Logistics and Supply Chain Management
Martin Christopher
Chapter 11 – Service Logistics
‘Service products’ have supply chains & logistics management principles too.
What is a service?
- Not physical objects like products.
- Production & consumption take place at the same time.
- Perishable: a service cannot be made or stored in advance.
- Heterogeneous: they involve human interaction; each delivery of service can be different.
Nowadays the service package that accompanies the product is as critical to the purchase decision as
the physical product itself > consumers are much more demanding and look for higher levels of
support.
Consumers have an increasing tendency to seek to buy performance rather than products.
Theodore Levitt: customers don’t buy products, they buy benefits.
> performance-based purchasing
- Puts an even greater emphasis on availability.
- Balancing supply & demand in order to capitalise on this trend.
SaaS: Software as a service > the advent of cloud computing has made possible the prospect of on-
demand access to information systems across global supply chains.
Service Dominant Logic (SDL): Stephan Vargo & Robert Lusch
- There are no products – only services – as the value of a product is determined by the utility it
generates for the user.
- Value-in-use: which customers seek to maximise through their purchase choices.
- Value is created through the interaction of the supplier and the customer through a process known
as co-creation: companies should seek to embed themselves in the customer’s value chain; in other
words, they should actively seek to explore with customers how new sources of value can be
developed > high level of customer engagement.
- Transition from the traditional ‘product dominant logic’ to a ‘service dominant logic’.
- Transition from a business model based on standardization, economies of scale (cost advantage
that arises with increased output of a product) and operating efficiencies to one that is capable of
offering specific solutions to individual customers.
Service Factory: Richard Chase & David Garvin
In the business of producing and delivering customised solutions to customers.
1
Martin Christopher
Chapter 11 – Service Logistics
‘Service products’ have supply chains & logistics management principles too.
What is a service?
- Not physical objects like products.
- Production & consumption take place at the same time.
- Perishable: a service cannot be made or stored in advance.
- Heterogeneous: they involve human interaction; each delivery of service can be different.
Nowadays the service package that accompanies the product is as critical to the purchase decision as
the physical product itself > consumers are much more demanding and look for higher levels of
support.
Consumers have an increasing tendency to seek to buy performance rather than products.
Theodore Levitt: customers don’t buy products, they buy benefits.
> performance-based purchasing
- Puts an even greater emphasis on availability.
- Balancing supply & demand in order to capitalise on this trend.
SaaS: Software as a service > the advent of cloud computing has made possible the prospect of on-
demand access to information systems across global supply chains.
Service Dominant Logic (SDL): Stephan Vargo & Robert Lusch
- There are no products – only services – as the value of a product is determined by the utility it
generates for the user.
- Value-in-use: which customers seek to maximise through their purchase choices.
- Value is created through the interaction of the supplier and the customer through a process known
as co-creation: companies should seek to embed themselves in the customer’s value chain; in other
words, they should actively seek to explore with customers how new sources of value can be
developed > high level of customer engagement.
- Transition from the traditional ‘product dominant logic’ to a ‘service dominant logic’.
- Transition from a business model based on standardization, economies of scale (cost advantage
that arises with increased output of a product) and operating efficiencies to one that is capable of
offering specific solutions to individual customers.
Service Factory: Richard Chase & David Garvin
In the business of producing and delivering customised solutions to customers.
1
