Modelling Customer Satisfaction to Improve Receivables of a Firm in a Supply Chain

Modelling Customer Satisfaction to Improve Receivables of a Firm in a Supply Chain

Mohammad Hossein Jahangiri (University of Surrey, Guildford, UK)
DOI: 10.4018/IJAMSE.2020010102

Abstract

A firm in a supply chain usually defines payment strategies such as penalty rate, delivery time, customer discount, and quantity of order fulfilment regarding the invoices issued for the products ordered by the customers, whilst these payment strategies affect not only the amount paid by the customers but also customer satisfaction. The main aim of this article is to evaluate the effects of customer satisfaction on the cash inflow of a firm in a supply chain. In fact, this article develops an optimisation mathematical model to maximise the amount of cash received from customer within a time horizon through maximizing customer satisfaction and optimising the payment strategy parameters. Customer satisfaction in each period is defined as a dependent variable of three parameters such as penalty rate, demand variation and delivery time. All the firms in a supply chain can adjust these parameters to improve the amount of cash received from the customers. The penalty rate in each period is related to the amount and time of cash received from the customers in that period and the amount are supposed to be received from the customers in the next period. Consequently, customer discount can be applied to improve the firm's input.
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Background

Customer satisfaction with conceptual and experimental evidence can be defined as a feeling or judgement that features of a product or service provide a pleasurable level of consumption related to its fulfilment (Oliver, 2010). Similarly, customer satisfaction is viewed as the perception of the products’ performance in relation to the expectation, and is often used as an indicator of whether customers will return to repurchase or not; satisfied customers are likely to purchase again, whereas dissatisfied customers are likely to leave and try elsewhere. Thus, the firms with dissatisfied customers surrender the market to its rivals who offer better products and services (Nagel and Cilliers, 1990, Narteh and Kuada, 2014, Hansemark and Albinsson, 2004, Torres and Kline, 2006, Tripathi, 2014, Simon and Gómez, 2014). In this paper and based on the definition presented by Webster (2000), a customer is an individual or business entity that buys and pays for the product to acquire it. Since the customers who pay for the products or services are the biggest source of cash inflow for a firm, a higher rate of customer satisfaction leads the firm to have a greater number of satisfied or loyal customers, and concomitantly greater cash inflow. Maximizing the number of satisfied customers and also maximizing cash inflow is the primary aim of every firm (Simon and Gómez, 2014, Anderson and Mittal, 2000, Fecikova, 2004, Bartikowski and Llosa, 2004, Nagel and Cilliers, 1990). With this in mind, customer satisfaction has become the central concept of modern marketing. Such a marketing concept emphasizes delivering satisfaction to the customers who pay for the products or services to obtain a profit in return; hence, measuring customer satisfaction is becoming an importance issue in business practices today.

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