MODULE 2:

CUSTOMER RELATIONSHIP MANAGEMENT AND

LOGISTICS OUTSOURCING
INTEGRATED LOGISTICS STRATEGY
SCMC876
SUE MAKAROV

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 Today’s Topics
OUTLINE •
•
Assignment
CRM & Strategy Example
• Measures
• Customer Relationship Management & Levels (CRM)
• Tradeoffs & Contribution
• Customer Accommodation Margin
• Outsourcing
• Establishing a CRM Strategy
• Logistics Outsourcing
ASSIGNMENT: PURCHASE OF 3PL SERVICES

• Read the assignment at the end of Module 2.

• Download and the template; the template was reviewed during the Module 1 Live
Session
• Instructions are provided within the template

• Complete the template and upload for grading.

• Your assignment will be graded Complete or Incomplete.
• Assignments that are graded Incomplete can be revised and resubmitted.
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
• Has been around a long time, and has evolved
• Part of the corporate strategy
• Customers’ expectations are higher than ever, driven by industry
consolidation and Amazon.
Success!
• Executed by the Logistics organization, with many internal stakeholders
• Adds or takes away value to the customer
Satisfaction

Basic
Service
THE LOGISTICIAN’S ROLE IS UNIQUE & POWERFUL
TIME AND PLACE UTILITY

• Take your seat at the table!

• Logistics brings:
• Supply Chain knowledge
• Customer delivery insight
• To deliver:
• Service strategies
• Capabilities
• And to maximize sales!
THREE LEVELS OF CRM

Understand and solve/ value- added services /

seek growth through differentiation / cost to
serve / customized solutions
Aim is to, in partnership, identify and meet
needs
Deliver success through your capabilities
One size fits all
Strive to meet expectations
Not necessarily meeting their needs

Benchmarking and measuring service

Logistics provides 7 rights: amount,
product, time, place, condition, service,
information
 YOUR CRM STRATEGY
ALIGN YOUR SERVICE & RESOURCES TO SEGMENTS
EXAMPLES OF SEGMENTS EXAMPLES OF STRATEGIES

• Basic customer service (order fill and on

• High volume, high turn time), with monthly reporting and annual
check-ins. CRM is a Customer Service
• Growth or innovative customers Representative

• Dot.com • + Defined services (ex: case picking) with

quarterly check-ins. Assigned CRM resource.
• Declining volume or low margin
• + Specialized packaging to support in-store
promotions or dot.com shipping needs. Full
time CRM resource.
Segment by profit or by need?
 CUSTOMER SERVICE MEASURES
C )
• Definition: How well the logistics system performs time and place utility.
O S
l (
i l l f i l l F i l
e F n i t On Time r S t o c k
i n U d e
L O r Out
• Of the fill rate measures, which is the toughest (most exacting) to achieve?

• Service improvements can sometimes be realized through process improvements at no cost.

• However, service improvements frequently come at a cost: higher inventory, shorter cycle times,
premium transportation, overtime, etc.
ANOTHER MEASURE: THE PERFECT ORDER
• Select the attributes that define the The Perfect Order Goal Actual
perfect order On time 98% 99%
• Define goals for each attribute Item fill 98% 97%
Damage free 97% 96%
• Measure performance for each attribute
• Calculate Order performance actual vs Perfect order performance* 93% 92%
goal
*Multiply the individual
percentages above
Example: “Goal” = .98 times
.98 times .97 = .93
 TRADE-OFFS AND CONTRIBUTION MARGIN
$ New Contribution margin
• Excludes fixed costs = Revenue – Variable
Sales $ 1,000 $ 1,167
Less: Variable Costs $ 400 $ 567
• Expressed as a percent = 600/1000 = 60%
Contribution Margin $ 600 60% $ 600 Example: Air freight vs OTR, increase of $.10/unit or $100
To offset increase cost, sales revenue must increase. By how much?
Less: Fixed Costs $ 300
Operating Income $ 300 Revenue required = Change in variable cost / % contribution margin

Less: Income Taxes $ 100 Incremental sales revenue required = $100 / .6 = $167 or 167 units
Net Income $ 200
The incremental sales enables the company to recover the 40%
variable cost PLUS the increased logistics cost of $100.
Units 1000
1167 units * .4 variable expense + $100 incremental cost = $567
LOGISTICS OUTSOURCING
WHY OUTSOURCE LOGISTICS SERVICES?
• Logistics is not your core competence
• You want to own the strategy, but not the tactics (labor management, warehouse
management system)
• Your business is best supported with a short-term arrangement
• You don’t want the fixed costs associated with owning/leasing assets; you prefer these
costs to be variable.
DEFINITIONS
• 3PL Third Party Logistics Provider – An external supplier that provides all or part of a
company’s logistics function. --asset based--
• 4PL: The concept of a Fourth-Party Logistics provider was first defined by Andersen
Consulting (Now Accenture) as an integrator that assembles the resources, capabilities,
and technology of its own organization and other organizations to design, build, and run
comprehensive supply chain solutions* --may or may not be asset based--

• supplychaininsights.com/sciwiki/index.php?title=Fourth-Party_Logistics_(4PL)
1-5 PARTY LOGISTICS PROVIDERS

• 1PL – An organization that uses their own resources (assets) to store and/or ship their goods. Example: A
manufacturer that uses their private truck or fleet of trucks
• 2PL – An asset-based organization that uses its own resources to ship or warehouse items for another
organization (i.e., carrier or warehouse). Example: Transactional relationship, carrier or public
warehouse
• 3PL – An organization that handles one or more activities in the supply chain on behalf of another
organization. Similar to 2PL, but fuller service vs transactional. Asset based warehouses or fleets. Example:
DHL full scale warehousing services.
• 4PL – An organization that assembles resources of others to provide comprehensive supply chain solutions.
Integrator. May or may not have assets. Example: Consultant that assembles and orchestrates
various providers (non-asset). UPS Solutions (assets).
• 5PL – An organization that aggregates demand from other logistics providers to collaborate and utilize
resources better. Examples: Broker that matches multiple buyers and sellers of transportation
services. A purchasing co-op.
 LEAD YOUR SUPPLIERS

• When outsourcing, carefully choose the logistics services that are best for you. 1PL – 5PL
• Level of engagement can range from transactional to fully integrated
• Vendor or partner?
• Logistics Services relationships can evolve

• It’s imperative to establish and lead through expectations

• Levels of engagement can range from scorecards to strategy development

Service
Roadmap Stew
Zero Loss a rdsh Cos
ip t
MODULE 2 LEARNING OBJECTIVES
• Analyze the relevance of the logistics role in customer-focused marketing
• Compare and contrast the three levels of customer accommodation: customer service
vs. customer satisfaction vs. customer success
• Identify the components of CRM strategy development
• Identify the roles of, and the selection process for outsourcing logistics services

Today’s Topics
• Assignment
• CRM & Strategy Example
• Measures
• Tradeoffs & Contribution
Margin
• Outsourcing
REFERENCES
• Cover sheet: Group of College Students[Photograph found in Direct Degrees]. (2018).
Retrieved from http://directdegrees.com/
• “Levels of CRM”: Graph created by Dr. Yem Bolumole
• 3PL image:
Amos, E. (2012, July 29). Ikea-Brooklyn-Warehouse-Aisles [Photograph found in Wikipedia
Commons]. Retrieved from https://commons.wikimedia.org/wiki/File:Ikea-Brooklyn-
Warehouse-Aisles.jpg