Measuring Supply Chain Success using Customer Service Level

3 minread

Tags: Blog, Demand forecasting, Inventory management, Inventory management, Tips & Tricks

Peter Drakeley, Head of Global Customer Success, EazyStock

Peter Drakeley   19 April 2018


Servicegrad messen für eine erfolgreiche Supply Chain

Index

  1. What are Key Performance Indicators?
  2. Example KPI: customer service level 
  3. Customers can make or break your business
  4. How can inventory management teams help improve your customer service level KPI?
  5. What comes next?

What are Key Performance Indicators?

Key Performance Indicators (KPIs) act as a set of quantifiable, measurable values that demonstrate how effectively your business is performing in relation to its strategic objectives. Businesses often track multiple KPIs to evaluate how successful they are at reaching targets.

KPIs help identify the gaps between your current and desired performance and help you decide how to close these gaps. Closely monitored KPIs show precisely what to do to improve performance. Businesses need a method of assessing where they are in terms of performance and whether they are on course with their strategy.

 

Example KPI: customer service level 

Choosing the right KPIs to monitor depends on your business priorities.  When it comes to customer service and customer satisfaction, businesses often monitor their customer service levels. Offering the best customer service level is essential for organisational success and ensuring you stay ahead of the competition.

 

Customers can make or break your business

Customers are keener than ever to review an organisation’s customer service levels before doing business.  88% of customers look at company reviews online and have been influenced by them before they decide on the purchase of a product or service. Poor reviews can therefore negatively affect your sales and it’s estimated that a single negative review can drive away 22% of customers. Negative reviews can also be damaging to prestige, profitability and the trustworthiness of your business.

The customer service level KPI can be used to measure overall customer satisfaction and track any changes over time. Customer satisfaction is a great indicator that your business is on the right track.

Measuring customer service level

Net Promoter Score (NPS) is a simple and standardised KPI to determine customer satisfaction. It is also a globally recognised and commercially meaningful score. NPS places your customers into three categories:  promoters, passives, and detractors. It acts as a scale from a range of -100 to 100 and measures how willing your customers would be to recommend your services.  This allows you to determine how well you are performing through the eyes of your customers and helps identify areas for improvement.

Customer retention

According to the Harvard Business Review, it costs around 5 times more for your business to acquire new customers than it does to retain an existing customer. NPS can be used to effectively improve customer experience, resulting in an increase in acquisition and retention. Customer loyalty can be viewed via a simplified framework called the loyalty funnel, with each stage representing a deeper level of loyalty and a higher-value customer.  When your customer makes the first purchase, they are at the first stage of the funnel; they can then move further down the funnel by making repeat purchases and gaining a more valuable customer status. By measuring your performance, you can pinpoint challenges and opportunities for your customer retention.

 

How can inventory management teams help improve your customer service level KPI?

Successful order fulfillment is key to keeping customers coming back. They need to know that you have the right products in stock to be able to meet their delivery expectations.  Here’s a few ways that your inventory management processes can help ensure high customer service levels.

Increase supply chain efficiency

Fork Lift in WarehouseAn inefficient supply chain can lead to a host of problems such as stockouts, slow deliveries and incorrect orders. This will no doubt lead to poor customer service levels that will drive your customers away. By automating your supply chain management you can improve efficiency, accuracy and remain competitive. By receiving real-time data about your supply chain efficiency, you will be able to make informed management decisions and better adapt to changing customer demands.

Accurate forecasting and procurement

Being able to accurately predict product demand is necessary to ensure you can provide customers with the products they want, and when they want them. Demand forecasting will help you stock the right products so that you can fulfill customer orders with the shortest possible lead times. If you underestimate the demand then you run the risk of stockouts and losing your customers to competitors.

ABC analysis

Inventory classification methods, such as ABC analysis, can help inventory management teams to improve current customer service levels.  Using this method, you can classify products in your warehouse based on turnover rate and value. You can then ensure you’re stocking the products that are in high demand and bring your business the most profit.

What comes next?

High customer service levels are critical to the success of most businesses. Ensuring stock availability and order fulfillment will help drive customer service levels and encourage positive customer reviews. But don’t just measure the customer service level KPI in isolation of other metrics, three are a host of inventory management KPIs that will help you up your game when it comes to satisfying your customers with excellent service. Download our KPI eBook below for more details.

eBook - A Guide to EazyStock's Key Performance Indicators