He related that a few months ago they needed to understand why their call volumes were increasing, but not necessarily in line with revenue.  So for a short time period they had each of the phone reps keep a tally sheet next to their computer, and on that tally sheet were 8-10 categories of call reason codes – called to place order, called to track order, called to return a product etc.  After each call the rep would record the reason for the call on the sheet.

After a few weeks they measured the results.  Only 30% of the calls were to place orders, the other 70% of the calls were true customer service calls.  On top of that, they were using a third party call center for overflow to take a large percentage of the overall calls because of the increase.

As it was, the third party call center was not able to answer most customer service calls for them, and the problems quickly became:

1.       The customer couldn’t get the answer they were looking for immediately.

2.       The third party call center was sending emails back and forth to our client trying to get answers.

3.       Most of the time our customer then had to make the outbound call to the customer to try and get them their answer and it usually meant more than one call to reach them.

Throughout this whole process the customer didn’t get an immediate answer and the costs for our client went through the roof.  In the end they realized that they needed to do things differently.  They needed to be more in tune with the customers and give them the tools they needed to answer their questions.

They opted to hire additional customer service reps in the short term to answer the questions immediately as well as provided more information to the customer to reduce the number of calls back and forth.  With the elimination of the third party call center they were able to eliminate almost $200,000 annually.  The real cost savings is much higher than that by not having to deal with the additional emails and additional customer service calls to the customer.

To some this may seem like a no brainer, but I guarantee you most companies could benefit from taking a step back and looking at things like this.  Not just in the call center but the warehouse and other areas.  Everyone has some low hanging fruit that could easily save them some money its just a matter of looking for it.

It didn’t take a ton of cash to find these problems; it just took some patience and the realization that audits like this are important.  For assistance with thoughts on how to identify this and other low hanging fruit, give us a call and let’s see how we can help your business.

Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.

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This reduction is significant not only because of the reduction in costs, but because it shows how this company has uncovered problems with their online processes.  Too often this number stays stagnant or increases.  You may never be able to get rid of web orders that need to be completed in the call center but you need to identify why the calls occur.

Stronger companies will categorize and analyze why calls occur and develop a strategy for solving them, this will eventually lead to a reduction in the inbound calls to assist customers with web orders.  Here are some of the most commonly found reasons for customers completing their orders in the call center:

1.       In-sufficient product related information, including use and care or technical documentation.

2.       In-sufficient product photos accurately depicting the product.  Not just one or two photos but all aspects of the product, dimensions and colors.  Often times videos are needed to demonstrate a product or provide customer reassurance.

3.       Confusing product availability or expected ship dates for a product.

4.       Obscure or non-existent shipping & processing fees until the point of check out.

5.       Clunky check out process with confusing pricing, taxes and shipping and processing options.

6.       Forced, cumbersome registration processes.

7.       No ability to do customer self help on the site.

If your customer hasn’t just totally abandoned the cart and has opted to call you, then you better make sure that you record what the problem was in addition to placing the order for them.  The goal needs to be to analyze the various problems and quickly implement solutions to resolve the issues.

Companies that have a larger amount of inbound calls pertaining to web orders more than likely have a large percent of abandoned carts on the website.  Many marketing related guru’s may look at the cart abandonment but not consider the increased inbound calls.  By looking at both the marketing and call center aspects, you will be solving both – increasing the gross demand through efficient and effective web applications and reducing the call center costs from inbound calls.

When was the last time you reviewed this metric for your call center?  How often are you taking customer calls because your website isn’t functioning in a way that focuses on the customer?

Identifying call center problems and developing a strategy for improving the issues and measurements is F. Curtis Barry & Company’s core competency — let us help you.

Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.

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More importantly this means the company is moving away from what it does well.  For some this isn’t a problem, for most this can be a major problem.  Managing call centers, small package pick pack ship operations, and dealing with customers for a direct business is entirely different than a manufacturing operation.

But this doesn’t mean that it can’t be done.  For those not wanting to invest in operations necessary for a direct ecommerce or direct marketing business, there are options.  One option that several manufacturers and consumer product goods companies have turned to is Jagged Peak.  Not only have they developed a strong warehousing and logistics division, but they have also developed exceptional order management and ecommerce applications.

What does this mean – if you want to take your products direct to your end customers, Jagged Peak can provide all of the applications necessary but also provide end to end services to support order fulfillment.  By doing this, Jagged Peak allows their customers to remain focused on what they do well and leave the rest to them.  Third party options like this are often times a great way for companies to test new markets and new channels in order to meet their financial goals.

F. Curtis Barry & Company assists companies of all types to develop fulfillment strategies which include the sourcing of third party options.  If we can help your company develop a plan or evaluate different third party options, please contact us today.

Jagged Peak can be found online at www.jaggedpeak.com

Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.

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Dear Curt -

We met briefly at the NCOF conference in Vegas, and I wanted to reach out  to you regarding performance errors.  I was hoping you could provide  me with some insight into how other 3 PL fulfillment companies manage employee errors.  Currently, we don’t have a strong policy in place to  deal with these issues.

Some questions that arise in my mind are:

1.  How many mistakes is too many?

2.  Should the consequence be different in receiving than picking or packing?

3.  If there is a larger mistake that causes our company should there be a more severe consequence?

I understand that everyone makes mistakes and I would like to allow  for learning and coaching, but I also want to make sure that our  employees have a formalized consequence to ongoing errors, and they  know what to expect.  If you have any feedback on this I would really  appreciate it.  Or, if you know any warehouse managers I could speak with to get ideas on what they do that would be great!

Thank you so much for your time!

Sharon, VP of Client Services, 3PL Company

Dear Sharon -

In my opinion, there are a couple levels of issues:

1. Weekly productivity reporting by person through out the call center and fulfillment.  Our clients display these by department and person on white boards, reports and monitors throughout the facilities.
2. Contact center monitoring should be in place.  There should be a form for evaluating the calls and a weighting system for the responses.  What are your standards for monitoring experienced core employees versus new hires?  Companies have developed coaching approaches to improve employees, get them to accept responsibility for improvement or a basis for asking them to leave the company.
3. Personnel policy that deals with severe HR issues.  These include theft, embezzlement, sexual harassment, etc.  These should have clear documented policies which employees understand.

In terms of error rates, we would expect that controllable error rates would be only 0.5%. Meaning, 99.5% of all major transactions are error free.  In bar coded systems it will be much higher.

In a speech a number of years ago when I made the statement about error rates of 0.5%, a national FedEx manager pointed out that meant 73,000 of their customers would not get their package on time in any given day. What is your management’s attitude about errors?  And you are in a 3 PL service so what guarantees are you making to clients?  Hope this helps.  Call me if I can further explain.

Curt Barry

Hey, blog readers, what’s your company’s approach?

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Yet no one vendor in the marketplace today can provide more than two of the best-of-breed components needed. Even most ERP systems available to direct marketers don’t provide specialized direct, retail or warehouse management functions that are as good as best-of-breed.

Such systems have given companies access to the best system functionally for end users. But even when they are integrated with one another, you still have numerous – and differing – occurrences of key data and metrics.

The result of all these silos of information is that no one system provides more than 30% of the data needed by senior management; for larger companies it may be only 10% to 15%.

Top managers have to request that department heads pull data with spreadsheets, use access databases, or ask business analysts to come up with reporting. These manual efforts mean management’s reporting depends on delay-riddled, error-prone processes.

What’s more, valuable productivity and service data exist in systems to which management may not have access or of which they may not be end users, such as telephone switches (ACDs) and e-commerce analytic systems. And with database structures and languages that can span 25 years of systems development, data often doesn’t reconcile from one information system to another.

Simply put, these systems and data flows can’t deliver the single version of the truth you need. Management faces the question: On which version of the data should we base our decisions?

Dashboards, metrics, alerts

Business intelligence (BI) solutions with dashboards and executive analytics can, potentially, solve this problem. By creating standardized and normalized databases that sit on top of your best-of-breed systems across the enterprise, those databases open up huge possibilities for management to sharpen critical decision-making.

You must also select a single, common version of data that is available in each best-of-breed system. Executives will, ideally, be able to select key metrics that can then be set up on a desktop, laptop or PDA for real-time monitoring of areas for which they are accountable.

In fulfillment, this may include orders shipped, orders carried over, productivity by department, or labor costs. Merchandising may want to see performance against the sales plan, top-50 selling products, products that are running low on inventory, or slow sellers that are potential candidates for liquidation. And marketing is likely to want all the current promotions and their sales and percent completion to plan, results from e-commerce analytics, and so on.

More than simply extracting data, such solutions allow management at various levels to set up actionable key performance indicator (KPI) alerts that proactively notify the executive when “dials” indicate a variance from an acceptable range or, conversely, extremely high performance.

Another feature of such BI systems is the ability for executives to drill down into the details that are the basis for their dashboard dials and alerts. So for an inventory control manager who has a dial for excess aged inventory, the drill-down would show all the key item-level inventory statistics for slow selling products with excess inventory.

Think for a minute: What data do you want to gain access to across your business? What information do you need, as a member of senior management, to run the business?

The key results and metrics a company president may want to be able to view regularly on a personal dashboard would include demand to net sales; call center, fulfillment, marketing, inventory and finance. Much of this is not found in any single information system. A number of the analyses and KPIs are created by including data mixed and matched between information systems.

The personal dashboard shown on page 54 represents a drill-down into each of the six core areas. The chart “Source data across the enterprise,” shown above, shows the best-of-breed system, independent system or spreadsheet from which the source data is drawn and in which the drill-down occurs.

One of the key benefits is that management can align the analysis and reporting with their short- and long-term strategy. It’s not just about reporting, but about achieving improved performance management and profitability of your business.

Many views, one set of data

Whether you are analyzing inventory levels or fill rates, demand or sales, the new BI tools ensure all departments are using a standardized view of the same data. Such BI systems also allow users to take cuts of the data and compare them in multiple ways, including this year to last year or actual to plan, as well as to reassemble the data and analyze it from one department to another.

Each department needs to maintain its own way of analyzing data, but also be able to bring its plans and results together in a consistent, uniform way.

Here’s an example of an advantage provided by the access to uniform data that these BI solutions allow. Merchandising, marketing and inventory control may have different information needs during the product and promotion life cycle, but they all revolve around gross demand planning and results.

Merchandising wants to know the sales trends and the quantity of each product that is needed across all promotions and channels – print, e-commerce and store. Marketing arrives at the catalog gross demand plan based on their circulation plans by drop, by house file, and by outside list segment.

Merchandising’s catalog preseason plans are built top-down by merchandise category, and bottom-up by product – but they should come close to tying together with marketing’s demand plans at the demand level.

It’s inventory control’s job to interpret the plans and selling results and purchase product far enough in advance to be in stock when customers order. But management allows inventory control to purchase more product than the demand plans indicate, based on vendor lead time, vendor discounts offered, etc. – so they aren’t going to tie back to the others’ plans exactly.

Week-for-week, it’s hard to read selling trends and interpret them in a way that allows you to make the right decisions across the enterprise. The key departments above, along with the call center and fulfillment center, all benefit by sharing the latest sales plans and selling trends. BI solutions that can bring about the single version of the truth help keep everyone on the same page.

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First the background.  On April 1^st, I ordered 5 pairs of chino pants and 1 was on backorder.  The CSR told me immediately that the color would not ship until May 15, six (6) weeks later!  I liked the color and the price so I let it remain on backorder.

Well guess what?  The 4 other pairs came in 2 days shipped for free on my L.L. Bean card and express delivery which is standard.  And the back order arrived before May 15^th much to my surprise-I’d forgotten it.  Who hasn’t had nothing but disappoint with projecting back order dates arrivals?

But even as important, I found something of real interest printed on the backorder’s order/packing slip.  On the line above the item was this message:

“SORRY FOR THE DELAY – THANK YOU FOR WAITING”

It struck me, how many times do we thank customer’s for their patience when we disappoint them?  And better yet, how many times do we follow through with the promises we make on backorders?  But then, that’s why I always use L.L. Bean as one of the standard bear’s for high customer service.

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Two articles in the Wall Street Journal serve as stark reminders of this reality. The first, “Retailers Reprogram Workers in Efficiency Push” (September 10, 2008) described installations of workforce management software at AnnTaylor Stores Corp. and other retailers. According to the article, workforce management systems are “sweeping the industry as retailers fight to improve productivity and cut payroll costs.” As the Journal noted, some workers aren’t happy about the trend, saying the systems leave them with shorter shifts, make it difficult to schedule their lives, and “unleash Darwinian forces on the sales floor that damage morale.”

The Ann Taylor system keeps track of the usual productivity metrics: average sales per hour, units sold, and dollars per transaction. The system schedules the most productive people during the busiest hours—and, because it awards more-productive salespeople with favorable hours, it gives employees an incentive to persuade shoppers to buy things. And it’s worked, as far as the overall economic goals are concerned; the chain’s director of store operations said it has helped turn more store browsers into buyers. But, as the WSJ story made clear, it also resulted in the loss of some veteran salespeople who had developed long-term relationships with customers. By focusing strictly on the metrics that could be easily measured, the system actually penalized associates whose selling style depended on longer interactions with the customer—even though such relationships often assured continued customer loyalty. Others found their hours cut back to the point where they could no longer afford to make the trip to work. During busy times, the formerly congenial staff began competing for customers, sometimes stealing them away from one another. While productivity was, indeed, increased, perhaps the most surprising unintended result of the system was that this story, with all its unflattering aspects, was splashed across Page A1 of The Wall Street Journal.

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Higher Labor and Benefit Costs

There has been a tremendous acceleration in hourly labor rates over the past five years. In addition, our industry is in competition with call center jobs in banks and other financial services, which often pay more and have stronger benefits. As recently as 2003, many of our clients had average pay rates in the $7.50 to $9.00 range, with benefits adding 15% to 20%. Today those same clients are paying an average of $10.50 to $13.00 per hour. Some of those in urban areas are faced with $16.00 to $17.00 per hour, with added benefits in the 25%-30% range. However, there are still fortunate direct call centers with labor rates of $7.50 to $9.00 in smaller cities and rural areas.

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Recently, one of our clients outsourced 300,000 phone calls off shore, resulting in a substantial reduction in costs. How substantial? This client’s fully loaded internal cost per minute was $0.72, while a fully loaded off-shore cost per minute for this client is $0.42—and most of the customer service remains in house. Additionally, the client’s 90,000 mail/fax orders cost only $0.15 per order: scanned, transmitted to Asia, keyed overnight and available on-line for picking and customer service the next morning.

Clearly, you need to look at the potential savings of offshore outsourcing. How should you approach doing this type of study?

Know your internal costs. In order to compare your internal costs to outsourcing, you need to identify your fully loaded internal costs. “Fully loaded” includes direct and indirect labor, occupancy and telecom costs.  This needs to be converted to a cost-per-minute basis, which is how outsourcing will generally be proposed and invoiced. You may say that you can’t control occupancy costs, however, there may be other uses for that space, if call center is outsourced.

Competitively bid out to multiple vendors. It goes without saying that you need to competitively bid the potential project to a short list of qualified bidders. This is the only way to get the lowest costs.

Formalize an ROI (Request For Proposal). This should include:

• A pro forma for your business, meaning the types and volumes of transactions (actual and multi-year forward projections)
• Required services
• Service level standards for total call length, abandonment rate, and average call service level standards
• Request references and boilerplate contract
• Details about order management systems needed, systems integrations including e-commerce site, etc.

Decide what to keep in house. In my opinion, you should keep your custom service internal. This gives you a way to monitor the service levels of the outsource company.

Ask other critical questions. Among the things you’ll want to know:

• How will training be conducted about your product(s) and company policies?
• Is the provider PCI credit compliant and certified?
• How will you monitor your customers’ calls?
• Who are the company’s references? Come up with standardized questions to ask each of the references so you can compare their responses.

Domestic outsourcing has some advantages over off shore. Here are a few that I think are important:

• There may be an advantage in the area of English speech. However, I am greatly impressed with how well the Philippines has performed for some of our clients.
• Shorter travel distance means you can visit centers more often.
• Understands US culture.
• Keeps jobs in the USA. This may or may not be as much of a factor for you.

Of course, domestic outsource providers’ costs will be higher than off shore, but that is not necessarily a dead end. We have one client, a major non-profit with a high average order, that outsourced 100% of its direct orders domestically while keeping customer service in house. They were able to successfully renegotiate with their domestic outsource provider so that the costs were not so widely different.

Tocky Lawrence is Vice President of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at www.fcbco.com.

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