven interlining and fusible interlining, achieving a high level of inventory availability requires a great deal of planning. The performance of availability is measured on three attributes, namely, stock-out frequency, fill rate, and orders shipped complete.

1. Stock-out Frequency.
A stock-out frequency occurs when a supplier has no product available to meet customer demand. The stock-out frequency refers to the probability that a stock-out occurs in a firm with no available inventory to meet customer orders. The aggregation of all stock-outs across all products can serve as an indicator of a firm’s performance to provide basic service commitment in product availability. Therefore, taking an interlining supplier for woven interlining, non-woven interlining and fusible interlining for example, good strategy must be applied to lower stock-out frequency.

2. Fill Rate.
Fill rate measures the impact of stock-out over time. It is important to identify the units of a product that is not available to the customer order. Fill rate performance is usually used to evaluate for a specific customer or item like woven interlining, non-woven interlining and fusible interlining, or for any combination of business segments like products and customers. However, fill rate may not always require a 100% achievement. The customer may accept a reorder on the short items at a later time. The essential of fill rate strategy need to take customer requirements for products into consideration.

3. Order Shipped Complete.
Order shipped complete is the most exacting measure of supplier performance in product availability. It covers everything in a customer order as a standard of acceptable performance. An order will be recorded as zero for a complete shipment if even the supplier failed to provide one item on a customer’ order.

The above three measures of availability help build the extent to which a supplier’s inventory strategy is meeting customer demand. They also serve as the basis to evaluate the firm’s appropriate level of product availability in a logistical perspective. With the information technology to identify the customer demand in advance and the forecasting theory application, an interlining supplier for woven interlining, non-woven interlining and fusible interlining succeeded in achieving high levels of basic service performance of product availability without a corresponding increase in inventory stocking. Understanding the measurement of product availability is the starting point to plan a great customer service strategy.

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