Our first question to the store manager was "What can your supply chain do better?" His response was that he would like more of everything. I someone arrogantly thought to myself "he must not understand the implications of holding cost. Especially in the quickly evolving world of technology where the risk of obsolesce is high."
We addressed this Q&A with the corporate level strategists. This managers said something that was quite remarkable to us. "We are constantly trying to find a balance between maximizing shareholder value and customer service." It occurred to me as we learn to the most cost efficient way to do things, we must also consider customer service and others factors that might increase bottom line cost in order to serve the customer's needs.
2 comments:
I would be interested in knowing how the corporate strategist equates customer service to costs. What measurements due they use to decide customer service level, and what units is it in? Also, what is the dollar value of a unit of customer service and how did they get that value?
I ask because if you still have access or already asked, this is a good example of "b" or cost of backorders, and it is very subjective. So an example from industry would be nice to know.
Jason
This is an interesting question that is brought up regarding the trade off of customer service and lower inventory levels. When looking at how much product to order, it can be easy to overlook customer service levels. However, costs of unsatisfied customers must be accounted for in determining whether to carry higher levels of safety stock to protect against stock outs. We all have experienced the frustration of going into a store and then finding out that they were sold out. This trade off of customer service must be looked at before any decision of order quantities are made.
Michael
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