Customer service in physical distribution: a utility-function approach

Decision analysis in management science employs concepts from economics such as utility functions and indifference curves. A utility function U models the "satisfaction" that a customer obtains from logistics service. Here U depends on two attributes (lead time, fill rate) whose values mor...

Full description

Saved in:
Bibliographic Details
Published in:International journal of physical distribution & logistics management 1997-12, Vol.27 (9/10), p.540-558
Main Authors: Bookbinder, James H., Lynch, Maureen E.
Format: Article
Language:English
Subjects:
Attitudes
Brand loyalty
Costs
Customer satisfaction
Customer service
Customer services
Decision making
Diminishing marginal utility
Distribution
Expected values
Linear programming
Logistics
Management science
Materials handling
Perceptions
Psychological aspects
Risk aversion
Risk premiums
Services
Studies
Utility functions
Variables
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Decision analysis in management science employs concepts from economics such as utility functions and indifference curves. A utility function U models the "satisfaction" that a customer obtains from logistics service. Here U depends on two attributes (lead time, fill rate) whose values more directly represent customer service. The shipper can, at additional cost, improve either or both of these attributes. Constructs and maximizes various utility functions U given a total budget B for distribution service. Finds that without increasing the budget overall logistics service can often be improved from the customer's point of view. Whether U is additive or multiplicative, a customer's utility resulting from the optimal lead time and fill rate is typically 20 per cent higher than when those attribute levels are set intuitively (without reference to customer preferences and tradeoffs expressed by U). Gives some introduction to decision analysis (certainty equivalent, risk aversion, ) to aid in understanding the functional forms employed for U and methods of solution, rendering the paper more self-contained.
ISSN:0960-0035
1758-664X
DOI:10.1108/09600039710188585