Value Added Logistical Services

The purpose of providing services is to deliver value to the customer for the money he is spend­ing in acquiring a product. To add value to tangible products, the intangibles, such as after-sales service, are provided to the customer. Similarly, for adding value to intangible products, the help of tangibles is taken. For example, the ambience in a star hotel is supported by the presence of tangibles that speak of the quality of service being delivered. For the business to get going, mini­mum basic customer service is necessary. Basic customer service means treating all customers equal­ly and extending the service to build fundamental business relationships. It is the bare minimum service activity for survival of the business. The supply of spare parts for trouble-free operation of machinery is the basic service capability the machinery supplier should exhibit if his product is to be considered for purchase and building further relationship with the buyer.

A step ahead of the basic services is the zero-defect services. This involves gearing up of business processes for perfect operational performance. In zero-defect service, the systems have a significant role to play. The repetitive operations are performed without errors by automated systems. The activities wherein speed, accuracy, and reliability are essential can be well coordinated, monitored, and controlled through the systems approach. The scope for errors is eliminated as involvement of the human element in performing these activities is minimized.

The third category and the next in evolution are value-added services that are unique and add efficiency and effectiveness to the basic service capabilities of the firm. With value-added services, the firm can deliver superior customer value, which can be leveraged for competitiveness. These are basically tailor-made or customized service packages for strategic customers. These services are in addition to the basic services provided to the customer by the seller.

As an example, a supplier may manage a high-value inventory requirement at the customer’s end by owning the inventory-carrying responsibility for the customer’s manufacturing operation. He may open a small shop in the buyer’s premises and keep a minimum inventory to meet the customer’s daily requirement. The supplier gets paid on a daily basis for the inventory consumed.

Thus the supplier gets business on a continuous basis because of the value-added logistics services he is providing the customer. The customer is satisfied because his inventory-related cost for items is zero, while the supplier is happy because he gets repeat business and immediate payment for the material supplied.

Another case could be that of a transporter who may extend the services of product mixing and labelling of packs in his transshipment warehouse before delivery of the final product to the customer. He may also collect money from the customer on behalf of the seller against delivery of the consignment. Typical value-added logistical services extended by logistics service providers are:

• Customized transportation (vehicles, perishables)
• Payment collection on delivery
• Price marking and labelling
• Product mixing and packaging (for co-promotional scheme of two products from two differ­ent companies)
• Cross-docking (product storage not more than 48 hours in warehouse)
• Inventory management
• Web-based consignment tracking and tracing
• Frequent deliveries in small lots
• Reverse logistics
• Load cobbling

Value-added services may be categorized into customer-focused services; that is, customized services for the customer’s specific requirement of the product or shipments.

The other value-added services are the timed-focused ones, such as inventory on demand for the manufacturing assembly line, which may involve implementation of just-in-time (JIT) system to lower inventory-related costs. The evolution of value-added services are an out­come of forced innovation for differentiated offerings for survival and growth in competitive markets.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.