Relationship among logistics processes, manufacturing flexibility and customer service
Crocs Australia contracted local delivery to the third party, Star Track for customers in Victoria. Fill rate are monitored on daily basis. StarTrack is evaluated according to two major indexes, one is delivery performance and the other is cost. New courier will be engaged if StarTrack fails to achieve key performance indicators. According to Crocs Australia order fulfillment report, order fill rate and on-time delivery rate achieved target goal. Survey results also suggested that retailer satisfied with delivery performance. However, it is noted that Crocs Australia hold 6 months of average monthly sales/forecasted quantities to ensure order completeness and on time delivery. Long shipping lead time and tight time window required by retailers are major reasons to hold high volume inventory. More importantly, retailers only provide sales forecast to Crocs Australia two times a year. Under such circumstances, Crocs Australia has to hold high volume inventory to deal with high level of uncertainty of customer demands. It provides evidence how logistics processes determine customer service quality delivered while expected customer service level requires related logistics processes.
To improve the information sharing through supply chain, Crocs launched ERP system, E1 in 2006. Retailers were required to email order by Excel form instead of ordering through fax or telephone. The transition period brought chaos in order processing and caused unhappy customers, according to the director of Crocs Australia. Some particular retailers who can not use email even ceased trade with Crocs. The survey was conducted on February 2007. Retailers evaluated their satisfaction level against past experiences. Crocs Australia order system transition (to ERP) happen in 2006. It explained partly why the level of satisfaction to ‘ability of advice on product non-availability’ and ‘order status tracking service’ was low.
Logistics efficiency and manufacturing flexibility are two crucial capabilities for organization seeking to provide high quality customer service. According to Bowersox, Patricia, Cornelia, Richard, and Dale (1992), flexibility is the ability of the firm to be proactive in adapting to changing customer requirements. Crocs should respond quickly and appropriately to a changing environment. Some actions Crocs took like expanding manufacturing capability, sourcing more raw material supplier, increasing product variety aim to improve organization flexibility. The higher the manufacturing flexibility, the more logistics efficiency Crocs has, the higher the level of customer service Crocs is able to provide.
REFERENCE
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