Newsletter October 2002A
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Version in Newsletter Format October 2002A

PERFECT CUSTOMER SERVICE: Bigger is NOT Better

Why do companies have customer service departments? Some common reasons are to solve disputes, to answer questions from prospective customers, and to update customer accounts. Recently we talked to management in a large food service company who said she was working on increasing the number of people in her customer service department; more calls had been coming in from customers, lately. We explained to her, as we will to you in this article, how a bigger customer service department was the last thing she needed. Consider this: if management developed alternative solutions to customers' needs, some or all parts of the customer service department could be eliminated. Don't think so? Read on.

Let's imagine that management can develop a perfect customer service system, from placing orders through final delivery and collection of receivables. You build a product that fits the demand of every customer you visit with all information in a way that quickly shows your customers why it's their best solution. Customers and purchasing agents set up perfect purchasing scenarios and never have to call you to place an order. All your customers have a shared scanning system that checks every incoming box to confirm its count for both them and your accounting system. Invoices are confirmed. Products are shipped in special boxes that hold products in levitation so that the products never break and are delivered within tolerance every time. Invoices are created and sent to the customer while an Artificial Intelligence system reviews the invoice with purchasing and inventory. Invoice figures are posted into the accounting system. The money is wire transferred to your account exactly 720 hours after generation (30 days). The premise is not only to "do it right the first time" or to eliminate staff. It is to build a system that services customers so efficiently on the front end that you don't need as many people answering phones to clarify the unclear, correct the incorrect or assuage the dissatisfied.

You can move your firm in the direction of perfection by changing how you look at problems. Don't start with, how do we fix the problem? Ask, what would make the situation not exist? For example, you don't need service technicians if the unit does not break down. Cannon did this by putting as many of the parts that will break or malfunction into the original toner cartridges in earlier copy machines. When the toner was replaced, so were the parts that could break down. Xerox could never catch up.

Today's customers expect their vendors to be accessible and available 24/7. The world is now an interconnected global economy. You buy your shoes from American companies that employ labor on the other side of the globe. While the American executive sleeps, his Indonesian managers are making sure that sneakers are still being manufactured. The customer service offices in North America might close at 7pm, but when customers have questions at midnight, they expect to access a website and get answers. Customers who want to purchase new sneakers can surf the web and check out several different companies' brands in minutes, without the help of a representative. Buyers can order online. They can also purchase from stores, but today they can enter retail outlets more informed and less in need of a clerk's help. This reduces the need for sales personnel to actively engage in the selling process.

Think about strides made in banking when executives made the shift from servicing bank patrons between 9am and 3pm to 24/7. If you needed to make a deposit at 3pm but arrived at 3:01pm, there was no way you were getting the teller to open up those steel-bolted doors, even if the teller was your own mother. Now you can make that deposit at the ATM machine or at a drop box. If you want your account balance, check online. Move funds with click the mouse. Pay bills while sitting in your robe on Sunday night at 11:23am. At the same time, if you have to talk to a live representative, one is always available. Can you imagine going back to the way banking used to be?

It's important to make strides in the direction of virtual access before you need to do so. Sprint PCS offers the virtual representative, Claire. Call their customer service department and you talk to Claire to be directed to the appropriate representative. Unfortunately, Claire can't answer all questions, and if she does not understand you, you're tough out of luck. How annoying it is to ask a question of a computer and get sent to the wrong department. Their system often creates frustration and more calls. The only way to move within the system is to talk to Claire, (and we just had our first fight. Not sure if she feels the same way I feel about her.) Anyway, Sprint's introduction of Claire is to cut down on the amount of customer service representatives they have on the phones. Combined with a very high turnover, the company can't handle the load and management is pulling at straws. Unfortunately, management is a little off course. Don't put Claire on the phone; fix customers' phones so they always work where and when needed. Simplify invoices so that customers can understand them. Be a solutions partner who will not keep customers on hold for 29 minutes on hold only to be disconnected.

Ask yourself, what would be the ultimate workflow system? Could you create a pull for your product, offer tools to allow customers flexibility and develop a system that eliminates much of the human decision making along the path to delivery? Wal-Mart improved customer service through their supply chain by developing their own proprietary software that links trucks to goods and profits to people and eliminated human intervention. Think about how Electronic Data Interchange (EDI) has transformed the way that companies and vendors interact. EDI is the method by which businesses exchange information electronically. For example, when a customer purchases a television from Sears, Sears' inventory system is automatically notified. The inventory system software replenishes inventory by ordering a new television from the vendor once minimum balances are met through EDI. The purchasing agents don't have to consciously touch any of the order. Again, this means a reduction or elimination of elements of the customer service staff taking orders or answering about the status of an order. FedEx, UPS and Airborne must have eliminated the need to answer millions of calls by allowing customers to track a package online. If you've been shut out of the EDI craze due to its high expense, you'll be happy to know that less expensive alternatives are becoming available. To find out about one such alternative, visit http://www.xmlglobal.com/consult/.

Soon, it will be realistic to take proactive customer service one step further. Your computer system calculates exact demand needs, you have enough credit with vendors, stock is available in production and personnel is ready to fulfill the orders on time consistently. The orders move through the system in Willy Wonka Oompa Loompa-style, creating a perfect product with not one scratch or dent. Even the packaging makes it so that no product is damaged in transit. In addition, the shipper is so familiar with supply chain management and logistics, that a carrier arrives at precisely the time needed to get the order to its destination on time. Meanwhile, the accounting department has cleared credit and/or payment, including having a direct relationship with the purchaser's bank, so that you will be paid on time. How different would the customer service department look if this scenario were real?

Look at your entire business to see how you can accomplish excellent customer service in new ways throughout the system. In that answer, you'll still want live people who are accessible to customers. However, their roles will be more specific to offering value up front and throughout the process to insure customer satisfaction. When that happens, customer service is preventing problems, not solving problems. While customers still expect human contact, they're also looking for more services that don't require customer service representatives. Those services include internet access for managing their accounts and learning about new products and services. Depending on your industry, you may need to offer 24-hour automated phone services and access, as well. Customer service departments can look very different than they do today if your products showed up on time, employees did what was expected, orders were completed with precision and products rarely, if ever, failed. If you're doing everything right, your customer base will be growing and your customer service department will not.
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SAVING MONEY EVERYWHERE:
Uncovering Waste's Hiding Places

How would you like to stop wasting money and start keeping more hard-earned dollars? Corporate waste is more prevalent than most people realize. The good news is that once you know where to look, preventing waste and pocketing profits is an easy task. We'll start by exploring four hiding places: qualifications of employees, staff education, systemized purchasing, and productive use of time. Then we'll wrap up with some things you can do today to get quick results.

Smart hiring, a winning environment, and reasonable pay attract qualified employees. When you have competent people in place, they can troubleshoot more accurately. You want people who can identify a problem and fix it in the most efficient manner. Case in point: a small pneumatic pump was once ordered to replace a distinctive part. The cost for the replacement was around $150.00 and was ordered in via next day air just because an individual made the decision the part was necessary, adding another $20.00 onto the ticket. Months later when working one of our 24/7 shifts, management had to fill in to get the order out the door. Surprisingly the problem still existed in the machine. A few checks by management of the device and a little analysis uncovered that a small ball of lint had gotten into a part. Once the lint was removed, the unit worked like a charm. Unfortunately this discovery also uncovered the aforementioned "new" part… still in its original box, unopened … Next Day Air label still affixed.

Make training and education a priority. The cost of ignorance adds up fast. Mistakes made by multiple people multiply into big losses. Decision makers from the top level to the lowest ranking manager often make errors in judgment. If you're cost conscious at all, saving those $10, $20 and $50 tickets end up to be real money. If you have 50 employees each making a judgment error or systems error of $25.00 per week, that adds up to losses of $1250 per week and $65,000 per year. If you don't think it's common, take a look around.

Chances are you're making the same mistakes at home. Have you ever bought a can of paint or any other item, only to find that you indeed already had it "in stock?" That extra paint can is a $32.00 mistake. Could this have just as easily been a $4000 surgical patch in an operating room kept on hand for the rare case of specific head trauma? This same thing happens with office supplies, extra tuna for a restaurant, or a second skid of chemicals for a lawn care business. Maybe you'll actually use the supplies ... or maybe they will go to waste as in the case of a construction firm only needing 58 I beams of a certain customized size, and not 116.

Systemize order processing and purchasing to reduce waste and save money. The best methodologies come down to inventory controls and/or centralized order processing. We want to be clear, here. Everything doesn't have to go through purchasing for a 3-bid process, nor must you take the controls of making purchases away from the people who need the stock. This is about setting up a system that works for both. With technology as it exists today, the system must continue to put choices on the front lines. But there can always be better controls.

One way to systemize your inventory is to develop a partnership with one reliable vendor. Here's an example. A professional firm, having offices in two locations, had over 200 people purchasing supplies whenever and from whomever, when stock ran low. This developed a high probability of rush service, including freight charges and interoffice paperwork. Everyone knew that over a certain dollar amount some offices were choosing to purchase extra inventory just to hit the delivery firms' free delivery levels adding unneeded stock. The solution was to bring in several firms to bid on the entire company's office needs and then to have the suppliers manage their customer's stock rooms. The chosen supplier would bar code the shelves and always make sure a minimum balance was kept on hand never to run out. The prices the firm received were far more economical; they were lower than the $200.00 per hour waste generated by employees who lacked the proper tools. To enable individuals to continue to use the items they preferred, employees simply marked a form using the vendor's catalog or emailed the vendor as to a change in inventory stock. Inventories were also balanced between venues so that any pattern shifts prevented over-purchasing and excess reports.

Finally, when you or your staff make mistakes that cost money, you also have the element of lost time. Not only did you pay the first time to do something incorrectly---money that is gone forever-but you have to bump current profitable activity to correct the error. If you have a skilled worker off the job to run out and pick up a supply across town, that is wasted productivity. Lost time is lost money, too.

Turnover in staff, building an educated employee base, streamlining purchasing systems and incorporating more productive use of employee time are solutions that evolve over time. Start working on those areas, and you could see drastic improvements to your bottom line. Here are some things that you can do today to start saving money:

Every business leader must look at their entire organization every day. And as we always say, the key role of management is to think and plan. Thinking with the big picture in mind builds businesses that efficiently operate through well-greased systems. Those systems, in turn, eliminate errors and emergencies that produce waste. If you were to talk to an exterminator, s/he would tell you that for every cockroach you see, there are many more hiding in the walls. Applying that to your business, for every lost dollar you see, there are many more that are being wasted. Now that you know where to look, roust waste makers from their hiding places. Exterminate them and watch your bottom line thrive.

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David & Lorrie Goldsmith are founders of the Syracuse based MetaMatrix Consulting Group Inc. Their firm specializes in consulting, executive management education and speaking services. They can be reached at 315-476-0510  888-777-8857 or emailed at david@davidgoldsmith.com

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