suppliers, do you know your customers

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Suppliers, do you know yourcustomers?

R.A. SchofieldRLC, UK, and

Liz BreenUniversity of Bradford School of Management, Bradford, UK

Abstract

Purpose The purpose of this study is to investigate the customers perception of service qualitywithin the context of the pharmaceutical supply chain, and look specifically at the supplier/customerrelationship.

Design/methodology/approach The research in question focuses on the trading relationshipbetween a pharmaceutical wholesaler and its pharmacy customers. Existing literature shows thatquality of the overall service is determined by the customers perceptions of that service; therefore it isimportant that the supplier measures the customers perception of service quality and understandswhat factors influence that perception and build this into their service delivery. The data werecollected via a series of qualitative semi-structured interviews with hospital and retail pharmacieslocated in the North West of England.

Findings The findings show that pharmacy customers have a range of vitally important to lessimportant criteria associated with good service quality and that pharmaceutical wholesalers assuppliers should aim to excel at the vital and important issues and meet those of lesser importance tosatisfy customers expectations of service quality.

Research implications/limitations This reinforces the importance of measuring customerexpectations and incorporating outputs into service design to ensure a customer focus to the service

provided. Further consideration should be given to adopting the SERVQUAL tool in conducting futureresearch and analysis.

Practical implications Suppliers should be aware that there are vital activities that customersexpect to have performed/delivered and that they need to know what these are and excel at these,whilst managing less important criteria effectively.

Originality/value This paper provides an insight into the customer-supplier relationship withinthe pharmaceutical supply chain in the NHS, which will be of benefit to practitioners and academics inthis field.

KeywordsPharmaceuticals industry, Supply chain management, Customer services quality,Consumer behaviour, United Kingdom

Paper type Research paper

IntroductionSince the work of quality gurus such as Crosby (1979), Deming (1986), and Juran (1988),gained in popularity during the 1980s, it has become widely accepted that high qualitygoods and services can give an organisation a considerable competitive advantage.Good quality can reduce costs such as re-work and returns, but also creates satisfiedcustomers (Slacket al., 2003). Juran (1983) defined quality initially as fitness for usebut also noted that quality is customer satisfaction. This implies that quality of aproduct or service is ultimately determined by the customer. The internal organisation,

The current issue and full text archive of this journal is available at

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Received April 2004Revised September 2004

International Journal of Quality &

Reliability Management

Vol. 23 No. 4, 2006

pp. 390-408

q Emerald Group Publishing Limited

0265-671X

DOI 10.1108/02656710610657594
http://www.emeraldinsight.com/0265-671X.htmhttp://www.emeraldinsight.com/0265-671X.htm


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physical support of the service producing system, corporate image, staff-customerinteraction and the degree of customer satisfaction all contribute to service quality(LeBlanc and Nguyen, 1988).

Based on the work of authors such as Parasuramann et al. (1988) the predominant

accepted notion of service quality involves the differences between expectations andperceptions on all of the factors that matter to the customer (as cited in Drew andKarwan, 1994). However, it has been argued that the majority of research on servicequality focuses on the customers perception and ignores that of the service provider.Both perspectives should be considered (Svensson, 2002). The perceptions of thesupplier are based primarily on internal and external performance measures that arerelated to creating a satisfied customer. What is suggested though is that theperceptions held by the supplier of customers expectations and perceptions of servicecontent and delivery are not necessarily accurate. Thus, data collected concerning thiscan lead to potential misinterpretation, inaccurate specifications being developed andincorrect designs being drawn up and implemented.

The need to acknowledge the role of the customer and meet their needs in theservice environment has become evident in the literature produced in managementcircles in recent years. In service processes, customers are more than mere consumersof output, they are co-producers of the process (Gronroos and Ojasalo, 2004). Earlierworks in this area, e.g. Parasuraman et al. (1985) have paved the way for futuredevelopment and exploration, such as variations on the GAP model (Frost et al., 2000;Giannakis and Croom, 2003) and the use of SERVQUAL (Pagouni, 1997; Curry andStark, 2000). Current literature has responded to changes in the service market withresearchers now investigating the concept of service quality aligned with technology

(Tanet al., 2003; Bharati and Berg, 2003; Voss, 2003), with gender issues (Spathiset al.,2003), and customer expectations and satisfaction (Bebko, 2000; Santos, 2002;Svensson, 2002; Giannakis and Croom, 2003; Filho et al., 2004).

When examining service quality consideration needs to be given to what thecustomer expects from the service provision and how the supplier determines this andreflects this in the service design and provision. Thus, delivering a service which meetscustomers expectations and thus incites satisfaction. Satisfaction includes evaluationof service quality, product quality and price (Parasuraman et al., 1985). Researchconducted suggests that customers do not necessarily buy the highest quality servicesbut buy services that provide more satisfaction (Lee et al., 2000). Factors such asconvenience, price, or availability may influence satisfaction while not actuallyaffecting customers perceptions of service. It costs less to serve experienced customersand therefore greater profit is achieved (Reichheld, 1996). However, in the currentclimate of fierce competition the quality of service throughout industry is seen to be a

source of competitive advantage and is something that cannot be ignored (Christopher,1998).

The large pharmaceutical wholesalers carry similar products and therefore theservice that they offer can be a method to differentiate between themselves and theircompetitors. Customers are starting to assess suppliers on more than just price and thetangible quality of goods and their delivery. Dimensions of quality in the service

domain can be seen as customer/account winning and account qualifying criteria(Roth and van der Velde, 1991).

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There has been little academic research into this area, i.e. in the pharmaceuticalwholesaler to hospital pharmacy in a supplier-customer context. This research willtherefore aim to provide a clear portrayal of a suppliers response to customerperceptions and expectations and their impact on service delivery. It will also discuss

how services should be designed and provided in line with customers actual needs andnot the suppliers anticipation of these needs or operational strengths.

BackgroundWithin the North West of England there are four main pharmaceutical wholesalerswhich service this area amongst others. They provide a service to NHS hospitalpharmacies, retail pharmacies, GP surgeries and clinics. The service provided tohospital pharmacies is generally a twice-daily delivery unless specified otherwise. Thetrading relationship between the wholesaler and customer is governed partly byregional contracts and by locally negotiated contracts between the supplier andcustomer (where the customer can attain a specific discount on discountable items as

agreed by the supplier). The regional contracts however are subject to a tenderingprocess and the prices agreed are uniform across the region. The discount arrangementcan benefit certain hospitals as the amount of discount received is reflected in thebusiness achieved by the supplier from customer.

The choice of which pharmaceutical wholesaler to use has traditionally been basedon cost, both in hospital pharmacies and retail. The wholesaler offering the bestdiscount would win the order or contract. Some hospital pharmacies have attempted tomonitor the performance of their suppliers and feedback information to them (Ritchie,2002). However, it has been difficult to reconcile the internal performance measuresused by the wholesaler with those used by the hospital pharmacies. It may be that thewholesalers have not yet addressed the issue of customer expectations and perceptionsas a measure of service quality, and as a means to improve customer satisfaction and

create competitive advantage. Rather, it is expected that performance is measuredusing financial and internal operationally-based key performance measures such asstock availability and order completeness.

Company profileWholesaler X is a Super Regional Distribution Centre (SRDC), and part of Cirricomswholesaler division (Cirricom, 2003)[1]. Cirricom is a leading European distributor ofpharmaceutical, healthcare and wellbeing products and services. In 2003 Cirricomsturnover reached 8.8 billion (e12.7 billion) and has an approximate marketcapitalisation of 1.8 billion (e2.55 billion) (Company web site, December 2003).Cirricoms network serves over 85,000 pharmacies and other healthcare customersfrom 222 warehouses and employs over 30,000 people. The Company integrates

state-of-the-art logistics techniques, e-business and related technology tools, andinnovative commercial arrangements to deliver its services to customers and suppliers.Its retail pharmacy division operates over 1,092 pharmacies in the UK, TheNetherlands, Italy, Norway and Switzerland.

Wholesaler X provides medical products, stored in the Location A warehouse, andover the counter (OTC) products, which come overnight from a Central DistributionCentre (CDC) at Location B to 928 customers in the North West region of England. Atotal of 70 of these are hospital pharmacies. The warehouse at Location A currently

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covers 67,000 square feet of space with 4,200 pallet spaces. Distribution of products iscarried out using wholesaler X vehicles that deliver twice a day during the week andonce on Saturday. There are 50 different delivery routes. There are approximately 360employees of whom 50 per cent are part time and 58 are van drivers. The warehouse

receives deliveries from pharmaceutical companies weekly or fortnightly and holdsapproximately two days of buffer stock in addition to the seven or 14 days of stockdelivered each time. The warehouse can receive in between 250,000 to 500,000 items aday and holds 16,000 different lines of which 300 are lines held for manufacturers. As asuper RDC, wholesaler X holds the full range of items including slow moving stock.The stock is managed using the worldwide chain stores inventory stores system.

Service quality responding to customers needsWithin the NHS quality is critical in both its delivery and output. Recent years haveseen the growth of Clinical Governance in the healthcare arena, a quality initiativeaimed at instigating quality practices and encouraging a cultural change within the

NHS which instils quality in everything that it does. Clinical Governance has beendefined as a system through which NHS organisations are accountable forcontinuously improving the quality of their services and safeguarding highstandards of care by creating an environment in which excellence in clinical carewill flourish (Scally and Donaldson, 1998).

Considering the nature of the beast, the NHS has to be one of the most complexservice providers in industry today, and thus bearing in mind the demand on itsresources and the task at hand, quality needs to be second-nature or even ingrained tothe extent that it happens naturally without any consideration on the part of theprovider or recipient. Whilst clinical governance is an internal quality initiative, itsefficacy is reduced by external factors such as poor performance received frompharmaceutical suppliers and wholesalers. This can cause a ripple effect and can have

a detrimental impact on internal logistics within hospital pharmacy. Suppliers need toacknowledge their potential role in causing such problems and factor this into theirservice delivery.

In order to win and retain customers it is now widely regarded as important toachieve customer satisfaction. To achieve this requires an understanding of thecustomers expectations. However, what the pharmaceutical wholesaler believes thecustomers expectations of good service quality to be may not be the same as how thecustomer perceives the service. It is the difference between the two that may determineservice quality and how satisfied the customer is.

The earlier works of this area, as mentioned previously are generally linked toParasuramann et al. (1985, 1988). The outputs of their research identified tendimensions of service quality; tangibles, reliability, responsiveness, communication,

credibility, security, competence, courtesy, understanding/knowing the customer,access (Parasuramann et al., 1985). These were later reduced to five dimensions:tangibles, reliability, responsiveness, assurance and empathy (Parasuramann et al.,1988). Services were also believed to consist of two segments, the procedural andconvivial segments (Martin, 1986). Procedural segments relating to those systems,which provide the service continuously, and efficiently to the customer. Convivialsegments are those which the customer warms to, e.g. attitudes, behaviours and verbalskills of the service provider. Other factors associated with standards of convivial


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service are; body language, tone of voice, tact, the ability to name names, individualisethe customer, attentiveness, making the customer aware of alternatives available andproblem-solving (Saleh and Ryan, 1991).

Silvestro and Johnston (1990) carried out research within UK service

organisations. They too identified dimensions of service quality, a total of 15,which they then categorised into hygiene factors, enhancing factors and dualthreshold (critical) factors. Hygiene factors were those that are expected by thecustomer as the basic level and if not delivered will result in dissatisfaction.Enhancing factors were those that lead to customer satisfaction but which will notnecessarily produce dissatisfaction if not delivered, and dual threshold factors werethose where failure to deliver will produce dissatisfaction however delivery abovea certain level will enhance customers perceptions of service and lead to customersatisfaction.

Recent work by Kennedy and Curasi (2002), aimed at understanding the factors thatcontribute to customer loyalty, identified a series of different levels of loyalty:

purchased loyalists, satisfied loyalists, prisoners, detached loyalists and apostles. Theyidentified that the primary factors distinguishing levels of loyal customer were the roleof customer satisfaction, the bond connecting the consumer to the supplier, the level ofcustomer commitment and the available choices for customer. The authors noted thatmost levels of customer loyalty include a requirement for a positive attitude from thecustomer towards the service provider. A positive attitude to the supplier can belinked, amongst other things, to a positive customer perception of the quality of serviceprovided and to customer satisfaction.

So, how can a supplier ensure that a customer is satisfied with the quality of serviceprovision and think favourably of the service provider and service received? Theconcept of partnerships and whether they are successful in securing such favourablerelationships and outputs has been widely debated (Kanter, 1994; Mikkelson and

Johansen, 2001; Lauet al., 2002; Theodorakioglouet al., 2003). Work by Kanter (1994),identified that good inter-company relationships had certain characteristics such asfrequent communication, good passage of information, trust and commitment. Onlyrelationships with full commitment on both sides would endure long enough to createvalue for the partners. There is therefore a time aspect involved in realising the valuefrom close integration.

Within the UK, the Government has committed itself to modernising the publicsector including the National Health Service and partnership and innovation are beingactively encouraged (Maddock, 2000). Research in the NHS suggests that thisfundamental change of approach to partnerships is facing difficulties due to theconflicts between partnership and the public sectors requirements for stringent

performance monitoring (Maddock, 2000).Partnerships however can be detrimental as some organisations may not be ready

for them (Mikkelson and Johansen, 2001) and this can lead to discontent with theindividual partners. According to Forker and Stannack (2000), some firms continue tomaintain arms-length relationships with their suppliers and to use competition andsupplier switching as motivations to obtain optimal performance from their supplybase. Further writings however have been presented on this area (Ireland, 1999;Lonsdale, 2001; Caldwell, 2003), focussing on issues including supplier dominance,

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impact of regulation on buyer and supplier power, understanding buyer and supplierpower, and satisfying dependent customers.

In order to determine how effective a service is and whether it is meeting the needsof its customers, performance measurement practices needs to be in place. The

literature discusses a number of specific methods available to measure service quality.The tangible aspects of service can be measured using the very basic quantitativemeasures of operational performance objectives related to meeting customerexpectations; for example those defined by Slack et al. (2003): speed, quality,dependability, flexibility and cost. In addition to measuring the tangible aspects ofservice quality there are techniques that have been developed in total qualitymanagement, service quality and service-marketing literature that enable the moreintangible aspects of service quality to be measured. Examples include tools such asthe Balanced Scorecard (Kaplan and Norton, 1992), mystery shoppers (Wilson, 1998),customer feedback and focus groups, and SERVQUAL, (Parasuraman et al., 1988) orderivations of SERVQUAL (Martin, 1986; Saleh and Ryan, 1990, 1991). Measurement ofservice quality has traditionally been a measure of customer satisfaction however asthe literature has evolved, customer service or service quality has come to be defined asthe difference between customer expectations and perceptions (Lewis, 1999).

In research conducted within the hospitality industry by Saleh and Ryan (1991), agap analysis was performed in order to ascertain the quality of the service beingoffered as considered by both supplier and customer. The results for Gap 3,management perception of service delivery and guests perception of service delivery,indicated that out of 33 items, management scored 15 items higher than the guests, andin seven of the variables the difference was statistically different. Overall, the findingsin this case implied that there was congruence between guests and managementperception of the quality of service albeit on separate items some differences did exist.

Lewis and Klein (1987) in a like analysis report that on 29 of 44 variables examined

management held the view that they delivered a service that was deemed to be good,whereas in fact the guests had scored the services lower than management. Researchconducted by Tsang and Qu (2000) in the Chinese Hotel Industry indicated thattourists perceptions of service quality provided in the hotel industry in China wereconsistently lower than their expectations and that managers overestimated theservice delivery, compared to tourists perceptions of actual service quality. From theresult of their gap analysis, was concluded that delivery gap and internal evaluationgap were the main reasons contributing to the service quality shortfalls in the hotelindustry in China.

Can it therefore be taken for granted that without monitoring customers views ofservice provision that service managers can ever get it right in relation to the appropriateand purposeful service provision? Regular performance appraisal within the supplier

organization also encourages the direction of efforts and resources to those activities thatmost impact upon the customer base and that are deemed important to them, e.g. have apositive impact on then internal logistics. By assessing activities through the use of toolssuch as the performance/importance matrix (Chase and Hayes, 1991), managers can bestdetermine where and how to allocate improvement resources in line with where customersneed and expect to see excellence in operational efficiency.

Due to the nature of services, the true test of success is the delivery and experienceof the service provision itself. Should it fail, contingency plans need to be in place to


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recover quickly from the situation in order to reassure the customer and secure repeatcustom. The literature is clear that in the event of a failure in service, the return of thecustomer to a satisfied state after complaint handling leads to higher repurchaseintentions (Zemke, 1994). A good service recovery system will detect and solve

problems, prevent dissatisfaction, and be designed to encourage complaints, and asuccessful recovery can actually promote a positive response from customers, despitethe original failure or problem, (Zemke, 1994; Zeithaml and Bitner, 2003). The servicerecovery process on the one hand has an impact on customer loyalty and thesubsequent effect on companies income and profitability, and on the other, the valuableinformation it provides on the causes of the problems which are at the root ofcomplaints, making it a source of information for continuous improvement (Johnstonand Mehra, 2002 as cited in Escobar and Revilla, 2004).

MethodologyThe aim of this research was to determine if the customers perception of service

quality was recognised by the pharmaceutical wholesaler X and if it was beingincorporated into service design and delivery. The data was researched and collectedover a period of four months (May to August 2003) within the North-West of England.

In order to gain access to the relevant data a number of methods were adopted.Questionnaires were delivered during semi-structured depth interviews withpharmacies, these provided the main source of primary data. General observationsand informal conversational interviews were carried out during site visits towholesaler Xs warehouse, customer service, sales managers and transport operation.The same approach was adopted in several of the hospital pharmacies when a tour ofthe pharmacy stores was provided after the semi-structured interview and also duringa visit to Company Y warehouse and maintenance facility. Relevant documentationconcerning performance data and customer surveys were also examined.

The choice of methods was justified as being those most appropriate for collectingthe necessary type of data required to meet the objectives of the research; as beingfeasible in terms of time and resources, and as being as valid and reliable as possible.

The selection of pharmacies for interview was done in conjunction with wholesalerX using their customer database. These were selected on the basis that they were themost approachable customers and those most likely to have a variety of opinions.

A comparison was made between the main focus of the study, the hospitalpharmacy supplied by wholesaler X, and a number of retail pharmacies supplied bywholesaler X. A total of 13 hospital pharmacies were selected of varying sizes. A smallnumber of these did not use wholesaler X as their main supplier. Four retailpharmacies were selected of varying types and size of business. The pharmacies,

hospitals and retail, were similar in function and purchasing profile.The interviews conducted were on the pharmacy site and in hospital pharmacieswere 40-65 minutes in duration and in retails pharmacies 30-45 minutes, less time beingmade available in the retail interviews due to time restrictions as dictated byinterviewees. The customer questionnaire had 31 semi-structured questions in totaland covered the following areas:

. Section 1 Views concerning the quality of service provided by wholesaler X.

. Section 2 Failures experienced in the service and how are they dealt with.

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. Section 3 Performance monitoring.

. Section 4 Working relations with wholesaler X.

. Section 5 Miscellaneous (e.g. perception of wholesaler X).

The data were recorded at the time of interview and interpreted after the interviewswere completed.

ResultsThe results generated from this research covered multiple areas. For the purpose ofthis discussion and analysis, those which are most pertinent to the exploration of thecustomers perception of the service quality provided by wholesaler X are discussed.The main areas for further elaboration are; the general perception of wholesaler X (asdictated by the customers), perception of good service quality leading to the factorsaffecting the choice of wholesaler. Data collated concerning the service encounter, andcustomer services will also be examined.

General perception of wholesaler XThe perception of wholesaler X as a company was varied. The general perception wasthat they were a large and developing company who were established in the market,fair, trustworthy and had a professional image. The perception was based very muchon the relationship and experience that the pharmacies had with wholesaler Xcustomer services and the regional sales managers rather than a corporate image.Respondent K, who used an alternate main wholesaler, had a very limited relationshipwith wholesaler X and therefore had no perception of the company. The threeindependent retail pharmacies had a very specific perception and all viewed wholesalerX as an organisation primarily concerned with gaining more business.

Generally wholesaler X were thought to be fair in their treatment of different

customers however respondent L, a subsidiary of wholesaler X, didnt think that thiswas the case. The respondent considered that the independent pharmacies got a betterlevel of service. The respondent was tied to wholesaler X as a supplier and thereforenot in a position to change supplier if the service was poor. Two pharmacies raised theissue of discounts and thought it was unfair that they received the same discount asother pharmacies spending much less than them. It was also felt that those that weregeographically closer to wholesaler X would receive a better service. Four hospitalpharmacies thought that wholesaler X should provide a more attentive service to thosecustomers with large accounts who used them as their main wholesaler. Therelationship between the pharmacies that used wholesaler X as their main supplier wascloser than those who rarely used them because they had more contact and thereforereceived more attention.

Other comments recorded stated that the organisation was still developing butcould get complacent and take the customer for granted, did appear to want to improveitself, was better than wholesaler Y due to continuity of customer service but on theother hand wholesaler X was deemed to be just a cog in the works.

Perception of good service qualityGood service quality was perceived to be the receipt of exactly what was ordered ontime and without damage. Passage of information in a timely manner was also


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considered as essential if a good quality of service was to be achieved. The supplierwho provided a good overall quality of service was expected to be able to meetparticular criteria as demonstrated in Figure 1 (as determined by the researchfindings).

Of the 17 respondents, 16 said that they were satisfied with wholesaler Xs qualityof service and that their performance was generally good. Respondent L was notsatisfied because they found that the range of stock and stock availability was low.Respondent L, a subsidiary of wholesaler X, was tied to use of wholesaler X as awholesaler and had to pay a handling charge for items not available from wholesaler X,therefore providing a good stock range and availability was particularly important.

The activities that wholesaler X was particularly good at were: customer service,providing deliveries on time and at suitable times, the provision of a single invoice perorder and pick accuracy. The general perception was that the picking of stock to orderwas similar to or better than competitors.

Respondent B had carried out performance monitoring and stated that wholesaler Xhad the lowest error rate of the main wholesalers. Respondent H considered that

wholesaler X were performing well at the moment and performance statistics for theperiod August 2002 to May 2003 showed that 95 per cent of orders were completed firstdelivery with 4 per cent to follows and 1 per cent errors or returns. The majority ofpharmacies based their perception of quality of service on subjective views and onlyrespondents B and H had monitored performance to provide factual evidence toconfirm perceptions.

The most notable things that wholesaler X were perceived to do badly in order ofimportance were: sending single items when the pharmacy had asked specifically for,or ordered deliberately in, outer pack size; packing heavy items on top of light items;sending the invoice before the goods resulting in a claim for missing items being madeand then the items arriving with the next delivery and using bags as packaging whichmeant that damages were more likely.

There were three factors concerned with customer satisfaction that were mentionedtwice as frequently as all others. These were the ordering of outer pack sizes butreceiving singles, failure to inform pharmacies promptly by telephone when an item

Figure 1.Criteria that provide agood quality of service

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was not in stock, and miss picks where the pharmacy received the wrong product. Allhad implications to the following work required by pharmacies to provide items totheir own customers and this is discussed in the following section.

The most serious outcome of failure to provide the correct product when ordered,

and to deliver on time without damage, was that a patient or pharmacy customerwould not receive their urgently required medication and may suffer. The recoveryprocess for failure to supply was well established in all the pharmacies. Of theresponding pharmacies, 12 percent were dissatisfied with the lack of resolution ofservice provision problems raised with the regional sales managers. The majority ofpharmacies complained immediately when failures occurred and problems weregenerally resolved amicably and quickly with the customer service staff.

Choice of wholesalerAll pharmacies identified the same three main criteria as important when choosing amain wholesaler (17 out of 17 responses 100 per cent):

(1) Service level efficient operations.(2) Delivery times vital to be early enough to issue to pharmacy customers.

(3) Good financial terms and competitive discounts.

The main criteria that was considered when choosing a main wholesaler included,delivery times (100 per cent), financial terms and discounts (100 per cent), range ofproducts stocked (24 per cent), good customer service (30 per cent) and availability ofcontract lines (8 per cent). Less important criteria mentioned were paperworkgenerated, communication channels and the availability of performance data (all 5 percent).

Service encounter and customer service

As service quality is determined both by its outcome and experience it was feltnecessary to gain opinions on the service encounter as experienced by the pharmaciesinterviewed. The service encounter between wholesaler X and the pharmaciescomprised visits from the regional sales managers and the twice-daily encounter withthe wholesaler X delivery van driver.

The service encounter with the regional sales manager occurred on a three to fourmonth basis for most pharmacies. With the exception of one hospital pharmacy thisgroup of respondents all found the service encounter with the regional sales managerto be positive. The customers perception of the wholesaler X delivery van drivers wasextremely positive and the continuity provided by having a dedicated driver wasimportant. The pharmacies all had dedicated drivers although a stand-in was used tocover holiday periods or sickness. Deliveries were not as prompt when a stand in driver

was utilised.The overwhelming perception of wholesaler x customer services was very good,

and the single point of contact (SPOC) was a key feature. Adjectives such as excellent,brilliant, efficient, professional, honest, straight talking, polite and helpful were used todescribe the customer service staff. All the hospital pharmacies knew the two customerservice clerks dealing with hospital accounts very well and felt they received apersonal service. Customer service staff were considered to be very good at handlingqueries, resolving problems and calling if there was breakdown in the picking process


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to ask what items were really urgent. A third of the respondents did, however, mentionthat they experienced problems getting through to customer services on the phone,although none thought that having a queuing system or answer machine or e-mailfacility was a good idea.

DiscussionFrom the research it was evident that the image that the pharmacies had of wholesalerX as a company were generally positive. On the whole they were consideredprofessional, fair and trustworthy. Kennedy and Curasi (2002) state that in order togenerate customer loyalty there needs to be a positive attitude about the service qualityand the service provider itself and this appears to be the case in this research.

There were some differences of opinion however; the retail pharmacies consideredthat wholesaler X was primarily business orientated whereas respondent M consideredthat wholesaler X has previously concentrated on business but were now becomingmore focussed on improving service to the customer. Again, the fact that some

pharmacies (B and H) felt obliged to monitor performance on a factual basis as opposedto discussing performance based on perception. Pharmacy B conducted this exercise aspart of a wider supplier development initiative, and Pharmacy H due to poorperformance in service delivery. Other hospital pharmacies stated that they did nothave the time to carry out regular monitoring and retail pharmacies felt suchmonitoring to be unnecessary. This would indicate problems in both the transactionalfunction of the relationship (buying and receiving products) and the partnershipdevelopment aspect of the relationship (reduction in trust or faith in action being takendue to previous discussions being ignored and/or problems not being resolved).

Influences on service quality became apparent during the research. These includedprice, past experience, marketing information, service failure and recovery, regionalsales manager/customer service staff and general operational and logistics capabilities.

Knowing the customers perceptions and expectations of the service itself providescrucial information for service provider to work with in order to design the serviceoffered (Leeet al., 2000; Bebko, 2000). The communication of information also provedcrucial in supporting an informed relationship between both parties, e.g. both customerservice and drivers being able to discuss why incidents had occurred and how theywere being resolved. A similar experience is discussed by Parasuraman et al. (1985)who report of a favourable impression created by a repairman who not only repairedthe appliance, but explained what was wrong and how such a fault could be repairedagain in the future if it recurred.

An analysis of the expectations of the pharmacies can be made against the tendimensions identified by Parasuraman et al. (1985). They can also be categorisedagainst the typology used by Silvestro and Johnston (1990), to illustrate the varying

effects of each on satisfaction. Figure 2 provides examples using the data frompharmacy interviews.

The analysis in Figure 2 shows that the majority of pharmacy expectation factorsare hygiene factors, in other words they are expected as the basic service, have aneutral effect if provided and cause dissatisfaction if not. These are the factors thatwholesaler X have to get right. The dual threshold items will cause dissatisfaction ifnot provided, however, can cause satisfaction if in place. These are the factors thatmake wholesaler X competitive. Finally, the enhancing factors have neutral effect if not

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provided but can potentially delight the pharmacies if available. These are the

activities that will give wholesaler X competitive advantage but only if the hygiene and

dual threshold activities are in place.

Overall, it was clear that wholesaler X really needed to have the flexibility to align

their service to the expectations of local customers if they were to beat the competition

through provision of service quality and meet customers local requirements. National

Figure Comparison classification


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surveys cannot identify the specific needs of local distribution centre customers,neither do the current performance measurements in place at wholesaler X provide abalance of financial, operational and customer focussed performance measuresrequired to optimise decision making. Maddock (2000) asserts that partnerships in the

NHS are facing difficulties due to the conflicts between partnership and the need forstringent performance monitoring. As demonstrated by these findings, the customer(as represented by the hospital and retail pharmacies) needs to have access toperformance data in order to be more informed about the total service package beingreceived from the supplier (wholesaler X), so as to be able to make choices aboutinvolvement in the service and feel confident that they have made the right choices andwill not suffer any adverse repercussions in poor service quality.

Martin (1986) asserted that services were composed of both procedural andconvivial segments, those which related to systems and provision of the service andthose which were more the packaging of the service, attitudes, behaviour to customersetc. It can be said that the customers serviced by wholesaler X, appeared to be

responding well to convivial aspects but suffered due to a weak delivery of the moreprocedural aspects of service provision. They appeared to rate very highly thecustomer service and response received by customer service staff, van-drivers and to acertain extent the company sales representative, but the noted failures were those of anoperational nature. This was significant enough to warrant performance monitoring ofa more rigorous nature to present factual data in order to instigate improvement andchange in service delivery.

Figure 1 outlines the criteria deemed as vital, important and less important topharmacy customers in determining a good quality of service. If compared to the abovecategorisation, those in the vital/important (some encroachment into latter section)would be identified as being procedural and those in the important to less importantwould be convivial.

These can also be aligned with Silvestros classification presented in Figure 2. Asshown in the table, certain pharmacy expectations regarding service performance canbe categorised as either enhancing, hygiene or dual threshold factors, the latter beingthe most critical and enhancing being necessary but would not necessarily lead todissatisfaction if not delivered. If all three classifications are compared (Silvestro and

Johnston (1990), Martin (1986) and good quality of service criteria, (Figure 1) thefollowing picture emerges (as demonstrated in Figure 3). Procedural segments ofservice would equate with both dual threshold and hygiene factors and vital andimportant criteria, whereas convivial would relate more closely to enhancing factorsand be of less importance to pharmacy customers.

In a survey conducted by wholesaler X in 2002, the issues rated as most important

included; good at having products available, having an excellent product range,delivering the right product and delivering on time (rating 78 per cent-54 per cent).However, of lesser importance was; feeling like a valued customer, regularly makingcontact and good representative visits (21 per cent-7 per cent). Again, it can be seenthat those elements rated as important and desired by the customer are those whichwholesaler X appear to be weakest (procedural) whereas their strengths lie in thoseareas which are of lesser importance to the customer (convivial). If the above findingswere plotted on the performance/importance matrix as determined by Chase and Hayes

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(1991) they would clearly demonstrate this anomaly to the company if they have notrealised it before.

ConclusionsService processes are characterised by the fact that the customer provides significantinput into the production process (Gronroos and Ojasalo, 2004). That input can be ofthree general types: the customer him/herself, goods from the customer and/orinformation from the customer (Sampson, 1999). Customers do not only provide input(they themselves, information, requests, complaints), they also take part in the serviceprocess, influencing both the processs performance, i.e. efficiency and the perception ofquality of the service produced, or rather its effectiveness (Gronroos and Ojasalo, 2004).

The research findings indicated that pharmaceutical wholesaler (wholesaler X) isaware of customers perceptions of their service (as in-house surveys have indicated)but have not interpreted this adequately into service design and provision and thusservice quality issues still exist. The company excels in core areas, which appear to bethose that the customer rates as less important, e.g. personal contact and introductionof innovations, and is weak in the more systems-related areas, e.g. order compilationand deliveries, which the customer expects to them to be excellent in. Again, usingMartins classifications (Martin, 1986), they appear to be taking on board customersentiments in order to develop their service but simultaneously eroding theiroperational efficiency? Is this a case of misdirection of resources?

It is the customers expectations that determine service quality, not what thewholesaler considers service quality to be. Failure to identify customer expectations of

service, perceptions of the service delivered, and the factors that create positive andnegative satisfaction will prevent the company from aligning its service to therequirements of the customer. If a gap exists between what the customer expects fromthe service and the actual quality of service delivered (as perceived by the customer),then service quality is reduced and the customer is dissatisfied. This means that gapsmust be identified and reduced through improvement measures.

From the research it can be seen that expectations of service quality vary betweenpharmacies. Therefore, it is vital that the regional distribution centre understands the

Figure Classification of pharmac

expectations usinParasuraman et al. (198

and Silvestro and Johnsto(1990) typolog


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expectations, perceptions of service quality and customer satisfaction of its own localcustomers. National surveys cannot provide this local information. Moreover, eachregional distribution centre has different characteristics, processes, and quality ofworkforce, producing different problems that will influence customer expectations in

varying ways. Undertaking local external performance measurement to identify theexpectations of local customers is therefore very important.

Customer expectations are increasing and customers expect more flexibility fromthe service, therefore it is essential that expectations are continuously monitored andthat the Cirricom adapts with the customer. As wholesaler Xs managing director of thewholesale division notes: Poor businesses fail to change in response to customer andindustry needs, excellent companies change in anticipation. Customer focussedexternal performance measurement must be part of an integrated performancemeasurement and improvement system.

The research suggests that pharmacies expect to see improvements to service.Improving service quality can only occur if the organisation is aware of its currentposition and can identify areas for improvement. This is achieved by regularmeasurement of quality, both internally (operational capabilities) and externally(customer expectations and benchmarking), and by making quality part of theorganisations culture. To deliver improvements, existing best practice suggests thatthe following criteria should be met: continuous improvement must include everyone inthe organisation with input from external customers, quality standards (keyperformance indicators), must be linked to customer expectations, quality standardsmust be enforced amongst the workforce (Bowersox et al., 2002; Zeithaml and Bitner,2003).

Clinical governance may force hospital pharmacies to look more closely at quality(Ritchie, 2002a, b) and to exploit the benefits that can be gained from supply chainintegration, partnership, supplier monitoring and supplier development. When

suppliers develop their service quality or own supply chain management systems, theycreate cost savings that benefit both themselves and the end customer (Starling andBurt, 2003). However, partnership activities cannot be one sided and pharmacies mustcommit to joint improvement to optimise benefits to the end customer.

Wholesaler X, whilst recognising the role of the customer in shaping their desiredservice, they have failed to direct their efforts to those factors which impact most oncustomer satisfaction and have instead developed highly successful supportingfacilities, e.g. customer service which have less impact on the actual service deliveryand more on the service recovery and follow-up. This is a regressive stance to takewhen providing a demanding service to an even more demanding customer based i.e.developing a successful back-office as opposed to a front-office operation which thecustomer sees first and has most overall impact on both customers expectations and

the organisations operational efficiency.

RecommendationsWork is currently being conducted nationally to review the performance ofpharmaceutical wholesalers as performance monitoring is seen as one of theprimary ways of gaining access to the actual quality of service attained. This in itself,however, will not provide a representative picture of what the expectations of the

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customer are as it focuses too narrowly on service outputs and not on the serviceencounter itself or customer perceptions/expectations.

From the research undertaken the following recommendations have been made. Theexisting research could also be extended further to include more specific operational

analysis of the internal and external procedures that potentially contribute to servicesuccesses and failures within wholesaler X; with a view acknowledging operationalstrengths and determining if these have a positive impact on meeting customerexpectations through service design and delivery.

This research was limited to one main pharmaceutical wholesaler, wholesalerX. Whilst it was considered that the customer expectations of wholesaler Xs servicethat were identified could be seen as expectations of the service required from allwholesalers, it was apparent from the research that other wholesalers had differentprocedures that affected customer satisfaction. This research could therefore beextended to include a range of wholesalers, which would allow wholesaler best practicefor providing service quality to the pharmacies to be assessed. A similar study could becompleted using other industries as a point of comparison and assessing the data usingthe SERVQUAL tool.

Note

1. Cirricom is the name given to this company for the purpose of this discussion. All materialpresented for this company is factually correct but its name has been replaced to ensureanonymity.

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development in the pharmaceutical supply chain in hospital pharmacy, University ofBradford School of Management, unpublished.

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Corresponding authorLiz Breen can be contacted at: [email protected]

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