Master’s in Supply Chain and Purchasing Management

(MIP Politecnico di Milano – Graduate School of Business)

Master of Science in Supply Chain and Purchasing Management

(Audencia Business School)

The Customer Service in Supply Chain

Management
Prathyush Ram BELUR RAMGOPAL
Executive Summary
(From article: Importance of Customer Service in supply chain and Logistics Management,
published by Westford, University College, 2016)

‘’There are both opportunities and threats for any organizations competing every day in the
business world. Those companies are able to out win the competition by providing better service
to customers. The company’s motive is to offer better products with advantages than those sold
by their competitors. Along with this the products needs to be delivered in time and the delivery
method also matters in the success of the company’’.

The important factors that motivate the operations of the customer service in a logistics
management company are:

 To ensure the products are delivered to customer with speed and accuracy.
 Track shipments to ensure they reach their destination safely.
 To be prepared with optimal level inventory stock and deliver when demand arrives even
during challenging times.

For a Logistics company, they have relationship with suppliers, a manufacturing company and
Customers. Their relation with customers is the most important. Therefore, the Logistics
companies combine both internal and external processes to derive maximum customer
satisfaction. (Thierry Sauvage – International Journal of physical distribution and Logistics
Management – 2003)

The term “customer service” in the supply chain is considerably used to describe both marketing
and substantial distribution activities that ate aimed at enhancing the product offering or facilitating
the exchange process between a supplier and the customer. Firstly, it should participate actively
in creating and ensuring implementation of supply chain strategies effectively. It is evident for the
supply chain that institutional client (Clients dealing with large volumes) is greater than any end
consumer. The instituitional clients appear in dual role, they could be suppliers and the customers.
(Operations management of logistics and supply chain issues and directions – Xiane Li – 2014)

Abstract
Supply chain management activities are related directly with a company’s Customer Service. If a
company has great customer service, it is likely that it can lead the competition. To be successful,
business must take advantage of every opportunity to stand out from their competitors.

The customer service strengthens relationships of trust with customers. It fulfils the promises and
exceeds expectations. There is a high potentiality for retention of customers and the customers
are likely to refer their friends as well. To a logistics company the relation with customers is more
important (Brian Stutter- 2017)
Table of contents
Executive Summary…………………………………………………………………………………...02

Introduction……………………………………………………………………………………………..05

Literature Review………………………………………………………………………………………08

Chapter 1: Customer service

1.1 Introduction……………………………………………………………………………………….. 10
1.2 Value Adding……………………………………………………………………………………… 11
1.3 Trust………………………………………………………………………………………………… 11
1.4 Service Quality……………………………………………………………………………………..12
1.5 Relationship……………………………………………………………………………………….. 12

Chapter – 2: Supply Chain Management

2.1 Introduction…………………………………………………………………………………………13
2.2 Practices in Supply Chain Management ………………………………………………………14
2.3 Supply Chain Management as an advantage for manufacturers ………………………… 15
2.4 Performance Measurement………………………………………………………………………16
2.5 Performance Outcome…………………………………………………………………………... 16
2.5 Frameworks of Supply Chain Management ………………………………………………….17

Chapter – 3: Customer Service in Supply Chain Management

3.1 Introduction…………………………………………………………………………………………19
3.2 Customer Segmentation………………………………………………………………………….20
3.3 Customer Service Interface………..…………………………………………………………… 21
3.4 Customer Service Strategy………………………………………………………………………21
3.5 Impact of Customer Service Strategy………………………………………………………….22
3.6 Customer Service in Supply Chain management of Small and Medium Enterprises…………..…….………23

Chapter – 4: SCM in Small & Medium Enterprises in India

4.1 Introduction.………………………………………………………………………………………. 24
4.2 India’s SME Profile………………………………………………………………………………. 24
4.3 Customer Service in Small & Medium Enterprises………………………………………… 26
4.4 Conclusion………………………………………………………………………………………… 28

Chapter – 5: Small & Medium Enterprises in India (South Region)

5.1 Introduction…………………………………………………………………………………………29
5.2 GDP of India Region……………………………………………………………………………….30
5.3 Bangalore-Tamil Nadu Industrial Region……………………………………………………...33
5.4 Research Gap………………………………………………………………………………………33

OBJECTIVES & METHODOLOGY

1. Introduction: ……………………………………………………………………………..………….35
2. Formulation of Hypothesis……………………………………………………………….……… 35
3. Nature & Scope of Study.………………….…………………………………………………….. 35
4. SME’s Of South Region.………………….……………………………………………………… 36
5. Structural Equation Model..……………................................................................................ 36
 6. Confirmatory Factor Analysis..………………………………………………………………….37
7. Generation of Scale Items………………………………………………………………………..39
8. Scale Items………………………...………………………………………………………………..39
9. Data Collection Forms….……………….………………………………………………………..39
10. Reliability of Testing and Results……..………………………………………………………..41
11. Suggestions to Managers..…………….………………………………………………………...41
12. Exploratory Structural Equation Model..………………………………………………………42
13. Limitations…………………………………………………………………………………………. 43
14. Conclusion………………………………………………………………………………………….43

Reference: …………………………………………………………………………………………….. 44

List of Figures
Figure 1: Annual report MSME 2017-18………………………………………………………….… 26
Figure 2: Annual Report MSME 2017-18 Leading Sectors of MSME………………………… 28
Figure 3: MSME in South India 2018…………………………………………………………….…. 30
Figure 4: Human Development Index – 2017………………………………………………….….. 31
Figure 5: High - Human Development Index – 2017………………………………………….…. 32
Figure 6: Medium - Human Development Index – 2017…………………………………….…... 32
Figure 7: Structure Equation Method - Customer Satisfaction………………………….……..36
Figure 8: Confirmatory Factor Analysis - Reflective & Formative……………………….…….37
INTRODUCTION
AN ESSENTIAL SUPPORTING STRUCTURE DEFINING ACTIVITIES OF
CUSTOMER SERVICE IN SUPPLY CHAIN MANAGEMENT WITH AN EMPHSIS
ON SMALL AND MEDIUM SCALE INDUSTRIES IN INDIA
During 1960s managers faced many complexities associated with a decision-making for building
an support structure for procurement of materials and interactions between multiple entities, also
the challenging Geographical distance apart. This process was to detect restoration time,
accuracy in information and balance the inventory across different entities. The problems were to
encompass the main drivers of the logistics performance, which are inventory, transportation,
information, and facilities. These changes were needed to give birth to the modern idea of a
“Supply Chain”.
The excerices of Logistics and Supply Chain Management (SCM) are defined as a group of
actions undertaken to promote effectiveness and efficiency in managing the supply chain
processes. These include partnership with suppliers for the movement of goods and to meet
customer demands. Most importantly sharing of information by using ICT (information
communication technology, and which also includes ‘specialists who could use informal methods
perform specific jobs across. These practices impact the actions of Logistics and supply chain
performance.
Supply chain management has been described as a strategic tool to be incorporated into overall
strategy of an organization. It was during the1980s The SCM was first instituted by consultants
and also by various experts in the subject areas such as purchasing and supply, logistics and
transportation, marketing, behavior of organization, management of network strategy, Information
management and management in operations have played part in to the ignition of supply chain
management (Chen & Paulraj - Journal of Operations Management).
During the 1980s, Supply chain was the term being used to define the concepts of Distribution,
Logistics, warehouse management which were now being termed as a single unit.
According to Harvard professor Michael Porter’s book - Competitive Advantage, ‘’It illustrates the
five primary processes of an organization on which the framework is built on:
(1). Inbound logistics (2) Operations (3) Outbound logistics (4) Sales and marketing (5) Service
(which includes - procurement, technology development, human resource development, and firm
infrastructure)’’. The main objective of these processes was to improvise the operations by
focusing on interrelationships between business entities and to provide the competitive advantage
from their competitors. Thus, maintenance of this horizontal strategy, was a concise way of
describing supply chain management by representing the aspects of corporate strategy.
CSCMP (The Council of Supply Chain Management Professionals) defines: All the planning and
management activities i.e sourcing, procurement, logistics and conversion are all the
management functions in Supply Chain Management. This includes the coordination and
collaboration with suppliers, intermediaries, third parties, and customers. According to Simchi-
Levi, Designing and Managing the Supply Chain: Concepts, Strategies and Case Studies,
suggested that supply chain management as the next frontier of competition. Th aspects
determining the success of the organizations. By incorporating the supply chain into the
organizational strategy is therefore a key factor for sustainable performance.
The essentials of business processes from purchasing raw materials from supplier and
manufacturing a product and have it deliverd to customers and also by providing services,
assistance and information which could add value to the products and customers and other stake
holder. All these activites are incorported with Supplychain management.
This integrative approach aims at synergizing efforts created through linkages, controlling,
cooperation, distribution channel relationship for the benefits of all parties involved, to maximize
efficiency of resources in delivering customer satisfaction.
The customer service strategy is built for the firm to implement in the supply chain to increase
customer satisfaction. The overall objective of the customer service in supply chain is to increase
the competitive advantage. The accomplishments of these objectives should be held through
creating customer value, which could be superior to the competitor’s value offering and therefor,
enhance the customer satisfaction. The increase of global competition is the primary driver for
greater customer demands and improved products and services.
The businesses took the initiatives to bring an improvement by implementing policies that
managed JIT – (Just in Time), QR (Quick Response), Management of Inventories. This initiative
was undertaken due to an increase in Demand. This gave birth to processes of Business process
re-engineering and supply chain management. (Jones & Riley, Using Inventory For Competitive
Advantage Through Supply Chain Management - 1985).

India was largely neglected among the world market. It was until 1991 when India deregulated its
economy - a new competitive spirit was unleashed, and it attracted global players. However, a
distinctive feature of the economic environment in the country was insufficient. The required
support from Government to support the organized economic activities was not enough. The
major obstacles to competitiveness in India was lacking the government’s support, poor logistics
and supply chain for the infrastructures were the major setbacks. Moreover, the infrastructure
comprising roads, airports, seaports, railways, information and communication technology (ICT)
and energy production of India is still poorer as compared to many other countries. However,
things were changing for the better at a fast pace (Srivastava - Empowering Leadership in
Management Teams - 2006). ‘’India was at 59th position among 117 countries in – ‘’The survey
was conducted by Geneva-based World Economic form under’’ (WEF) The Growth
Competitiveness Index. In 2012, the logistics and supply chain management (SCM) for an
organisation were thought to be expensive but necessary for the organizations in India. But these
were necessary for the competitive advantages to survive the competition. Therefore, it was
necessary that several organizations had their businesses performed by hiring logistics service
providers. Therefore, several Logistics companies have emerged which was the reason behind
the DOT-COM boom in 1990’s. There were companies from worldwide that made investments in
infrastructure and technology to make the supply chain’s vision a reality with the additional feature
of logistics. Companies like Wal-Mart and Dell Computer focused on customer needs and supply
chain efficiencies. They made high investments in information communication technology (ICT)
to get the leadership position in the global competition. The other innovative practices of supply
chain such as cross-docking, system of bar-codes, collaborative planning, forecasting and
replenishment (CPER), radio frequency identification (RFID) and direct-to-home delivery were
introduced by many of these organizations.
In the same way, as the competition increased some the supply chain and logistics companies
shifted their focus from courier/ cargo freight dispatchers and customs clearances to co-ordinate
shippers and consultants. In India, the service providers of the supply chain management (SCM)
are also evolving rapidly. This change in service providers from being just a cargo carrier and
movers to supply chain and logistics services has quickened in the past few years. These Supply
chain firms provide diverse ownership. Several industry sectors including primary sector for
example: Agriculture and Allied industries, secondary sector which is the manufacturing industry,
and tertiary sector also known as Services industry. All these industries primary focus was
towards the customers. Therefore, customer service is treated like an integrated component in
the supply chain architecture. To increase efficiency and make use of resources are the key
functions of customer service in supply chain management.
By utilizing its skillset a carefull consideration should be given to costs, improved customer service
and maintenance of lower inventories. This is to SCM’s customer service object enchance
profitablity by having created an advantage in competition. (Cooper and Ellram - International
Journal of Logistics Management - 1993).
Stevens (Successful Supply Chain Management - 1990) describes that Supply chain
management’s objective is to balance goals of to meet customer expectations and manage
inventories with low investments.
There is consensus that SCM’s objective is to include those of lower costs at specific level of
customer services. To understand this better it is first necessary to examine more broadly the
meaning of customer service. Customer service can be described as
1. A set of activities / functions that are to be managed within the firm. For Example - order
processing, invoicing or handling customer complaint
2. Performance outcome or measures i.e. order fill rates, cycle time, average time spent on
delivery
3. Customer perception of availability, quality and timeliness, leading to customer value and
satisfaction are the objectives related to Customer.

The implementation of customer service being fruitful in supply chain management has been
emphasized. In 1990 – Stevens, describes ‘’the circumscribing of all the aspects between
customer and supplier which includes delivery, pre and post-sale service, technical service and
financial packages are the key functions of customer service.
Customer satisfaction is the ultimate goal for any service provider whose, primary work is to create
and increase – Value. This result is the outcome derived from the operational functions of
Customer Service. The customer service interface plays a significant role in the supply chain
conditions. To meet customer requirements, supply chain management need to undertand
through its key processes about customer relationship management, demand management,
customer service management and order fulfillment management.
Cooper, & Wagenheim, (1989) The important dimensions of logistics service are, product
availability, reliability, delivery, accuracy, responsive and freedom of damages.
Moreover, customer service is the unifying factor for integrating marketing and logistics, which
results in customer service of the firm (Rinehart-1989). Thus, customer service can be thought of
as an integrative activity both within the firm, between firms, within the channel.
The International Customer Service Association (ICSA) define: For a Business whose primary
duty is to provide ‘’customer satisfaction’’. This target could be achived through sales orders,
forcasting demand through the need for information by collabrating with customers (Rinehart
1989). Langey and Holcomb (1992) cite a Council of Logistics Management study definition of
customer services as “the process of providing significant benefits to the supply chain that are
value-added in a cost effective’’.
The study was also able to find the dimension of customer service namely: product quality, order
cycle time, flexibility in the system of distribution, information system about distribution,
malfunctions in the distribution system and provision of support for after-sale products.
These are the set of activity within the firm, focusing primarily on facilitating customer interface
i.e., delivering product, fulfilling customer orders, and providing information to customers to
enhance customer satisfaction. It is through this interpretation that highlights the customer service
in supply chain management that it has become the core area.

Literature Review
The key concepts and approaches used in the study will be examined in this literature
Review. In this study, we will examine the activities of customer service in the Supply Chain
Management. The aspects of customer service in the supply chain management include the,
customer segmentation and relationship, Service Quality, Strategy, and analyse these subjects
in developing country like India. The review begins with a discussion of supply chain
management, including definitions and development, evolution of supply chain management,
advantages of supply chain management for manufacturers and supply chain management
practices. The review then considers the customer service aspect. This customer service
perspective assists in understanding the improvement of relationships between the suppliers and
supply chain management performance measurement. Then, the review focuses on supply chain
management that involves the issues of:

 Performance measurement of customer service in supply chain models in small and medium
enterprises.
 Performance measurement factors for supply chain performance measurement.
 Improves communication with logistics providers.
 Relationship with customer can be established when the rapport/communication with
suppliers is stronger becuase it will overcome competition
 The more businesses turn to third party logistics (3PLs) providers, it becomes a more
necessity to collaborate and strategize approaches to these results in effective partnerships
and improved customer service to customers during the goods transit period.
 To treat customer’s feedback as a priority: To understand customer’s need and act
accordingly to satisfy their expectation. (3 ways to make customer service your best supply
chain strategy by Brian Stutter- 2017)

Management philosophy, states that the customer service is not the ultimate goal however, it is
just an operational function and its outcome is to support the other activities of the SCM.
For the customer service activities and its outcome, the centre of focus is on ‘the customer’. The
supply chain management is associated with – Focus on customer and has a significant impact
on the management. (Ellram, LaLonde, & Weber – 1989).

The term “customer service” in the supply chain is considerably used to describe both marketing
and substantial distribution activities which is aimed at enhancing the product offering or
facilitating the exchange process between a supplier and the customer. The activities of customer
service representative is designing the product, provide maintenance, train to be responsive that
could help the company and customer form a relationship, to provide an assurance to the
customer on behalf of the company and help decide pricing, in addition to the element of logistics
service. The Logistics services functions include handling materials, managing warehouse, to
deliver products and to meet expectations of customer needs. Therefore, Logistics service is one
of the activity of Customer service.

‘’A customer-centric supply chain comes from controlling data from both long-term and short-term
demand, an inventory management system(IMS) gives this information and at the same time link
this data with an encircling view of the supply chain’’ (Brian Stutter- 2017). It empowers the
company to maximize customer satisfaction. The activities of Customer Service in the SCM starts
at the Beginning of the chain till the End of the Chain. With the intension of having a beneficial
customer service for the entire processes of manufacturing, distribution, and the final outcome of
customer’s purchase, it must be launched by the top management who is deteremined to
incorporate customer service strategies in the supply chain, from material supply procurement
from suppliers over collaborating, all the way to the delivery of product to the customer in the retail
store. The Customer Service Officer’s bonus should be based on improved customer service in
the supply chain. The CEO provide key performance indicators (KPI) to the customer service’s
key managers to filter the services towards customers.(Tamina Steele – Customer Service KPI’s
you should be tracking - 2017).
 Chapter - 1

CUSTOMER SERVICE

1.1 Introduction
The service which provides assistance and advice by a company to the people who buy and use
that company’s product.

A Managerial Perspective, Prentice-Hall, 2002, Turban et al., Electronic Commerce: It is a

necessity for any company to assist a Customer during before and after a purchase. It also helps
designing products and it also studies the customers’ expectations through channels like
feedbacks and it enhances the satisfactory levels.

Customer Service plays an important role processes like sales and generation of revenue.
Customer services plays an integral role for the success of a Firm. It understands the relationship
between the firm and the customer from before and after the product is sold. It is essential that
the firm maintains a relationship with the client even after the sale of its products.

The customer service provided by a small firm is different from that of a Big firm.

Tippayawong (2009) compares the two size groups of companies with different supply chain
operation and developed a scorecard for the supply chain management and logistic to understand
the strength and weakness of companies in the areas, of Structure of the organization, planning
and execution of ideas, logistics and IT implementation and management.

Product reliability, product availability, Delivery timeliness, Safe Freedom from Damages,
responsiveness and accuracy are important dimensions of logistics service (Mentzer et al., 1989).

Customer service is the factor that unites marketing and logistics, and their performance creates
the firm’s output for customer service. (Rinehart et al. - 1989)

Langley and Holcomb (1992) define customer service as ‘’an activity that provides remarkable
value-added benefits which are cost effective in a supply chain.

Zinszer (1976) defines – “The customer service facilitates the sale and use of product and
services”. Therefore, the manufacturer moves the product from the end of the production line to
the customer.
 1.2 Value Adding
The information of operations from a warehouse is the most valuable information as it provides
benefits in increasing the value of the firm’s customer service. The SCM’s intangible aspects can
be converted to tangible aspects that can measure the overall success. (Lumsden and Mirzabeiki
- 2008)

Barber (2008) proposed a model which is based on a scorecard that balances intangible value by
adding the total value chain aspects which requires to measure the supply chain. This model
helps to provide a better service to the customer. Since, supply chain management assists in
flexibility, collaboration, risk taking, sharing of information on resources.

McLaren (2004) The capabilities of an organizational which has adapted by supply chain
management information systems (SCM IS) forms an idea on the level of providing support for
operating flexibility, operational efficiency, , internal & external planning & analysis. McLaren also
explained the use of (SCM IS) system also reduces low or excess of stocks in the inventory,
increase in sales, external and internal customer’s information’s are synchronized.

Leong (2008) addressed the impacts of sharing information about suppliers and it is related to a
firm performance. Therefore, this collaborative method of information sharing has improved
competitive advantage among the small and medium size enterprises and logistics service
providers.

Keskinocak (2001) From the perspective of operations the supply chain has three elements
procure, manufacture and distribute. The management of inventory can be used with the help of
internet to provide value to customer.

1.3 Trust
Lakshminarshima (2007) measures the relationship of trust in supply chain management.
According to his research in India:
1. 33% of the companies share information with their suppliers,
2. More than 51% companies want to treat their customers as a part of the company and
3. 43% companies trust their suppliers.
The relationship between the Company and its customer and supplier is determined based on the
trust. This Trust helps in development of networks and adapt itself in the changes in the market
by keeping a tab on customer’s preference and changes in competitor’s strategy. The factors
involving in environmental changes boosts in competitive advantage.

Wong (2005) emphasized on trust which helps for continuous improvement in producing goods
and services to customer’s satisfaction.

Trust secures relationships and commitment, it improves communication, encourages risk taking
and promotes cooperation and mutual adaptations (Sharma 2000)
1.4 Service Quality
SERVQUAL is an instrument that tests the nature of Customer service quality. The focus on the
service quality dimensions describes the relationship between information technology and service
quality through communication channels including distribution intermediaries’ channel and
transactional intermediaries’ channels. (Zsidisin, Jun, & Adams - 2000)

Parasuraman (1991) rectifies the definition of SERVQUAL by measuring the service quality of
industries – 1. Telephone Network Operating Companies 2. Companies selling Insurance and 3.
Banks. He states that SERVQUAL is a generic tool with high reliability and validity. But on the
contrary Business strategy, quality determinants of downstream and upstream customer define
the relationship between service quality and customer sustainability. Service quality is the key
strategic issue for companies in the service sector.

The competition is fierce and rendering service quality is the support for the success of any
organization. Service quality helps the companies to differentiate itself from its competitors and
gain a competitive advantage in the market. (Sureshchandar-2001)

In the supply chain management (in perspective of service quality) there are three types of point
of views undertaken, which are that of supplier, customer and transport carrier. Therefore the
service quality can be improved through dividing the firm’s SCM into supplier, customer and
transport with the relationship they have. (Stimson, Jennifer-2005).

Parasuraman (1998) describes Service quality that makes a comparison between Customer’s
expectation and the total satisfaction provided both in the aspects of tangible and intangible
dimensions. The dimensions include components such as 1. Ability to delivery promised services
2. Knowledge and information through employees. The combination forms a positive image of the
product and that the customer could recommend the products to others.
Bienstock (1997) states that Logistics service in service quality is composed with product
availability, on-time delivery and process of service delivery by making customers interactive with
the firm ultimately leading to customer’s satisfaction.

1.5 Relationship
Rinehart (2008) assess the relationship between supplier and customer on different levels. He
views that the supplier/customer relationship is based on generic cultural assumptions. Supply
Chain orientation is important for fulfilling the customer requirements.

Harrison, Terry P. (2001) informs that designing a good supply chain will be beneficial in building
relationship between supplier & customer, cost reductions, better planning and coordination and
finally improves service to customer. The supplier/customer relationship improved small firms to
meet high demands, low margins & high working capitals. This relationship proved to be highly
beneficial by creating opportunities in the market.
 Trilochan Sastry (Financial Inclusion in Capital Market - 1999) Due to uncertainty of high demand
and changes in seasonality together with high working capital and low margins, the small firm’s
supply chain performance could improve their relationship with suppliers and customers. There
is a good chance that this relationship will help the Supply Chain Performance. This creates
opportunities for manufacturers in the market.

Rinehart (1989) assessed perceptions of supplier-customer relationships on different times and

anticipate that it will base on generic cultural assumptions.
Relationship between customer & supplier helps in lowering costs, better coordination and
improved customer service (Harrison, Terry P. 2001).

The uncertainty and vulnerability in relationship make the customer service risky but the trust
includes reliability, honesty, predictability, and mutuality between customer and supplier help to
make the relationship better in SCM (Edmund Stanley, 2007).

The Customer’s participation influences trust, resource integration and client’s knowledge through
feedback. Trust forms the basis of measurement and the creation of valued relationship.
.

Chapter – 2
Supply Chain Management

2.1 Introduction
‘’The Supply Chain Management’s Evolution’’. ... Supply Chain Management (SCM) is a
sequence of activities that are aiming at capturing Value and have an advantage over complex
competitiveness. It allows integrated management to control information, finance and flow of
goods. SCM develops the system of production and distribution

Mentzer (2001) express the evolution of supply chain into three steps as follows:

(1) A direct Supply chain, is a set of three or companies (supplier, manufacturer, transportor) who
are directly linked by one or more of information systems that are upstream and downstream. The
system that has control over services, finance and provide supports for the flow of goods from
one source to a customer
(2) An extended supply chain i.e., all the upstream and downstream processes that are linked to the
flow of products, services & information, and finances ‘of the other suppliers who are also involved
in supplying materials to the main supplier and on the other hand, a customer who is associated
with other customers form the extended supply chain.

(3) The ultimate supply chain i.e., All the upstream and downstream flow of products, services,
finances and flow of information, flow of goods from initial suppliers to the ultimate customers
includes all those companies involved in this process defines, the Ultimate Supply Chain.

Lambert (1998) define a supply chain as the alignment of firms that brings products or services
to market in order to affect a balance between what are often seen as low cost on managing
inventory, low unit cost and high customer service conflicting goals.

2.2 PRACTICES IN SUPPLY CHAIN MANAGEMENT

Galt and Dale (1991) A study carried out on the ten organizations in the UK confirmed that
organization’s aim was to reduce their suppliers base and to improve communications.
A survey was conducted on developmental programs that the suppliers were assessing. This
program’s aim was to bring improvement in quality and reduction in purchase cost rather than to
focus on the supplier’s capabilities. (Watts and Hahn - 1993).
In Asia Pacific region, the supply chain management practices reveal, that the competitive
advantages can be maintained when the firms increase their capacity to plan, manage and control
products, take and utilize services and information from suppliers and customers to integrate the
process. This will result in change in organizational structures, performance measurement
systems and increase service levels, relationships with supply chain members. McMullan (1996)

Kwan (1999) investigates the use of information technology (IT) in supply chain management in
Singapore electronics and chemical industries, and found that the top two supply chain
management strategies are;
1) To position logistics as one of the core competencies within the company and,
2) To produce demand rather than to forecast.

The primary focus of Indian firm’s supply chain practices four major supply chain dimensions:
1. Supply chain strategy,
2. Supply chain integration,
3. Inventory management, and
4. Information & technology.
The organizations in India arrange strategies between supply chain and business in order to
deliver:
1. Highest customer satisfaction.
2. Design supply chain processes for unification to achieve operational excellence
3. Develop partnerships to reduce inventory cots and maximize profits, and
4. Improve infrastructure and technology to build a specific supply chain process.
Moreover, these actioned can be achieved unless the Indian government is involved for the
smooth functioning of supply chain. (Sahay & Mohan, 2003)
The research by Sahay and Mohan (2003), investigates the logistics management practices in
India. The findings suggested that the Organizations preferred responsive suppliers who could
respond quickly to the needs rather than commitment to sustaining excellence. The conventional
method focusses mainly on logistics costs namely, transportation and warehousing. Th Logistics
manager still practice this method because there is a lacking in modern technology and skilled
logistics operations, the reason being - high cost of training and implementation. However, the
recent studies show an improvement in knowledge base in the Indian supply chain management
practices. Regarding to this study, the condition of being that the SCM practices in India is not
very consistent especially in the small-scale industry. Therefore, this research will further
investigate in order to contribute more knowledge about supply chain management and its
practices for the India small manufacturing sector.

2.3 SUPPLY CHAIN MANAGEMENT AS AN ADVANTAGE FOR

MANUFACTURERS
Trust influences the sharing of risks and rewards. The trust maintains interdependence in
relationship between firms with the partner to achieve its goals (Frazier, 1983).

As of 1990, the product life cycles shrank and due to an increase in global competition intensified,
many manufacturers and suppliers collaborated to bring improvement in product, quality and lead
time. Similarly, to gain competitive advantage, several wholesalers and retailers incorporated their
logistics functions.
There are two kinds of functional areas of a firm that develop and amalgamate into a strategic
approach of logistics management. SCM is considered as a feasible resource to gain an
advantage in competition (Tan et al., 1998a).

The elements linking to each chain during the process of manufacturing and supply, the process
transformation from raw materials to a product reaching its end user, and to have a control over
several organizational boundaries by unifying these organizations as a single business entity.
Scott and Westbrook (1991).

The technique that Firms use through their suppliers’ processes, technology and capability to
enhance competitive advantage is called supply chain management. (Farley G.A, 1997).

Many manufacturers and merchants have embraced the concept of supply chain management to
improve product development, quality and delivery goals, and to eliminate waste. It enables firms
to derive benefit from strengths and technology through suppliers to develop a new/better product.
(Morgan and Monczka, Robert.M 1995)

Manufacturers often include strategic suppliers to participate in their new product development
efforts to benefit from the design being – cost effective. This allows the processes to become
innovative with materials and products. This is allows to tackle competition in the global market.
(Tan et al., 2002).

For the Manufacturers to select best techonologies to design their products with alternative
conceptual solutions by invovling their suppliers during the stage of designing their product. (Burt
and Soukup, 1985).

2.4 PERFORMANCE MEASUREMENT

The process of quantifying effectiveness and efficiency of action is defined as the performance
measurement (Neely – Performance Management System Design - 1995).

The measurement of Efficiency is defined how a firm’s resources are economically utilized by
providing a specified level of customer satisfaction with effectiveness to meet the customer ‘s
requirements. Performance measurement systems measures the quality of both the efficiency
and effectiveness.

The manufacturing organizations have used performance measurement systems to determine

their performance. The importance of measuring their performances is to manage their customer
service which further brings improvement consistently. (Sink and Tuttle, 1989).

(Dixon et al., 1990) The performance measurement can be divided into two stages.
1. The phase until the 1980s focused on profits, productivity and return on investment. This helped
in understanding the improvement in customer service in SCM.
2. During late 1980s, there was emergence of new management concepts like the supply chain
management. There was an emphasis on the inclusion of less tangible and non-financial
measures in performance measurements.

2.5 PERFORMANCE OUTCOME

The outcome of the objectives in SCM have improved efficiency in cost reduction and improved
services. The activities of Customer service are important segments in the firm’s supply chain
management. It should be aimed at delivering of same level of service at a lowest cost to deliver
value to downstream customers.

Operational performance, which includes the dimensions of order cycle time, consistency in
performance, flexibility to handle unusual requests, and ability to respond and recover form
service errors, flexibility to handle unusual requests, and ability to respond and recover from
service errors. The efficiency in supply chain operation reduces cycle time and response time to
be in coherent in changing customer needs. It can reduce inventory requirements and improve
efficiency and cost reduction. Flexibility and reduced cycle time can also enable a firm to respond
more rapidly to changes in market demand, thus contributing to greater market effectiveness.
Customer service is the output of the supply chain. The factors include completeness, cycle time,
consistency of performance, responses to error and requests for information, special requests,
and services (Ellram – Partnering Pitfall and Success Factors - 1989).

Bowersox and Closs (Logistical Management - 1996) suggest that there are four levels of
customer service outcomes, i.e., efficiency, market access, market extension, market creation.

Customer service performance outcomes exist in two domains, the supplier‟s activity domain and
the customer‟s response domain (Mentzer 1989). Although these two domains of performance
outcomes may be strongly correlated, it is important to recognize that they are two distinct
domains. Measuring performance out comes in the supplier activity domain is important for the
supplier to maintain or improve its customer service performance.

To value the Customer’s satisfaction is the most important factor for running a successful
business. Each department should be linked to the firm value chain (Porter, 1985).

According to Ballou, (Logistics and Stock Management - 1993) Every department of the firm
carries out value-creating activities while the marketing manager pay attention in understanding
customer needs, understanding the firm ability to satisfy them and creating revenues to sustain
future growth and profitability. Whereas, the logistic manager focuses their time and attention on
three core functions of business operation:
1. Inventory policy and practice
2. Facility location and design and
3. Shipping the materials and products.
The supply chain organizations are shifting their focus from single cost inventories, facilities
installation, and transportation of products and materials to a multi enterprises while focusing on
cycle time compression, system wide cost reduction, and improved value for end customers
(Langley and Holcomb, Creating Logistics Customer Value - 1992).

2.6 Frameworks of supply chain performance measurement

The performance of supply chain management is required to measure with respect to some
standard frameworks. There are three kind of performance measurement namely Resources,
Output and Flexibility. These help to review and evaluate the performance of supply chain
framework and these three are necessary components in any supply chain performance
measurement system (Beamon, 1999).

Gunasekaran et al. (2004) offered “an alternative and better explaination about the significance
of performance management and metrics in Supply Chain Management. The projected
framework considers the measurement of supply chain processes (plan by forecasting, source
materials and information, manufacture the product and deliver) in regards to strategic, calculative
and operational levels then, it reviews the score in order to priorities for each metric by three level
i.e high, moderate and less. These levels are based on its importance and is inspired from a
selected group of British companies’’.

For measuring and evaluting the operations of a business on a day to day basis, Bhagwat and
Sharma (2007) build BSC(Balanced Scorecard). He chose four perspective i.e internal business
process, learning and growth, finance and customer. The case study is developed and applied in
small and medium sized enterprises (SMEs) in India.

FUZZY LOGIC TECHNIQUES: Fuzzy logic was developed by Lotfi A. Zadeh and represents a
form of mathematical logic. Values between 0 and 1 represent uncertainty in decision-making.
Here, 1 suggests a true value, and 0 is an indication of false value. Therefore, inside a fuzzy set
there is no restriction for x value from 0 to 1 but from the real interval.

Cai at el. (2009) suggests that ‘’to improve bilateral key performance indicator (KPI) there is a
systematic approach that can be accomplished in a supply chain context.
The framework proposes quantitatively to analyze the relationships interdependent among a set
of KPIs. The framework provides a successful approach to managing supply chain performance
in a dynamic environment. The PCTM (performance cost transformation matrix) can be adopted
for desion making and not for ‘direct decision making’ as it recommends a new development from
the existing Eigen Structure Analysis Methods. The transformation of Engineering management
to Business Management is derived from the amalgamation between WTM (Work Transformation
Matrix) which is further derived through DSM (design structure matrix).

Chae (2009) offers an approach that is practical to evaluate performance measurement in the
contexts of SCM. The proposal of key performance metrics can be easily adapted for different
businesses.

Thakkar et al. (2009) has proposed an integrated supply chain performance measurement
framework for the small and medium scale enterprises (SMEs) in India. The research identifies a
set of qualitative and quantitative understandings. The framework combines the features of supply
chain operation reference (SCOR) model and balanced scorecard (BSC) to deliver a complete
performance measurement framework for SMEs. It also defines the guidelines in detail for the
execution of the framework. The research gives a detailed set of performance indicators for the
supply chain processes like source, make and deliver in SMEs. It also connects with various
supply chain cycles like procurement, manufacturing, replenishment and customer order.

In the point of view of occurence and layout Flynn et al. (2010) studied the association between
the supply chain operational, integration and business performance. The study defines how the
manufacturer collaborates inter and intra organizational processes to gain efficiency in the flow of
products, information decision making and money with the ulterior motive to provide maximum
satisfaction to the customers.
The effects of individual supply chain dimensions that includes supplier, internal employees and
customers are measured with their performance based on interactions determined through
applying the contingency approach. The hierarchical regression determines the impact of supply
chain’s individual dimensions.
In the configuration approach, cluster analysis is used to develop patterns of supply chain
integration, which are analyzed in terms of supply chain integration strength and balance. Analysis
of variance is used to examine the relationship between supply chain integration pattern and
performance. However, it overlooks the decision-making ability across strategic, tactical and
operational levels.

Chapter - 3

CUSTOMER SERVICE IN SUPPLY CHAIN MANAGEMENT

3.1 Introduction
.Customer service in the supply chain is largely used to describe both marketing and distributional
activities to enhance the product and to facilitate the process between suppliers and customers.

Aimed at enhancing the product offering or facilitating the exchange process between the supplier
and the customer. Accordingly, in perspective of Supply Chain, the customer’s requirements are
regarded as a top priority. The supply chain connects the firm and its suppliers to meet up with
the customer’s expectation. Therefore, the firms should take an active part in creating and
implementing supply chain strategies for its success. The value of the organization depends on
the customer’s satisfaction. Hence, the elements of customer service in SCM includes design the
product, training sales team, maintenance and to be responsive to meet the customer’s needs.

Logistics is part of a larger group with elements including handling, warehousing and delivery,
which of course are the elements of Customer Service. The other aspects of Logistics services
include reliability of delivery, product availability, responsive to customer’s demands, information
accuracy and safety of products. Customer service unifies the factors of marketing and logistics.
Customer Service integrates between two firms and improves the networking of distribution
channels. (Wagenheim- 1989).

“You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost
primarily because of logistics.”– General Dwight D. Eisenhower, Late American president and
a Five Star General who served as Supreme Commander for the USA Army during WW2
The concept of Logistics emerged as the information and technology advanced. The first
organization to use the term “logistics” was in the Military during 1950s. The concept of logistics
was not yet introduced in the private industries yet.
The term ‘’logistics’’ was used for handling materials, warehousing, accounting, marketing etc. as
per Douglas M Lambert (Ohio State University), The eight essential Supply chain Management
Processes.

3.2 CUSTOMER SEGMENTATION

There are wide range of products in several kinds of markets. Fuller (1993), conceptualized a
phrase “One size does not fit all”. Later, this concept was further developed by Fisher (1997) by
identifying two categories among products i.e. functional and innovation. Therefore, they need to
be treated differently in supply chain segmentation for being responsive and efficiency.

Every day the business environment is increasingly becoming more complex, the reasons being
rapid innovation and technology, globalization, new business partners, emergence of different
markets, and new customers with variety of preferences.

To achieve the ultimate goal of consumer satisfaction, we believe that these practices must be
implemented throughout the supply chain. Total Quality Management (TQM) in upstream
(supplier) operations is particularly important for assuring downstream quality results (L. B.
Forker, D. Mendez &J.C. Hershauer, International Journal of Production research - 1997).
The new studies have led to a mixed conclusion concerning a remarkable positive relationship
with performance in regard to Quality Management.
To illustrate that TQM practices are related to performance, we could combine DEA (nonlinear)
and regression (linear) analysis.
We establish this relationship using objective (not self-reported) quality performance data. We
believe that this is the first study to use objective quality data collected by a third party. (L. B.
Forker, D. Mendez &J.C. Hershauer suggest to the manufacturers follow the TQM practices for a
better supply chain functions throughout. certain practices do lead to better performance.

Wind & Cardozo, 1974 - Industrial Market Segmentation - 1972). According to which the
segmentation offering in a firm depends upon the measurability, sustainability, responsiveness,
stability, profitability, accessibility and action ability. But actually, these offerings created by the
firm is not about the product development, but it includes and associates the elements of an
offering to create value to their customers. They offer a nonphysical path to the market’s
segmentation of an Industry by providing results from an exploratory survey about the practices
of an Industry in form of current segmentation. It has often been claimed that segmentation has
been used as a marketting tool because it explains the marketting strategic results of an export.
Wind & Cardozo, 1974 want to give a priority towards the strategies of market segmentation. They
want two examples be quoted because these examples encourage suitable usage of market
segmentation in planning and controlled marketing strategies.
For an organization, segmentation is an important function for developing better customer
relationship based on important, satisfaction, gaps (ISG). The opinion poll provides information
about different customers attitudes and preferences to help create segmentation. Tao and Koo,
(1999)

The service provider of information, communication and technology (ICT) services include the
demographic variable based on customer segment and their needs. This model helps in lowering
costs and increase in SCM performances. Environmental factors played a huge role in
segmentation. Since the competition has increased the value of pricing and trademarks have
increased thus, leading to the demand from retailers have also increased which is forcing the
suppliers to increase production rate. This has made the retailer’s information to be very influential
for the manufacturing companies.

Narayana (2004) explains how different regions have their own competitive advantages which are
based on quality and infrastructure cost.

3.3 CUSTOMER SERVICE INTERFACE

The point at which a customer or a client interacts with an organization is known as the customer
interface. The choice of how an organization or a customer chooses to interact will be influenced
by the activity that is taking place.
The exchange of dynamic information between customer and company is the function of
‘’Organization-customer Interface’’. For these reasons, organisations are exploring innovative
methods to reach and stay connected with their customer which proves to be a competitive
advantage.
Developing the long-term relationships, cooperation, information sharing, and trust in executing
supply chain management of a firm depends on the activities of customer service. Because it is
a critical interface between supplier and customer, the customer service interface has significant
implications for relationship quality and exchange of information between two firms (B2B,
Business to Business). The nature of interaction between the supplier and customer depends
upon the quality of service and relationship in supply chain management. The role of customer
service enhances the customer relationship and customer behavior.

3.4 CUSTOMER SERVICE STRATEGY

The inappropriate customer service strategies and the service that customer does not need or
want derails the marketing efforts of the firm’s (Lambert and Stock, – Strategic Planning for
physical distribution, Journal of Business Logistics 1993).

The idea reduces firm’s credit worthiness and reduce the market share to increase the firm’s
profit.
Lamber and Stock (1993) has reviewed five approaches to strategy development
1) customer reaction to product/service failure
2) cost/revenue trade off
3) ABC analysis for profitable customer
4) internal and external customer service audits
5) Competitive position matrix, for firms that will aid to setup proper strategies of customer service.

Lariviere 1999 - Collaborative Planning in Supply Chains: A Negotiation-Based Approach) –

suggested to suppliers that through allocating the capacity choice, the probability of idle capacity
will reduce.
James H. Gilmore (The Experience Economy - 1999) offers a new way to think about connecting
with customers and securing their loyalty. He also observed that performance of supply chain can
be improved through strategic audit framework: Six Functional Process Capabilities.
1. Customer dialogue supply chain,
2. Efficient distribution(logistics)
3. Demand driven sale planning
4. Lean manufacturing
5. Supplier partnering
6. Integrated SCM by technology capability, integrated information system, advanced IT,
organization capability, integrated performance measurement, teamwork, and organization
structure alignment for the Business Firm to grow and develop.
Therefore, implementing achieves a reasonably good allocation between the retailer and supplier.
Bhatnagar &Teo (The Role of Logistics in Enhancing Competitive advantage - 2009) introduced
the negotiation between logistics drivers as viewed in the Global Service Strategy.
a) Transportation facilities, b) Managing inventory c) Sharing information, facilities and
Indicators of measure competition d) financial e) operational f) to improve customer
service in supply is a competitive advantage globally as it enchances the competition.
The objective for supply chain strategy is focused on growth in revenue, reduction in
operation cost, improve efficiency in working and fixed capital to maximize shareholder’s
value. This objective can be achived through coordination between firms to utilise their
capabilities and facilities.

3.5 IMPACT OF CUSTOMER SERVICE STRATEGY FOR THE SUCCESS OF

THE FIRM
Long term partnership is secured through loyalty and customer service manages to build the
relationship. This is the most important factor in supply chain relationships to retain existing
customers. Leonard Berry (1995) describes this is as a marketing strategy in his journal
SERVQUAL: ‘’A multiple-item scale for measuring perception of consumer in a service quality”,
Journal of Retailing. The most important feature in relationship marketing includes customization
of products, pricing, extra benefits etc. for customers individually. At the same time SCM is a
concept that integrates Internal and external capacities that increase the market value and finds
new and innovative ways to find solutions and provide to customers individually. The success of
business is based upon valuing customer satisfaction (Porter – 1985). Therefore, it is important
that all the departments in a firm should coordinate together crate a superior value chain. The
cost of the product impacts the customer’s value and satisfaction. There are various parameters
that determine cost of a products such as raw material cost, labor cost, design and manufacturing
cost, transportation cost, inventory cost etc. The customer satisfaction is the reflection of the size
of the firm.
3.6 CUSTOMER SERVICE IN SUPPLY CHAIN MANAGEMENT OF SMALL
AND MEDIUM ENTERPRISES (SMES)
Since Independence in 1947, the industrial sector in India was extremely unorganized and since
there was no government intervention the availability and quality of infrastructure was very poor
at that time. There was a need for improved ownership, managerial skills and to meet their quality
level upto export mark.

One of the first initiatives undertaken by several SME companies was to make a collaboration of
suppliers, wholesalers and retailers. The main objective was to produce better quality products
and to enhance market competition.

For the times to come, these organizations came up with techniques and concepts that helped in
improving product, in time delivery of product, reducing wastage. These basic approaches gave
birth to the concept of Supply Chain Management.

There are many challenges for Small and Medium Enterprises when it comes to managing
warehouse, inventory, forming partnership/relationship (especially with transporters, suppliers,
customers etc.) As a result, supply chain processes are being implemented across SMEs’.
One of the most critical challenge is managing Logistics and Transport activities because there is
a huge cost related to it. The basic activity of transport is to move the product from its origin to
the destination (end user). However, there is many important variables that come during shipment
and these important variables are the activities of Customer Service, for example purchasing
transport rates, managing transit time, visibility of transport, to ensure delivery made on time.

Therefore, by combining the functions of logistics with supply chain management processes will
enhance the activities of warehouse inventory management, transportation and exploit strengths
of suppliers who can then help himself by upgrading to new technology for better product
development (Morgan and Monczka, 1995).

To pursue for an improved performance by eliminating waste and by managing internal and
external capabilities of their strategic suppliers for designing a better product are the key functions
of Customer Service Activities in a supply chain management. Additionally, the other elements
pertaining to customer service for SME’s includes managing lead time, order cycles, organize
significant strategic tools of supply chain management activities within Small & Medium
Enterprises for improving quality and to increase competitive advantage (Tan et al., 2002).
 Chapter - 4
SCM for Small and Medium Enterprise in India

4.1 Introduction
This study describes the India’s Small and Medium enterprises’ profile, with a special insight to
SME’s in South Region.

For any country in the industrial sector, the small and medium enterprises play a very important
role to form the backbone in the development for that nation, especially for a nation like India
which is in process of developing. But until the 1970’s there was any interest shown for the
development of small-scale sector in India. After this period, the government promoted the
policies about the industrialization by relaxing restrictions on foreign trade. It shifted the focus of
the large-scale firms competing with small firms. The government, of course did not discriminate
large scale sector during this process. The Government offered better market solutions which was
far away from competing with the small-scale sector. Therefore, the large firms were able to obtain
permits for imports on capital equipment, components and raw materials.
In April 1956, the industrial policy resolution was adopted by the Indian Parliament. For the
industrial development of India, this was the first comprehensive policy.
The policy continues to constitute the basic economic policy for a long time. The inception
stressed on the role of Cottage and small-scale industries for balanced growth with individual
development. Local community development was another important focus by providing
employment opportunities to people in and around the areas and also with utilization of natural
resources. The government put a lot of efforts by providing tax rebates and subsidies. Another
interesting scheme was to reserve some categories exclusively produced by small scale
industries for large scale industrial production. After 1977, the government emphasized on Small
Scale Industries (SSI) development in rural areas and small town through the promotion of fabrics
like Cotton and Linen. A focal point for development of Cottage industries established District
Industries Center (DIC) which emphasized on product standardization, quality control, market
survey etc. DIC also under took the initiative towards raising investments to help Small Scale
Industries.
However, after 1991, the time when Globalization was introduced in the country, the industrial
policy resolution’s process to enhance the relevance of Special economic zones (SEZs) which
had become an important contact for the exporting strategy. This played a crucial role especially
in the manufacturing sector and promote their products globally.

4.2 India’s SME’s PROFILE

Since 1990, then finance minister Mr. Manmohan Singh who initiated the economic liberalization
plan, India has continuously become an economic power in the world. Then on, India has
expanded its trade relations with number of countries. However, for India it was a challenging
situation to face global competition, lack of marketing facilities, inadequate financial support,
untrained manpower, lack of modern infrastructure and for all of this was leading to delay in order
delivery and fall in demand.
The government took many initiatives to develop SEM sector, but this sector is yet to find solutions
to compete within and outside the country. Therefore, new forums and policies are required for
competitive advantages as compared to other developing economies who already are dynamic in
their policies that understand the need of small and medium scale sector. One of the reasons is
that these countries have concentrated upon improving their logistics through collaboration with
3rd party logistics by developing their information system.
The government of India gave a special focus on improving the conditions of Small and Medium
Enterprises that will help the growth of the country.
The SME sector has raised as a greatly to be the dynamic force behind the Indian economy since
independence. This sector has improved the imbalances regionally and the socio-economic
reforms have been impacted with increasing income and wealth for the nation by presenting
employment opportunities. The SME has also been a support for large scale industrial
development even though SME’s capital investment is very low comparatively (as per annual
report MSME 2017-18).

Photo Courtesy : Annual Report of MSME – 2017-18

With a very low investment, the SME’s proud national heritage comes from the Khadi and village
industries (Khadi also known as cotton) . The Copper & Steel coir industries has also contributed
the nation’s pride. These two industries that have been a great support for the nation’s freedom
movement from the British since the early 1900’s. Even now, these two industries still provide the
basic needs to the rural sector development which promotes rural artisans. Whereas, the steel
and copper industries originated from South India from states like Kerala to start and its neighbors,
Andhra Pradesh, Tamil Nadu and Karnataka following to support the industry. These industries
 are environment friendly and have proven to be materials that can be imported. This has also led
to technological improvement with introducing diverse products.

4.3 CUSTOMER SERVICE IN SMALL AND MEDIUM ENTERPRISE

Small and medium enterprises are an essential part of economic activities in Indian economy.
Managing various activities such as inventories, warehousing, transportation, and partnership
alliances such as suppliers and customer have become very crucial for small and medium
enterprises. Hence, the implementation of supply chain activities have been adopted in these
organisations.
Transportation is associated with the highest cost with their logistical activities because its
process is repeated several times says Bart Nooteboom in his article - Effects of Trust and
Governance on Relational Risk - 1997.
This makes the management of transport for SMEs an important process. The outcome of
transport is to get product from origin to destination (Grant, David B. 2008).
The customer services have several vital roles to play in this shipping process about decision
making on transport rates. The supply chain features can be widened if it is inter-related with
transport solutions. These aspects that affect the customer service are:
1) Transport purchasing and SME’s 2
2) Transit times
3) On time delivery.
The most challenging aspects for SME in the Management perspective is in maintaining Inventory
system, Warehousing Management, Transportation, Managing partnership alliance. To meet
these challenges Organizations are implementing practices of Supply Chain.

Throughout the distributional channels, the most cost incurred activities are in the Transportation,
because this is one such process that repeats every time. Without the help of transportation
service, the goods cannot reach the customers. Therefore, the the transport management is an
important process for the small and medium enterprises. (Grant, David B. 2008). There are
several parameters involved in the transportation management for example, shipping cost and
other related charges. Transport solutions when interrelated with wider aspects of supply chain
affects the customer service.

For India since its Independence, the industrial sector, particularly for SMEs, the availability and
utilization of infrastructure was very poor. One of the reasons being – No support from the
Government. There was no availability of staff with technical knowledge and there was no
provisions for training the people. All this would have been possible only if the country’s bilateral
agreements (import & export) with other countries were in place. Therefore, several SME’s
collaborated and improved a networking system that included wholesalers and retailers. With this
Networking system, the SMEs were able to provide better quality products, introduce new
products and enhance better competitive advantages. With this approach The SME’s supply chain
was able to improve products, improve transportation services and eliminate wastage. (Monczka,
Robert.M -1995).
The process of logistics in SME infuses inventory in the warehouse, on the other side, the supply
chain management asserts the combination of both internal and external moments of inventory
management, relationship with vendor, distribution via services of delivery by using transportation.
The firms using their supplier’s processes, techonology to get an advantage in competition forms
a ‘connection’ between manufacturing functions with process of raw materials supplies to the
customer in the supply chain management. This ‘connection’ helps to maintain transperancy in
the inventory (Farley G.A, 1997). Therefore, the finished good and raw materials can be restored
quickly by making them available in smaller lot sizes. (Handfield, Robert B 1994).

(Burt and Soukup, 1985) The firms often involve their suppliers to find solutions and design better
products by selecting best components and technologies. Supply Chain Management helps in
improving performance through reduction of wastage. Hence, the coordination between Supply
Chain Management and Small and Medium Enterprises helps in keeping a track on lead time,
order cycles which is very essential for Customer Service. As of 21st century, supply chain
management a strategic tool for improving quality and increase in competitive advantages in the
small and medium enterprises.
(Photo Courtesy: Annual Report of MSMEs 2017-18, the leading sector of the micro, small and
medium enterprises)

As per final report fourth consensus 2006, the number of enterprises have been increasing since
2006. Thus, the MSME sector have been accepted as the pillar of support for the Indian economy
that contributes growth and development.

As per the report of 4th census of MSME sector 2017, about 450 million people are employed in
SME sector with 13% - 14% increase each year with more than 36 million MSME firms registered
as of 2017. As per the same report 45% are related to manufacturing sector and 40% of their
materials produced are export nature. This means that they have upgraded their technology to
match the international standards. The policy makers suggested that the employees should have
considered as stakeholders, so that they could provide their inputs and help in decision making
to contribute for the success of the firms.

4.4 CONCLUSION
The global aspects concentrate on seeking common market demands worldwide rather than
dividing the world markets and treating them as separate entities. Every industrial sector has its
own distinctive requirements. Customer service is an imperative requirement in SCM activities,
and it affects various environmental factors by shaping a marketplace. Customer service in
logistics strengthens the foundation of a firm. The strategy for customer service in Supply Chain
Management requires a basic balance between expenditure and profit. However, the importance
of individual customer service elements varies among firms.
The literature above supports Supply chain’s Customer service in Small and Medium Enterprises
by showing the jolt on the value and maintain loyalty between firm and the customer through
different dimensions to fulfill the gap in the research.

Since the time of Independence for India (1947), the manufacturing sector has been a vital booster
for the Economy in the country. Despite the strong competition from the Larger sectors, the small
scale sectors have been playing a very important role in terms of employment and economic
growth. As of 2005 there has been a record number of small and medium enterprises registered
in the field of manufacturing, repairing and processing sectors. All these sectors have been
carrying out the supply chain management services.

Therefore, these sectors have been growing in number and have played a vital role in the local
and national level economic development. In this study the customer service is measured with
services including strategies, interface and quality. The basic objectives that were yielded with
the implications of supply chain was to improve quality of the product, delivery in time with
organized logistics functions. This research focuses primarily of the small and medium enterprises
in the regions of India.
 Chapter - 5
Small and Medium Enterprise in India (South Region)

5.1 Introduction
The 5 states of South Region of India faced through tough challenges in comparison with other
25 states of the country. Managing the 3rd party Logistics provider was a challenge. One of the
biggest impediments was insufficient infrastructure. Whereas the other states were way ahead in
many aspects. One of the reasons being the other states were well connected by road as most
of the commercial activities and decision were taking place up north. Since the last decade there
has been a drastic improvement in network mapping, warehousing and material handling. Thanks
for the government intervention that the control of harbors in the south got organized. The
impediments that were obstructing the development of the supply chain system were resolved
and was on par with other states. Since the time there has been an improvement in the supply
chain by making it flexible, the south region has been viewed the most emerging market in the
country. The economic restoration will be useless if the region is not able to provide adaptive
business environment for logistic stream. There needs to be more improvement in logistics to
sustain growth rate and investments. (Business Standard – MSME in South India).

Socio-Economic profile of South India

Photo courtsey: (Business Standard – MSME in South India 2018)

The major SME in India (south) are Pharma, metal, leather, textile, agricultural products and IT.
While 80% of the population is employed in the agriculture sector, only about 430 thousand are
employed in handicraft sector. Comparing to the other states from the north, the export from south
are less due to stringent policies from the national government. The northern states like Uttar
Pradesh, Punjab, Gujrat economy is growing well for the reason being that the foreign direct
investment is well received in the northern states. The Central Government seem to show less
support toward the southern region.

Transportation and telecommunications have been the focus for the development of regional
logistics by giving a priority over infrastructure. The government took initiatives to boost
infrastructure by fastening flow of raw materials to finished products by relaxing export and import
laws. The government formulated policies to improve connection of transport between inter states
and help privatization to boost building of infrastructure. Investments through Foreign to introduce
capital, knowledge and technology. This project was to introduce with newly improved and
standardized distribution channels to transport raw materials to finished goods inter-states. The
standardization of pallets driven by SMEs in association with supply chain to avoid unnecessary
repackaging during the transfer of goods.
The two biggest port in India being one in Chennai and the other in Visakhapatnam, the supply
chain should study how to improve handling of containers and organize the other activities at the
ports. The study should detect opportunities to reduce costs and improve competitive advantages
and the time between the initiation and completion of a production process. This initiative will help
Supply chain management in the region of South India.

5.2 GDP of South India Region

The GDP of India as of 2017 is 7.2% as against 6.7% the previous year. The GDP is calculated
as per: GDP = private consumption + gross investment + government investment + government
spending + (exports – imports).

Whenever there is a change in quantity and price, even the nominal value changes accordingly.

The trades of India has seen very little contribution from Service sector but the industrial sector
has shown growth. (Economist Intelligence Unit, India - 2017).

The Human Development Index (HDI) picture conveys the progress of each state as per its HDI
development rate:
 Photo courtesy - List of Indian states and territories by Human Development Index - 2017

As per the HDI report the southern states, the ranking is based on 29 states and 7 union territories:
Ranking:
Kerala – Rank - 1, HDI - 0.784
Tamil Nadu – Rank - 11, HDI – 0.708
Karnataka – Rank – 18, HDI -0.682
Andhra Pradesh – Rank - 27, HDI – 0.643

This raking suggests that the Andhra Pradesh states has a slower growth rate than compared to
other states. Districts of Andhra Pradesh like North Andhra, Rayalaseema have been extremely
backward due to hit by drought.

With this HDI report, it is quite evident that the states from south are progressive but still an
improvement in their infrastructure in logistics. The states need special attention from the national
government to utilize their natural resources and available man power. Their chief handicrafts are
: Banjara Needle crafts, Budithi Brass ware, Durga Stone Crafts, musical instrument like Veena,
silk dress materials, Kondapalli toys, Ivory crafting, sandal wood items, Bronze casting. All their
handicrafts have a huge export market.
5.3 Bangalore-Tamil Nadu Industrial Region:
The two states of Karnataka and Tamil Nadu experienced the fastest industrial growth after
Independence in 1947. Until 1960, where the industries were restricted in districts of Bangalore
and Salem and Madurai districts of Tamil Nadu. Now, they have been spread all over the two
states. These regions started with cotton textile industry and now dominate these regions. In the
following years, Silk, sugar, leather chemicals, engineering goods, rubber, aluminum, paper,
cement, cigarette industries were introduced and developed. (Article – Industrial Regions: 8 Major
Industrial Regions of India)
Dams were built in Mettur, Papanasam, Sivasamudram, Sharavati and Pykara to generate
hydroelectric power proving a huge employment rate in these regions.

Coimbatore a town in Tamil Nadu is compared to Manchester of England, has a record number
of industrial setups with power plant, coffee, cotton, tanneries and cement works.

In Bangalore, the internationally reputed public sector companies like HAL, Bharat Electronics,
Hindustan Machine Tools has further pushed the growth in these regions.

The other important industrial places have been Madurai, Tiruchirappalli, Sivakasi, Madukottai,
Mysore, Mettur and Mandya.

Iron and Steel plant in Salem and Petroleum refinery in Chennai have been recently setup.

5.4 RESEARCH GAP

Since Independence, the Indian Economy has stressed on the manufacturing sector. Especially
the small-scale industries have been huge contributors in terms of employment and growth
despite heavy competition from larger industries (as per census 2017-18).
Since then there has been a record number of companies registered in manufacturing,
assembling, processing and repairing. The standardization of supply chain processes was
enforced for the setup of these SME firms. The SME sector has also to contribute in the regional
community development. This research is to measure the customer service including services
about strategy, delivery and quality in a B2B environment. The supply chain in SME helps improve
these functions integrating with logistics to produce a good customer service. During the last
decade, there has been a huge interest among the businesses to develop a customer service
strategy to improve the value of their firms.

The literature review explores the need to understand new development of supply chain
management’s customer service in a B2B environment. Generally, the SMEs are privately owned
by single individuals. Therefore, their approach towards customer service is viewed in another
angle. They usually carry out their customer service functions through input from suppliers. The
relationship with their suppliers is very crucial. This research study believes in the findings of
various aspects of customer service in the SME in the Regions of South India. This study is proved
through observation from various documents and now it should be able to provide a developed
concept to understand customer service in SCM.
 However, the existing literatures is insufficient to support the customer service in SCM. Therefore,
there is more to provide towards the relationship, strategy, segmentation towards customers and
suppliers to connect the gaps in the analysis on customer service.
The Purpose of this study includes:
1. SME’s customer service strategy in south region of India.
2. The role of quality of service that magnifies the SCM’s customer service.
3. How the customer service strategy impacts the development of the firm’s size.
4. Suggest a model that could bring an improvement in the customer service strategy in the region
of South India.

OBJECTIVES & METHODOLOGY

1. INTRODUCTION
 To study the strategies of customer service in supply chain management
 To study the role of quality in service to boost the service to customer in supply chain
management
 To evaluate effectiveness of relationship marketing in providing customer service in supply
chain management
 To find out the impact of overall size of firms on the customer service strategy.
 To propose a model that could improve customer service in supply chain management.

The power of an Industry is obtainable by collaborating with suppliers and customers through
effective supply chain management. This is to create a security in the market based on value
delivered to meet customer needs. Value is not necessarily permanent in a product but, the way
the experience is perceived by a customer and he knows that how this product standout compared
with its competition that defines the real Value. The customer satisfaction also influences the
success and growth of the supplier’s firm.

The primary function of supply chain is to create and meet the value of customer. Customer
satisfaction defines the success of the firm. To understand the various activities of an organization
and implementing strategies is part of core functions of a supply chain management. The SCM
can achieve its goal by improving efficiency and at the same time being cost effective. (Slater –
Journal of Marketing - 1994).

Hence, customer service in an important aspect of SCM and it plays a crucial role for the
development of Small and medium scale.
Henley, 2006 explains the structure equation model is used to explain relationship among
dependent and independent variables in each problem. This helps in identifying the nature,
presumptions, dependence and as well evaluate direct and indirect connection of the above-
mentioned variables.

2. Formulation of Hypothesis
The author examines various factors that are affecting the supply chain’s customer service in
SME performances under the categories of Satisfaction, relationship, financial, quality and
segmentation.

3. NATURE AND SCOPE OF THE STUDY

The essence of this study is to explore and illustrate various direct and indirect factors be
connected with Supply Chain’s Customer Service of Small and Medium Enterprises with a special
focus given to India’s South Region..
The study examines the interaction between Customer and supplier in B2B environment.
This study proposes insights that may be useful for the SMEs policy makers and researchers in
marketing in the regions of India. The proposed policies may help increase in customer service
for B2B customers and suppliers by improving customer service quality which may be utilized by
top management by inculcating these policies.
The study concentrates only in the regions of India. There have been 1,130,784 companies that
have been registered as of beginning of 2018. (As per District Industrial Centre).

For the Development of Industrial Base, the SMEs in the regions of India have been able to attract
foreign investors with the assistance of the Government. The change in investment laws has
encourages the private sectors to improve their market orientations and attract investors of other
regions. Among the 29 states in the Country, each state has been identified based on their Skilled
employment capabilities and export potentiality. Some of the products that are exported from
India are Steel, Iron, pharma & Health Care, Cotton & textile etc. There are almost 485 million
people employed in these sectors, but it is a very small number compared the remining 75% of
people still working in the agriculture sector. (Indian Economic Profile – 2018).

This study gives a special focus about industries in the five states of South region in India as per
DIC (District Industrial Center – 2017 report) there are up to 1748000 MSMEs registered in India.
Just alone in south region there are about 582600 registered MSMEs in South India (about 1/3rd
of the total country). This region has been able to attract investors from other states and with the
assistance from government there were some direct foreign investments as well that were able
to strengthen the base for many industries. There was more focus on relaxing laws on private
investments so that it could directly impact the improvement of Economy in these regions.

The traditional industries of the South region are textile, agriculture, pharmaceutical, Cement have
been given a priority because these have proved to be of export quality and have a huge market
abroad. The textile industry alone employs about 3.4 million which is very less compared to 80%
 of the population (of 1.3 Billion) still depending on agriculture sector. (Indian Economic Profile –
2018).

4. SME’s of SOUTH INDIA REGION AND THEIR DEVELOPMENT

The 5 states in South region has faced very tough challenges in comparison to other 24 states in
the area of SMEs and 3rd party logistics providers pertaining to development of infrastructure. One
of the main reasons is that the Central government is more focused on developing the other
regions up north because there is availability of more resources and the population is higher than
compared to South. Only by comparing a neighboring state like Maharashtra which is way ahead
in many aspects. All the other states are well connected through roads and other various
networking and communication channels. But in the South Region, because of the mountainous,
climatic and other natural hindrances has become a challenge to setup strong network channels.
Despite these hindrances the South region in the last decade has emerged as the most desirable
place for Business setups in the country.
The governments of the 5 states have been trying to introduce laws and policies (standardization
of pallets size, attempts to reduce loading and unloading shipment costs, increase in foreign direct
investments in form of introduction of Latest Machinery) and that which are adaptive and flexible
for Supply Chain / Logistics Managers to help them sustain trade and investment in their region.
In recent times the infrastructures of transportation industries and telecommunication industries
saw a significant growth. The Government has been proactive in increasing their participation in
development of Infrastructure projects which improved the flow of import and export of both raw
materials and finished goods.

The Government also recognized the need of foreign investments to improve the area of
transportation and logistics to improve technology and knowledge to open new distributional
channels within SOUTH and to also be well connected with other regions.

5. SEM (Structural Equation Method) is a flexible process based on assumptions by

allowing it to make clarification when there is a co-relation between independent variables in a
Regression Model. This correlation is a problem because when you try to fit the model and
interpret the results and if the degree of correlation between variables is high enough, it causes
problems. Therefore, independent variables should be treated as independent.

It applies CFA (confirmatory factor analysis) to measurement errors and reduce it (Peterson
2006). The other characteristic of SEM is to consolidate latent variables turn it into a examination
to study. This consolidation of latent variables with unperceived concept can be served by
measurable variables which can also enhance estimation statistically. Against the background of
this theory a group of specific dependent relationship betwixt exogenous and endogenous
variable can be tested. Gerbing(1998) suggested two ways to analyze this testing model.

1. Confirmatory Factor Analysis (CFA) is executed in pursuit of verifying the durability of latent
variable individually. CFA executes to measure the credibility and authenticity of customer service
in Supply chain among small and medium enterprises regarding customer and supplier in the
point of view of strategy, quality, segmentation, interface, and relationship. CFA is performed to
measure the overall size of the firm.
2. Once when the CFA testing is performed, SEM tests the connection between latent variables
through which a supposition or proposed explanation made on the basis of limited evidence as a
starting point for further investigation is tested.

Photo courtesy : Structure Equation Method, Customer Satisfaction

6. CONFIRMATORY FACTOR ANALYSIS (CFA)

Confirmatory factor analysis (CFA) is a technique that is used statistically to substantiate the
structure of factors that are affiliated to a group of observed variables. The researcher benefits
from using CFA to examine the hypothesis to define the observed variables relationship with its
underlying existence of latent constructs. During this research, the CFA method was tried to
discover the best instrument to measure the constructs. CFA was applied to measure the
durability, authenticity and sustainability of SCM’s customer service among small and medium
enterprises and by considering customers and suppliers viz., strategy, interface, segmentation,
relationship and quality.

There are two types of CFA: 1. Reflective and 2. Formative

(Martin Schmettow - University of Twente - 2013)
1. Reflective measurement theory directs from latent constructs towards measured variables.
Although, formative measurement variables cause the latent constructs. It is easier to study the
behavior and attitude to judge the intentions. (Hair, Joseph F. et al. - 2009). Technically, the
reflective measures are anticipated to have high inter-correlations. This is the way to test
exploratory/ confirmatory factor analysis.
2. Also, the very common Cronbach's alpha measures unidimensional of a scale by inter-
correlations. The measure scan precisely "reflect" the inactive variable. Most personality scales
are constructed as reflective.
3. Formative measures are not expected to correlate. They can be thought of having "formed" the
latent property in the past. For example: It is the analytical thinking and reading abilities that help
develop mathematical skills. However, the two prerequisites are not informally related, to the
extent that a strong correlation between the two cannot be expected.
 REFLECTIVE FORMATIVE

TIMELINESS LIFE STRESS

X1 X2 X3 X1 X2 X3

X1 – Accommodates Last minute Requests X1 – Job Loss

X2 – Punctuality in meeting Deadline X2 – Divorce

X3 – Speed of returning phone calls X3 – Recent Accidents

Indicators must be highly Indicators can have +, - or 0

correlated (Hulland, 1999) correlations

Jörg Henseler 2017 (University of Twente) in his article - Bridging Design and Behavioral
Research with Variance-Based Structural Equation Modelling - states that the division about
formative-reflective is outdated. Jorg Henseler’s new study separates between causal-formative,
reflective and composite formative measurements. Causal-formative measurement can be
administered with the AMOS software with the help of a MIMIC model. He asserts that the most
proposed formative second-order constructs can be thought of as composite-formative, however,
neither AMOS nor Smart PLS helps you further in this instance. The sole feasible option is now
ADANCO, it is a variance-based SEM’s new software. It should be noted that the introduction of
second-order construct, the model fit must be tested. It is pointless to resume with second order
construct if the Model fit is notably worse in place of a model fit without the second order construct.

(Mentzer, 1989) There are two domains that exists in the outcome of customer service
performance – Response of customer domain and Supplier’s activity domain.

The customer’s domain consists of perception of the customer for being accurate and responsive.
One of Supply chain activities is the customer service activities which is to improve efficiency and
its outcome is to deliver – Value. One of the several important elements of customer service
management is customer service strategy that help expand and develop supply chain activities.
These strategies help in understanding the level of satisfaction from strategic customers. This
also helps in developing the capabilities of the organization to provide suitable service to
customers with different segments. One of the important features to develop - customer service
is to figure out the failure in service in form of costs and response. Also, to understand the effect
of service provided on higher levels which contribute on revenue generation, customer
satisfaction and the potential to be responsive to change in market.

The activity of supplier’s domain is made up of the time period of an order placed after previous
order and completeness.

7. Generation of Scale Items

The interactions between subjects’ experts, government, SCM managers identified various
measurements for customer service in Supply Chain that includes service quality, interface and strategy
for suppliers and customers in a B2B chains. The study examines upon how the customer services is an
influencing factor in the supply chain management. Basically, the study was based on the design of
SCM’s customer service among the Small and Medium Enterprises, therefore an individual instrument
was constructed with business to business orientation in supply chain management. Various small firms
which is normally owned by single individuals, the owners utilize the inputs from their suppliers for
product development. - Aviv (2002)

8. Scale Items
The study covers all the aspects of supply chain’s customer service in small and medium
enterprises. The data was collected from several authors from various journals and literatures,
discussion with experts in the field of supply chain and marketing. The study was split into
customer strategy, segmentation, quality and relationship which includes with supplier and
customer.

9. DATA COLLECTION FORMS

In this study both primary and secondary sources of information has been used for gathering
information related to problems while conducting the research. Whereas, the primary source of
information is an information collected through customers directly and secondary source of
information is collected from journals, books and the internet has been a great source in collecting
the data.

A survey form was designed to understand from the people what is their understanding about
customer service supporting supplying chain management in small and medium scale industries.
A set of eleven questions as below was asked to 30 people and 27 people responsed. The
following is the result from the survey

1. Are you aware of the term customer service?

100% answered YES.

2. How important do you think customer service is important for the profit of the business?
 88.9% think it is very important

3. Do you think gathering information from customers is important to develop better product?
100% think it is a – YES

4. Do you think by having Customer Service department can help retain customers?
100% - YES

5. Do you think India is an economic feasible country for businesses to outsource their customer
service activities?
66.7% agree.

6. How important have been the small and medium scale industries for the development of a
nation?
1. Provides Employment opportunities
2. Promotes Cultural Development (Improves communication, Training facilities, Infrastructure etc)
3. Pays taxes to Govt
4. All the above
44.4% think providing employment is the top priority and 33.3% think its All the above.
7. Do you think SME’s require support from the government due to competition from larger
industries?
33.3% think that government interference is required but many think that since these companies
are privately owned by single individuals and the capital investment is usually self-arranged. But
Government interference is still required because many unions and law bodies will require to be
governed.

8. Do you think outsourcing logistics to a 3rd party can be profitable for the company?
Only 22.2% think so but otherwise since 44.4% think the size of the company - matters.
9. How often do you contact the customer service of a company to provide your feedback?
88.9% state that they do it at least once a year.
10.Which type of companies to you often provide your feedbacks?
The options being
A. Restaurants
B. Mobile network providers
C. Travel Agencies
D. Daily Usage item (for e.g.: Toothpaste, soap, creams, chocolates etc)

The poll suggested that 66.6% - the Restaurants are usually a common place to give feedbacks.
11. Do you really think if your feedbacks were valued and if the company really made those
changes that you had suggested?
Only 11.1% think so
 10. Reliability of Testing and Result
The above survey was conducted by involving various individuals who have some experience in
the field of supply chain and customer service. The result proves that customer service is an
additional department for a business whose primary responsibility is to interact with customers
and develop a healthy relatioship with them and take feedbacks that could improve their
sustainable opportuinities in the market. There was also a focus on customer service relationship
with Small and Medium Enterprises in this survey. Majority of the answers received agree that
SME have a major role to play in a Nation’s economic development which also includes regional
developmemt in the area of educational and cultural development.

11. Suggestions for Managers

Based on the findings related to small and medium enterprises in India (south region), the
following are the suggestions to the managers that could be followed to improve their customer
service in their supply chain management.

The managers should study seriously to understand port activities in towns like Vizag, Cochin,
Chennai, Mangalore and Tuticorin. The managers could bring improved efficiency in handling
containers that could lead to savings in handling costs and transport costs. These ports are
geographically located in a highly competitive zones and may connect to important distributional
channels – nationally. It may give a strong competition to other ports in the country.
1. The most important activity for an organization is purchasing. Therefore, it is necessary to
increase the power of Purchasing skills. This skill can be developed by having a depth knowledge
about Pricing, opportunities available in the market, competition and control logistical decisions.
2. The most common problems occur in SCM are associated to managing inventories, time
consumption in logistics, especially when the distance is far off. Then there are other obstacles
are related to lack of knowledge and maintaining ties with suppliers and customers in a B2B
environment.
3. The most important problems that occur is related to sourcing for production, finances, material
management, marketing and logistics.
4. It is necessary that there are multitasking skilled professionals, amalgamation with cross
functional teams during the process of manufacturing. Support the strategies for good customer
service activities.
5. One of the important objectives of supply chain is to increase competitional advantage for all the
channels associated with the firm. The firm should offer value to customer greater than its
competitors offer. The Customer Value must be created keeping costs low and collaborate with
customer’s feedback for production of better products.
6. There are 4 basic concepts in Marketing 1. Creating a message 2. Branding 3. Positioning 4.
Profitability. These concepts also make an impact on the supply chain. This marketing orientation
helps to focus on market information generation and spreading information and to be responsive
to customers. These marketing concepts could help restructure the organization’s system which
could further help in building commitment, trust and corporative norms with other firms.
7. There are four elements of Supply Chain 1. Supply 2. Operations 3. Logistics 4. Integration. These
four elements can be initiated to collaborate with planning, forecasting and replenish for a
successful process of supply chain.
8. There should be more focus on Purchasing decisions because purchasing is a very critical role
of all the other activities of a firm. This process should be looked beyond the relationship of a
mere Buyer and Seller.
9. Corporate strategies are a hierarchical strategic plan of an organization which defines the long-
term Goals and Directions and the ways they will be achieved. By applying logistics strategies,
the organization can achieve their goals.
10. Good planning can help companies to capitalize opportunities which will improve functions of
supply chain operations. The company should communicate its performance with all its stake
holders regularly.
11. The overall strategy of the firm is to understand the purchasing requirements. It is important that
the partners in supply chain and the relationship with them should be maintained on long term
basis.
12. Firms must develop and share their information system that can help combine all the supply chain
processes. The competitiveness for a firm is based on cost, improved customer service value,
long term relationships with suppliers and customers, to adopt ecommerce business environment.
13. There should be an open exchange of information between companies. This could help in
interpreting needs of customer and also the supply chain management functions could be
improved.
14. A company should monitor on its requirements and performance of a customer service that
influence on customer behavior.

12. Exploratory Structural Equation Model (ESEM)

It is an integration of exploratory factor analysis (EFA) within the global GSEM framework by
exploring data to provide information on how to best present the data with several factors involved.
These factors are not theory based and they obtained through statistical results.
Whereas, Confirmatory Factor Analysis (CFA) uses statistical technique to authenticate the
structure of factors from a set of variables through observation. CFA helps to differentiate
between observed variables and their underlying latent constructs exists (Hair, Joseph F. - 2009).
ESEM is a combination of measurement theory and a structural theory. For a business research,
the ESEM data analytical technique is the most popular because it is capable to measure -
measurement model and structure model at the same time.
The measurement model analyzes the relationship between variables and constructs. Structural
model determines the liaison between the underdeveloped variables of interest aka composite
measures. Another aspect of ESEM is that it can handle independent variable can be transformed
into a dependent model in another relationship.
 13. LIMITATIONS
All the efforts have been made to maintain the objectivity and reliability about the information in
this research. However, there have been some restrictions as follows:
1. Unable to provide accurate information about the customers due to privacy.
2. The scope of the study was limited to India’s (SOUTH) for Small and medium scale industries.
3. There were many variables involved in customer service aspects because of which some
variables have been missed out for example: images, the complete practices of customer
relationship management etc.

14. CONCLUSION
This study highlights five significant latent constructs of structural model namely, Customer
service strategy, relationship, segmentation quality and overall firm’s size which also includes
shareholder like suppliers and customers.
When examining the alliance between supply chain management with latent construct of small
and medium enterprises it was established that the relationship was stronger regarding customer
service of suppliers and customers.

All these latent variables used were widely recognized and supported based on the study of Aviv
(2002) noted about the supply chain inventory management, Holmberg (2000) described system
perspective on supply chain measurement, Closs and Xu (2000) based on logistic information
technology practice in manufacturing firm, Goh and Ang (2000) emphasized on logistics realities,
Mortensen et. al. (2008) on attractiveness in supply chain, Bhatnagar and Teo (2009) defined
logistics in enhancing competitive advantage, Gilmour (1999) put forward strategic audit
framework to improve supply chain performance, Clarke and Freytag (2008) talked about intra
and inter organisational perspective on industrial segmentation, Canever, Trijp and desLans
(2007) studied the benefit features segmentation in supply chain strategy, and Eckert and
Goldsby (1997) elaboration likelihood model to guide customer service based segmentation.
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