Who is customer?
In the term of logistics,
“ The customer is any delivery
Taking into consideration of supply
chain management customer are
divided into two part internal and
Customer service is a process which takes
place between the buyer, seller and a third-
The process results in addition of value to
the product of service exchanged.
The value added in exchange process might
be short term in a single transaction or long
term as in a contractual relationship.
Feature of Customer Service
It is a strategic process for providing value
added services to the customer
It keeps the customer happy and loyal.
It generally start with an order entry and
ends with the delivery of goods to
It brings about a competitive advantage in
the marketplace, increase sales and
Reason for better logistical service
Growth in customer expectation.
Freshness or date of manufacturing of
product are becoming a very important
issue in most of the purchase decision.
Market have become more service centric.
Product are unable to retain brand loyalty
in stock-out situation resulting into
availability of product is a vital factor.
The Logistics (Strategic) Planning TriangleThe Logistics (Strategic) Planning Triangle
Shipment size and
many? What size?
Element of customer service
Written statement of customer service
Order contact point
Method of ordering
Order size constraints
Order cycle time
Delivery of complete order
Condition of goods
Invoicing procedure and accuracy
Customer complaints and claim
Component of Customer Service
In respect of customer as a business
1) Best return of investment
2) Long term association
3) Continuous improvement of quality
1) Availability of products
2) Offer fixed replenishment cycle time
3) Zero-defect delivery
4) Point to point information
5) Consistency in service
1) Financial support
2) Credit facility
3) Training programmes
4) Authority power for spot decision
5) Fare trade practices
Internal communication Gap
Corporate vision about
Major Gap Minor Gap
Inventory is any stored resource that
is used to satisfy a current or future
Raw materials, work-in-process, and
finished goods are examples of
Inventory control means keeping track of
Knowing how much was sold and how
much is left.
To know when to order.
To keep records of losses and gains.
To know consumption rates of high
demand and low demand.
Purpose of inventory
Smooth-out variations in operation
Avoid stock out or shortage.
Availability of Fund.
Safeguard against price changes.
Take advantage of quantity discounts.
Types of Inventory
On the basis of nature of material.
Finished Goods Inventories
On the basis uses of Materials
Function of inventories
Element of Inventory cost
Cost of order processing.
Cost of transmission of an order from
purchase department to supplier
(Postage, follow up, fax).
Cost of transportation, including freight,
Octroi, transit insurance, protective
Cost of invoice pricing, including checking,
approval, book entries and payment.
Inventory carrying cost
Rent for storage
Cost of working capital
Cost of insurance of goods
Cost of spoilage in the quality of
goods in storage.
Cost of wastages due to passes of
time and change in weather.
Cost of obsolescence of goods or
The stock-out is the economic consequence
of either an external or an internal
Internal shortage occurs when an order of a
group/department within the organisation
is not filled.
External shortage incurs back order cost,
present profit loss due to loss of potential
sale, and future sales loss due to loss of
corporate image affecting future sales.
1) Customer says” I will be back”
2) Customer says" call me when it’s in”
3) Customer buy substitute product
which yields a higher profit for seller.
4) Customer goes to competitor.
Just in Time
Just in Time
Inventory is the
that is necessary to
keep a system
A corporate system designed JIT to produce
output within the minimum lead time and
at the lowest total cost by continuously
identifying and eliminating all forms of
corporate waste and variance.
With just in time (JIT) inventory, The exact
amount of items arrive at the moment
they are needed, Not a minute before OR
not a minute after.
To achieve JIT inventory, Managers
should Reduce the Variability Caused by
some Internal and External Factors.
Most variability is caused by tolerating
For example –
Transportation waste, Process Waste,
Inventory Waste, Waste from product
defects, Waiting time, Overproduction
Objective of JIT
Reduce inventory carrying cost.
Produce only customization product.
Production in minimum lead time.
Reduction of wastage.
Function of JIT
Elimination of Waste
Reduce inventory size
Reducing the order batch size can be
a major help in reducing inventory.
Limitation of JIT
Applicable in growth to maturity
phases of Product Life Cycle
• standard/fixed pay-rate
• problems with piece-rate scheme
Developed at Toyota 1950s to
manage line material flows.
Kanban ( Kan=card, Ban= signal )
Kanban = an authorization to
produce more inventory
We thus limit the amount of inventory
A card is used to signal the need for
material in a work center.
Sending a card authorizes the previous
work center to send its finished batch to
the subsequent work center.
Batches are typically very small. Such a
system requires tight schedules and
frequent set-ups for machines.
Server only delivers components to client
work station as & when needed
Kanban Control System
Card (signal) Flow
Part A Assembly
What does look like.
Kanban No.Kanban No. 56789905678990
part No:part No: 66789X66789X
descriptiondescription 16ga. Copper Wire16ga. Copper Wire
reorder/lot qtyreorder/lot qty 2020
store locationstore location Row 12, Bin 6Row 12, Bin 6
supplier telsupplier tel 0208-891-01210208-891-0121
supplier partsupplier part RT45502RT45502
Name/location of next process
Name/location of preceding process
container type & capacity
number of containers released