The ultimate in logistics service is to do everything right and to do it right the first time it is not sufficient to deliver a complete order but to deliver it hate. Nor is it sufficient to deliver a complete order on time but to have an incorrect invoice or to incur product damage during the handling and transportation process. In the past, most logistic managers evaluated customer service performance in terms of several independent measures: fill rates were evaluated against a standard for fill; on time delivery was evaluated in terms of a percentage of deliveries made on time relative to a standard; damage rates were evaluated relative to a standard for damage; Etc. when each of these separate measures was acceptable relative to standard, overall service performance was considered acceptable.
Recently, however, logistics and supply chain executives have begun to focus attention on zero-defect or six-sigma performance. As an extension of Total Quality Management (TQM)
Efforts within organizations, logistics processes have been subjected to the same scrutiny as manufacturing and other processes in the firm. It was realized that if standard are established independently for customer service components, even if performance met standard on each independent measure, a substantial number of customers may have order-related failure. For example, if orders shipped compete, average on-time delivery, average damage-free delivery, and average correct documentation are each 97 percent, the probability that any order will be delivered with no defects is approximately 88.5 percent. That is so because the potential occurrence of any one failure combined with any other failure is .97 x .97 x.97 x.97. The converse of this, of course, is that some type of problem will exist on as much as 11.5 percent of all order.
The notion of the perfect order is that an order should be delivered compete, delivered on time, at the right location, in perfect condition, with complete and accurate documentation. Table 3.1 lists some of the most typical failures that arise in the attempt to provide perfect order performance. Each of these individual elements must comply with customer specifications. Thus, complete delivery means all product the customer originally requested, on time means at the customer’s specified date and time. Etc. In other words, total order cycle performance must be executed with zero defects, availability and operational performance must be perfectly executed, and all support activities must be completed exactly as promised to the customer. While it may not be possible to offer zero defects as a basic service strategy across the board to all customers, such high-level performance may be an option on a selective basis.
Carry safety stock to protect against potential late delivery; the degree of variability translates directly into safety stock requirements. Given the numerous activities involved in order cycle execution, there are many potential sources of inconsistency in performance (review Figure 2.8).
The issue of consistency is fundamental to effective logistics operations, as it is becoming increasingly common for customers to actually specify a desired date and even specify a delivery appointment when placing orders. Such a precise specification may be made, taking into consideration a supplier’s performance cycle, but that is not always the case. In fact, customers frequently place orders far in advance of their need for product replenishment. In such situations, it is very difficult for customers to understand why failure to deliver as specified occurs. Their viewpoint of supplier consistency in operational performance is whether the supplier delivered at the specified date and time. In such situations the definition of consistency must be modified. It is no longer sufficient to evaluate in terms of planned time, such as 4 day to complete the cycle. It is essential to determine whether the performance cycle was completed according to the customer’s specification. Thus, in today’s logistical environment, consistency is frequently viewed as a firm’s performance in terms of on-time delivery.