SUPPLY CHAIN (Chapter1-3)

SUPPLY CHAIN(Chapter1-3) Chapter1: 1.Why can the current movement toward establishing supply chains be characterized as a revolution? Because the current movement toward establishing supply chains has reshaped contemporary strategic thinking. Two massive shifts, supply chain revolution and a related l ogistical renaissance, in expectation and practice concerning the performance of business operations are highly interrelated but they are significantly different aspects of contemporary strategic thinking. 2.Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding similarities and differences. Traditional distribution channels typically had an ord er fulfillment time of 15-30 days. But if something went wrong, this time would increase dramatically. It was a common practice to maintain inventory at every stage of the supply chain like retail ers, whol esal ers, and manufacturers. The market was characterized by scarcity to the primary goal of traditional model was to ensure availability of products. However, today customers want more options in product offerings. Mod ern supply chain is geared towards meeting the changing consumer needs. Transportation capacity and operational performance has become more reliable and economical. Logistical systems are capable of capable of delivering products at exact times. So customer orders can be fulfilled faster. With massive development in information technology, the need to maintain inventory has reduced dramatically. The occurrence of failures, characteristic of traditional supply chain, has been replaced by a commitment towards zero-defect of six sigma performance. In essence a high level of performance is achieved at a lower total cost with commitment of fewer financial resources than that in the past. 3.What specific role does logistics play in supply chain operations? Logistics is the primary conduit of product and service flow within a supply chain arrangement. It is the work required to move and to position inventory throughout a supply chain. It is a combination of order management, inventory, transportation, warehousing, material handling and packaging as integrated throughout a facility network. Logistics is essential for effective supply chain connectivity. 4.Describe “integrative management”. Be specific concerning the relationship between functionality and process. The challenge to achieving integrated management results from the long-standing tradition of performing and measuring work on a functional basis. Since the industrial revolution, achieving best practice has focused managerial attention on functional specialization. The prevailing belief was the better the performance of a specific function, the greater the efficiency of the overall process. The fundamental challenge of integrated management is to redirect traditional emphasis on functionality in an effort to focus on process achievement. Integrative process management seeks to identify and achieve lowest total cost by capturing trade-offs that exist between functions. The focus of integrated management is lowest total process cost, which is not necessarily the achievement of the lowest cost for each function included in the process. 5.In terms of enterprise extension, describe the importance of the information sharing and process specialization paradigms. The information sharing paradigm is the widespread belief that achieving a high degree of cooperative behavior requires that supply chain participants voluntarily share operating information and jointly plan strategies. The guiding principle is that information sharing is essential among supply chain participants to collectively do the things customers demand faster and more efficiently. The process specialization paradigm is commitment to focusing collaborative arrangements on planning joint operations with a goal of eliminating nonproductive or non-value-adding redundancy by firms in a supply chain. The basic idea is to design the overall supply chain processes in a manner that identifies a specific firm’s competen cies along with the responsibility and accountability to perform each element of essential work in a manner that maximizes overall results. Importance: Sharing information and joint planning can reduce risk related to inventory positioning. Collaboration can eliminate duplicative or redundant work, such as repetitive quality inspection, by designating and empowering a specified member of the supply chain to be fully responsible and accountable. Such extended enterprise integration introduces new challenges regarding measurement, benefit and risk sharing, trust, leadership, and conflict resolution. 6.Describe and illustrate an integrated service provid er. How does the concept of integrated service provid er differ from traditional service providers, such as for-hire transportation and warehousing? Integrated Service Provid ers (ISP) also known as third-party logistics provid ers provide a range of l ogistics services that includes all work necessary to service customers. With the regulatory changes in the transportation the traditional l ogistics services providers started offering warehousing and shared transportation services. Therefore the ISPs initiated the radical shift from single function to multifunction outsourcing. Their services includ e order entry to product delivery and in certain situations they also provide wid e range of value-ad ded services. For exampl e United Parcel Services (UPS) stocks Nike shoes and warm-ups at its Louisville warehouse and processes orders hourly. All the related communication and financial administration are handled by an UPS call center in San Antonio. Therefore UPS handles the basic logistics and value-ad ded services for Nike. In contrast the traditional service provid ers, such as for-hire transportation and warehousing specialize in specific functions. For instance, the for-hire transportation industry consists of carriers who specialize in moving products between geographic l ocations. The companies offering warehouse services are traditionally called public warehouses and they provid e storage supplemented by specialized services. 7.Compare and contrast anticipatory and response-based business models. Why has responsiveness become popular in supply chain collaborations? Anticipatory and response-based business models are the two ways used by firms to fulfill customer requirements. However the fundamental difference in the two models is timing Anticipatory model has been the traditional business practice, which was mainly forecast driven. Since information about purchasing behavior was not readily available, and the channel partners were l oosely collaborating, businesses were driven by forecasts. However the forecasts used by the manufacturers, whol esales, distributors, and retailers were often different that led to a lot of excess inventory in the system. All the work was performed in anticipation of future projections, so the likelihood of misgauging customer requirements was very high. In addition each firm in the chain duplicated the anticipatory process. Response-based model aims to reduce or eliminate forecast reliance by joint planning and rapid exchange of information between supply chain partners. This model has been mad e possible because managers can now obtain and share accurate sal es information faster. Consequently customers can be provid ed with their desired items faster. This model requires fewer steps and therefore less cost to complete a fulfillment process compared to the anticipatory model. Response-based model is similar to a buil d to order model however the former has a faster response time and all ows higher degree of customization. Responsiveness propelled by information technol ogy development has become the cornerstone of today’s supply chain collaboration. Higher responsiveness can not only increase the level of customer satisfaction but can also reduce the overall cost of d oing that. 8.Compare and contrast manufacturing and geographic postponement. Manufacturing and geographic postponement are strategies and practices that reduces the anticipatory risks of supply chain performance. The factors favoring one pr the other form depends on the volume, value, competitive initiatives desired customer service levels. Manufacturing or form postponement aims at manufacturing the products one order at a time with no preparatory work or component procurement until the customer specifications are fully known and customer commitment is received. The goal of this postponement strategy is to maintain products in a neutral or non-committed status as l ong as possible. In an ideal situation a standard or base product is manufactured in large quantities to obtain economy of scal e while deferring the finalization until the customer commitment. In this scenario, economy of scope is introduced by producing the base product to accommodate a wide range of different customers. An exampl e of manufacturing postponement is observed in mixing paint color at retail stores to accommodate the individual customer’s request. This strategy not only reduces the risks of l ogistics malfunction but also increases the use of light manufacturing and final assembly at l ogistical facilities On the other hand, Geographical or l ogistical postponement focuses on response accel eration. This strategy aims to buil d and stock a full-line inventory at one or more strategic locations. Forward depl oyment of inventory is postponed until the customer order is received. In an ideal situation this postponement strategy eliminates the risk of anticipatory risk of inventory depl oyment while retaining manufacturing economy scal e. An example of geographical postponement is the Sears Store Delivery System. The logistics of the appliances is not initiated till the customer ord er is received. An appliance purchased on Monday can be installed at customer’s home as early as Wedne sday. And there is a possibility that the product is not manufactured until that night or early Tuesday. In a number of supply chains both types of postponement strategies are combined to create a highly responsive strategy. 9.Define and illustrate cash-to-cash conversion, dwell-time minimization and cash spin. How does supply chain strategy and structure impact each? Cash-to-cash conversion is the time required to convert raw material or inventory purchases into sales revenue. It is directly related to inventory turn. Its benefits are realized by reducing and sharing risk and inventory investment. In traditional business the benefits were enjoyed at the expense of business partners. For example, terms of 2% net 10 meant that a prompt payment discount coul d be earned if the invoice is paid within ten days from the time of delivery. In a response based system these benefits can be shared by managing the inventory transfer velocity across the supply chain. To facilitate such arrangements supply chain partners often use dead net pricing, which factors discounts and all owances in the selling price. Therefore incentives of timely payment are replaced by performance commitments at a specified net price. Managing supply chain l ogistics as a continuous synchronized process also serves to reduce dwell time. Dwell time is the ratio of the time that an asset sits idle to the time required to satisfy its designated supply chain mission. As an example dwell time woul d represent the ratio of the time inventory is in store to the time it is moving or contributing to achieve supply chain objectives. Dwell time can be reduced if the supply chain partners are willing to eliminate duplicate work. Therefore each firm coul d be d esignated to perform and be accountable for the value-add ed work in ord er to reduce the overall dwell. Cash spin basically refers to free cash spin. This concept aims to reduce the overall assets committed to the supply chain performance. Therefore capital invested on inventory or warehouse can be made available for redepl oyment by revising the supply chain arrangement. Free capital can be reinvested in other projects that would have otherwise not been considered. 10.Discuss and support the following argument: "Supply chain arrangements may reduce consumer value." A somewhat more abstract but often cited potential d ownside of supply chain management coul d be labeled the dark side of collaboration. The argument is that the public does not benefit across the board from supply chain efficiency. Supply chain criticism comes in two parts. First, the line of reasoning is that operating efficiency does not automatically translate to or guarantee l ower consumer prices. Firms that collaborate may individually or collectively make larger profits and thereby generate large sharehol der wealth. However, no mechanisms exist to guarantee that efficiencies will be passed on to consumers in the form of l ower retail prices. In fact, the supporting logic is that as supply chains. The second criticism of supply chain arrangements builds on the premise that operating efficiency may not always be socially equitable. The argument questions the benefits of more precise matching of supply to demand in terms of the overall reduction in surplus goods. Chapter2: 1.Illustrate a common trad e-off that occurs between the work areas of logistics. Any illustration that demonstrates an inherent trade-off between information, inventory, transportation, warehousing, material handling or packaging is acceptable. The foll owing are a few exampl es of such trad e-offs: Information is increasingly being used as a substitute for inventory. For instance, a warehouse manager that is in constant contact with a supplier of his/her stocks need not hold traditional, high levels of inventory. By being “connected”, th e supplier realizes when the warehouse is in need of product and can make accommodations of product processing and shipping accordingly. Improved, faster means of transportation also prevent manufacturers and merchandisers from holding high levels of inventory. Poor packaging can lead to product damage in transit. Management should either improve packaging or seek a transportation mode that is more stabl e and less damage-inducing. Regardl ess, greater costs will be incurred upfront – though they are likely to be offset with reduced costs of product recollection and rework. 2.Discuss and elaborate the following statement: "The selection of a superior location network can create substantial competitive advantage." The statement “The selection of Superior locati on network can create substantial competitive advantage” holds true with regard to l ogistical networks. The network design implies customer service and cost considerations. Add ed value (and perhaps a competitive advantage) may be derived from the “intimacy” of being l ocated near customers. Networks that strive for the highest levels of effectiveness (superior service performance) often do so at significantly higher expense. Networks may also be designed for efficient product fl ows in order to l ower transportation and inventory holding costs. Depending upon the competitive environment in which a firm operates, competitive advantage may result from either being located near the customers to provide superior service or through l ow cost service with the cost-efficient network design. 3.Why are customer-accommodation operations typically more erratic than manufacturing support and procurement operations? Market or physical distribution operations are typically more erratic because they are initiated by the customer, whose behavior cannot be controll ed by the firm. Manufacturing and procurement operations, on the other hand, are initiated by the firm and considered to be within the firm’s span of control. However, better communications between the l ogistics organization and customers can reduce the uncertainty and erratic nature of market-distribution operations. 4.How has transportation cost, as a percentage of total logistics cost, tracked since 1980 The transportation costs as a percentage of total logistics costs in US has increased over the last 20 years. In 1980, the percentage was approximately 47 percent and this has increased to over 63 percent in 2004. Therefore transportation represents a significant portion of the overall l ogistics cost. 5.Describe the logistics value proposition. Be specific regarding specific customer accommodation and cost. Logistical value proposition is a cost framework that aims to match of operating competency and commitment to meet the individual of sel ected groups of customers’ expec tations and requirements. A well-designed l ogistical network must have high customer response with low operational variance and minimum inventory commitment. However the combinations will be different for different groups. Well d esigned and operated logistical system can help firms to achieve competitive advantage. 6.Describe the fundamental similarities and differences between procurement, manufacturing support and customer-accommodation performance cycles as they relate to logistical control. Procurement performance cycles consist of the many activities that maintain the fl ow of materials, parts, or finished goods into a manufacturing or distribution facility. The scope of procurement activities is limited. Although similar to the customer ord er processing cycl e, shipments are generally larger and cycles often require much more time. Maintaining raw materials inventory is sometimes l ess expensive relative to finished goods, since time of delivery and material security is often less sensitive into facility than out to the customer. Another difference is that the number of suppliers of a firm is generally less than the number of customers, making the procurement cycle more direct. Manufacturing support performance cycl es serve as the l ogistics of production. These functions maintain orderly and economic fl ow of materials and work-in-process inventory to support production schedul es. The goal is to support manufacturing requirements in the most efficient manner. These are internal cycl es to the firm, thus they are rarely affected by behavioral uncertainty. Customer-accommodation performance cycl es are those associated with processing and delivering customer orders. They link the customers through timely and economical product availability. Physical distribution integrates marketing and manufacturing efforts. To improve the effectiveness of the distribution system, forecast accuracy must improve to reduce uncertainty. In addition to the value of sound forecasting methods, the firm must emphasize flexibility and responsiveness to deal with the uncertainty of customers in the physical distribution cycle. 7.Compare and contrast a performance cycle node and a link. Give an example of each. Nodes are facility l ocations. Forms of communications and transportation represent links between the nodes. Most l ogistical work takes place at nodes whereas links represent the interface among locations. Nodes represent network facilities where materials are processed and base inventories and safety stocks are maintained. Inventory that is in between nodes is call ed “in transit”. 8.How does the "quest for quality" affect logistical operations? Does the concept of total quality have rel evancy when applied to logistics? Though l ogistical service quality is often in the eye of the behol der – that is, the definition of quality varies among suppliers and customers, it is possible to pursue a quest for quality. The quest requires l ogistics organizations to identify the service qualities that customers most highly value. Upon identifying these key dimensions of service, it is up to the firm to flawlessly execute those functions that ad d value. Ultimately, customers may d emand “perfect ord er” performance, a level of service that requires suppliers to meet expectations without error. The ideals of total quality –namely, d oing things right the first time, d oes find relevance in logistics. It is far better in terms of customer service and l ow cost to provide customers with desired service on the first effort. Customers more highly value suppliers that meet their promises, delivering product on time, in proper quantities, and without damage. Costs are reduced in the process as fewer products are recollected and reworked. These costs of service or product failure can be eliminated if processes are corrected, ensuring that the problem is not a recurring one. Over time, customers tend to rely on those suppliers that provide sound service time and again. 9.Discuss uncertainty as it relates to the overall logistical performance cycl e. Discuss and illustrate how performance cycle variance can be controll ed. One of the major objectives of l ogistical management is to reduce the uncertainty in performance cycles. Since the performance cycles are made up of many activities, each with its own volatility or variance, variance over the entire cycl e can significantly impede the logistics organization’s efficiency and effectiveness. To control variance, the firm must conform expected cycle time to actual cycle time. If cycle time is less than expected, the delivered product becomes inventory to be stored. If the cycl e time is l onger than expected, then the firm must rely on safety stocks to satisfy customer demand. In either case there are costs associated with variance. The ides is to eliminate variance by equating actual cycle time to the expected cycle time. This may require adjustments in product fl ows into or out of the organization. 10.What is the logic of d esigning echeloned logistical structures? Can echeloned and direct structures be combined? The echeloned l ogistical structure is built on the l ogic of stocking some level of inventory or performing specific activities at consecutive levels of supply chain. This structure utilizes warehouses to create inventory assortments and achieve consolidation economies associated with large volume transportation shipments. The inventory is position to meet the customers’ requirements faster. Typical echelon systems use either break bulk or consolidation warehouses. However the service commitment and order size economies determine the most desirabl e and economical structure to service the specific customer. So many supply chains use a combination of echel oned and direct structures to meet their logistical needs. Chapter3: 1.Explain the differences between transactional and relationship marketing. How do these differences lead to increasing emphasis on logistical performance in supply chain management? Transactional marketing is generally focused towards short-term interaction with customers. Traditional marketing strategies foll owed this approach wherein exchanges/transactions are carried out with customers in order to increase their revenues and profits. Relationship marketing focuses on the l ong-term relations with the key supply chain partners such as the consumers, intermediate customers and suppliers. This strategy aims to develop and retain long term preference and l oyalty because it has been realized in many industries that it is more important to obtain greater share of the purchases made by the existing customers than to attract new customers. This approach tries to identify the individual customers in order to satisfy their unique needs in the most cost-efficient and effective way. This requires a greater emphasis on l ogistical performance of the entire supply chain. 2.Why are the four primary service outputs of spatial convenience, lot size, waiting time, and product variety important to logistics management? Provide examples of competing firms that differ in the level of each service output provided to customers. Since every customer has different requirements regarding service outputs, spatial convenience, lot size, waiting or delivery time, and product variety represent the four generic outputs to accommodate customer requirements. Spatial convenience measures the amount of shopping time and effort that needs to be out by the customer. Higher convenience is offered by making the product available in more number of places. As an example some househol d furniture manufacturers offer their products through department store, mass merchandisers and other independent department stores whereas Ethen All en offers its products only at its own All en retail stores. Lot size refers to the number of units that can be purchased in each transaction. A customer who wish to buy larger quantity of items for example 12 or 24 rolls of paper towels to get a lower unit price can get it from Sam’s Club and Costco. However they can buy single rolls from grocery or convenient stores. The basic trad eoff in such purchases is between the unit price and the storage or maintenance cost of such volumes. Waiting time is the amount if time a customer has to wait between ordering and receiving products. The l ower the waiting time, the higher is the level of service. Buying products from retail or grocery stores has no waiting time however if someone wants to order from a catal og or via the Internet, he has to wait for the product. Although higher waiting time is associated with inconvenience, customers are reward ed in the form of l ower prices. Product variety refers to the different assortments or variety offered to the consumers and end-users. Supermarkets offer a large variety of items, whereas the warehouse stores offer a much less variety. And convenience stores offer even lesser variety. 3.What is meant by availability in logistics customer service? Provide examples of the different ways to monitor a firm’s performance in availability. Availability is the capacity to have inventory when d esired by a customer. As simple as this may seem, it is not at all uncommon for an organization to expend considerable time, money, and effort to generate customer demand and then fail to have product available to meet customer requirements. The traditional practice in organizations is to stock inventory in anticipation of customer orders. Availability is based on three performance measures: Stockout Frequency, Fill Rate, and Ord ers Shipped Complete. Stockout Frequency: For example, a study of retail supermarkets revealed that at any point in time during a week, the average supermarket is out of stock of approximately 8 percent of the items planned to be on the shelves. It is important to note, however, that a stockout does not actually occur until a customer desires a product. The aggregation of all stockouts across all products is an indicator of how well a firm is positioned to provide basic service commitments in product availability. While it d oes not consid er that some products may be more critical in terms of availability than others, it is the starting point in thinking about inventory availability. Fill Rate: For example, if a customer wants 100 units of an item and only 97 are available, the fill rate is 97 percent. To effectively consider fill rate, the typical procedure is to evaluate performance over time to incIude multipl e customer ord ers. Thus, fill rate performance can be evaluated for a specific customer, product, or for any combination of customers, products, or business segments. Fill rate can be used to differentiate the level of service to be offered on specific products. In the earlier exampl e, if all 100 products ordered were critical to a customer, then a fill rate of 97 percent could result in a stockout at the customer's plant or warehouse and severely disrupt the customer's operations. Imagine an assembly line scheduled to produce 100 automobil es that receives only 97 of its required brake assemblies. In situations where some of the items are not critical to performance, a fill rate of 97 percent may be acceptable. The customer may accept a back order or be willing to reorder the short items at a later time. Fill rate strategies need to consider customer requirements for products. Ord ers Shipped Compl ete:The most exacting measure of performance in product availability is orders shipped complete. It views having everything that a customer orders as the standard of acceptable performance. Failure to provid e even one item on a customer's ord er results in that ord er being recorded as zero in terms of complete shipment. 4.Compare and contrast speed, consistency, and flexibility as optional performance activities. In some situations,is one activity more critical than others? Performance cycl e speed is the elapsed time form when a customer establishes a need to ord er until the product is delivered and is ready for customer use.Speed is an essential ingredient in many just-in-time and quick-response logistical strategies as fast performance cycles reduce customer inventory requirements. Ord er cycle consistency is measured by the number of times that actual cycles meet the time planned for completion.most logistical managers place greater value on consistency because it directly impacts a customer’s ability to plan and perform is own activities.the issue of consistency is fundamental to effective logistics operations as it is becoming increasingly common for customers to actually specify a desired date and even specify a delivery appointment when placing ord ers. Flexibility involves a firm’s ability to accommodate special situations and unusual or unexpected customer requests. In some situations,adjustments can be implemented to prevent or accommodate special situations,thereby preventing malfunctions.so one may be more critical than others. 5.Why is perfect order service so difficult to achieve? An ord er should be delivered complete,delivered on time,at the right location,in perfect condition,with complete and accurate documentation.Each of these individual el ements must comply with customer specifications.thus,complete delivery means all product the customer originally requested,on time means at the customer’s specified date and time. 6.Using the ten categories of customer expectations in Table 3-1, develop your own examples of how customers might evaluate performance of a supplier. Reliability refers to performance of all activities by the supplier. If Fedex promises overnight delivery and fails to do that, then it will be considered unreliabl e, even if it is d one faster than any other provider. Customers can judge reliability in terms of all aspects of basic service platform. Responsiveness refers to the customer’s expectation of the ability and willingness to provide timely service. If Walmart experiences a stockout of certain product, its supplier’s responsiveness will be measured by the time it takes for replenishment. Access measures the ease of contact and approachability of the supplier. For example the ease of obtaining information about the status of a pending order will measure accessibility. Communication means to proactively keeping the customer informed. If the supplier expects a shortage of raw material that can affect delivery in the future, an advance notice to the customer will not only help to expl ore alternative but also builds a stronger partnership. Credibility refers to the customer’s expectation that the communication from the suppliers will be believable and honest. The real essence of this measure is the completeness of the information. Security refers to the customer’s feeling of risk in doing business with a supplier. For example a customer bases its production schedule in anticipation of delivery. If the supply is delayed the customer faces the risk of changing its plans. Another aspect of security concerns the confid entiality of business dealings. For example, Solectron undertakes the manufacturing for competitors like Nortel and Cisco, so confid entiality is a major issue. Courtesy involves politeness, friendliness and respect of contact person. Since the customer may have to deal with different individuals in the supplier’s organization, failure by one person can destroy the best efforts of all the others. Competency is judged by customers in every interaction with the suppliers. Therefore a truck drivers competency is measured when deliveries are made, customer service personnel when phone calls are made, etc. Failure by any individual can affect the customer’s perception of the supplier. Tangibles refer to the customer’s expectation of the physical appearance of facilities, equipment and personnel. For example a ol d and dilapidated warehouse can be an indicator of the firm’s overall performance to the customers. Knowing the customer refers to the customer’s expectation regarding supplier’s understanding of their unique requirements and supplier willingness to adapt to those needs. For example WalMart woul d expect its suppliers to understand its unique need and respond to that accordingly. (Your own examples) 7.Which of the gaps in figure3-1 do you think represents the major problem for most firms? how can a company attempt to eliminate the knowledge gap? The communication gap? 1>Knowledge gap is the first and most fundamental gap. 2>since sales has the major responsibility for customer interactions,we shoul d have an understanding of customer expectation,how the prioritized,and how they are formed. 3>There should be no gap between what a firm is capabl e of d oing and what customer are tol d about those capabilities.over commitment or promising higher levels of performance should not be provided. 8.Compare and contrast the customer service, customer satisfaction, and customer success philosophies of supply chain management. Customer service, customer satisfaction, and customer represent three levels of customer accommodation. Customer service represents logistics role in fulfilling the marketing concept. It aims to provide the right amount of the right product at the right time at the right place in the right condition at the right price with right information. The fundamental attributes of customer service are availability, operational performance, and service reliability. Customer satisfaction measures the d egree to which a customer is satisfied with the supplier’s performance. However, customer satisfactions d epends a lot on the customer’s expectations. Models have been developed to id entify some of the gaps that arise due the failure of many firms to satisfy their customers. Customer success phil osophy requires the firms to work very cl osely with the customers to understand their requirements, internal processes, competitive environment and try to make their customer successful. In contrast to the typical focus of basic service and satisfaction programs to meet standards and expectations of the customers, a customer success program tries to und erstand the entire supply chain, different l evels of customers and tries to ensure that customer at each level is able to meet their customers. 9.What is meant by value-added services? Why are these services considered essential in a customer success program? Value add ed services refer to the unique and specific activities that firms can jointly perform to enhance their efficiency and effectiveness. Such services foster customer success. These services are typically customer specific and therefore cannot be generalized. These services enable the customers to achieve their specific objectives. These are considered essential in customer service programs because by providing unique product packages, creating customized unit l oads, offering unique information s ervices, providing VMI, etc, firms enhance their customers’ success. Some of the value-add ed services like warehousing, transportation, proper sequencing and sorting of products involve specialists due to their flexibility and capability to concentrate on providing the required services. 10.How could a company use the four-stage process of cost-effectiveness, market access, market extension, and market creation to gain competitive superiority? Cost effectiveness is the first and most fundamental step of l ogistical competency to gain competitive superiority. It is essential for a firm to provid e basic services at a consistently high level of performance and in a cost-effective manner. Without this basic pre-requisite there is limited possibility of building any relationship. Market Access stage represents a higher level of commitment to the customers who are willing to cooperate. This involves sharing of basic information between the buyers and sellers to facilitate smooth operation. This stage however does not require a high degree of customer selectivity. Market extension aims to move towards zero defects and introducing value-ad ded services in ord er to build and strengthen business relationship. This stage witnesses customer selectivity since the number of customers that are willing or able to participate is limited. The companies could be involved in innovative value-add ed services, which are designed to increase operating efficiency and extend overall competitiveness. Market creation is the final stage and requires full commitment for customer’s success. This coul d involve creative arrangements like electronically linking with the customers. Building such relationships take time and l ong term commitment to be successful.