Here’s another ‘easy fix’ for your Supply Chain based on a real life case study.
A large distributor was paying a lot more than expected for customer delivery transport. Not the transport ‘rate’ just the overall amount they were paying each year.
You see these small retail customers, whose order was below $250 in value, should have been paying for the delivery freight. If the order was above $250 then delivery was free. That’s quite a common situation I think you’d agree.
But the numbers just didn’t stack up! The ‘free delivery’ freight bill was a lot higher than expected. So the business suspected that customers placing the smaller orders were not paying their freight invoices. This situation needed to be tightened up, but they couldn’t work out where or why this cost ‘leakage’ was occurring.
So having determined exactly what the customer service policy was, I thought I would sit in the customer service centre for a while and listen to the customer interactions…
Within 30 minutes the answer was obvious!
Each time one of these smaller customers called to complain about a late delivery, or a short order, or an error in paperwork, this is what the customer service centre staff said:
We’re sorry about this issue, so to compensate you for the inconvenience, we’ll waive the freight charge.
And most of the customer ‘issues’ were really petty. Do you see what the company was doing?
They were ‘training’ and rewarding their customers to complain! To the tune of $500,000 per year in free freight ‘giveaways’.
So what were the root causes of the problem?
1. The customer service ‘offer’ was not clearly communicated to all internal and external customers.
2. The customer service ‘policy’ lacked discipline.
3. And of course, those petty errors in delivery needed to be reduced.
So let me ask you:
- Is your customer service policy clear?
- Is it managed effectively?
- Or do your customers take advantage of you too?
There are not many businesses I know of, that don’t have this problem to some degree…