Global Logistic Management Global Logistic Management Lecture 11: Measuring and Selling the Value of Logistics Agenda Agenda  1 Options For Measuring Value  2 Components of Customer Value  3 How Customers Select Among Competitive Suppliers  4 Definition of Customer Value-Added  5 Calculating CVA  6 How Logistic Affects CVA  7 Selling The Value Advantages Options for Measuring Value Options for Measuring Value 1. Customer satisfaction 2. Customer value-added (CVA) 3. Total cost analysis 4. Profitability analysis (includes considerations) 5. Strategic profit model 6. Shareholder value Components of Customer Value Product attributes Service attributes Transaction cost Expected customer value Perceived benefit Perceived sacrifice Risk Life cycle cost Source: Earl Naumann, Creating Customer Value: The Path to Sustainable Competitive Advantage (Cincinnati, OH: Thomson Executive Press, 1995), p. 103. How Customers Select Among How Customers Select Among Competitive Suppliers Competitive Suppliers • Customer buys on value • Value equals quality relative to price • Quality includes all non-price attributes Product Customer Service • Quality, price, and value are relative Value Quality Price Customer service Product Source:Bradley T. Gale, Managing Customer Value (New York: The Free Press, 1994), p. 29. Creating Value That Customers Creating Value That Customers Can See Can See Understanding customer needs in a well-defined market Superior quality in areas that matter to customers Market-perceived quality Exceptional customer value Business results Profitability, growth, and shareholder value Advertising and other marketing communications Low “cost of quality” and overall cost leadership Effective design and quality control Source:Bradley T. Gale, Managing Customer Value (New York: The Free Press, 1994), p. 19. Customer Value Added Customer Value Added Provide products and services to customers that are a better value than those they could purchase from competitive companies in similar markets Customer Satisfaction Market Share THE VALUE QUESTION – Considering the products and services that you purchased. How would you rate them as being worth what you paid for them? Calculating CVA CVA = Perceived Value of Company’s Offer Perceived Value of Competitive Offers Order Fulfillment Customer Order Fulfillment Customer Satisfaction Survey Results Delivering Material Satisfaction Survey Results Delivering Material Performance (1 poor…5 excellent) Ratio Questions Attributes Company Best Other Vendor Company/best Other Vendor Delivering Material When You Wanted It 3.35 3.32 1.01 Having the Necessary Info on All Shipping Documentation 3.67 NA Having the Correct Materials Delivered Relative to What You Ordered 4.00 3.76 1.05 Overall Quality of Delivery of Materials 3.89 3.74 1.04 Total Cost Analysis Total Cost Analysis Purchase Price plus  Transportation costs  Inventory turns  Terms of sale  Ordering costs  Receiving costs  _______________  _______________  _______________ Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. [...]... Land/Facilities (owned) Equipment/Facilities (leased) Source: Douglas M Lambert and Renan Burduroglu, "Measuring and Selling the Value of Logistics," The International Journal of Logistics Management , Vol .11, No.1 (2000), p.12 Selling the Value Advantage  Who is the customer?  Must measure value from the customer’s perspective  Market segmentation based on value  Value is a moving target  Changing . Global Logistic Management Global Logistic Management Lecture 11: Measuring and Selling the Value of Logistics Agenda Agenda  1 Options For Measuring Value  2. Selling the Value of Logistics," The International Journal of Logistics Management , Vol .11, No.1 (2000), p.12. Selling the Value Advantage Selling the Value Advantage  Who is the customer?  Must