Part 1: The High Service Sponge

On September 26^th, Diane Clair, Director of Logistics at Dynamic World Corporation (DWC), a leading consumer packaged goods (CPG) company, had been running non-stop all morning. Now, as she sat down to put the finishing touches on the logistics teams five-year technology plan, she was running behind. Tomorrow morning, she would be arguing for some big dollar investments in new demand management planning systems.

No sooner had she clicked open her PowerPoint presentation, she heard an agitated knock at her door. Doug Hassle, DWCs North American Vice-President of marketing stood there - and he wasnt smiling. Diane responded, Good Morning Doug, come in and sit down. As Doug entered, he said Diane, the wheels just came off. Deb Gale, General Merchandising Manager (GMM) over at Monster, Inc., just called. She was ticked. Your team missed a delivery window at their Denver cross-dock facility. Worse, this is twice in one week we have failed to deliver as promised. Monster is our largest, most demanding customer. Deb made sure I remembered that little detail. She didnt hesitate to share her feelings about our recent fulfillment failures.

Sound like youve had a tough morning, Doug. Sorry about that brutal call. Lets find out what happened. Diane said as she picked up her phone. She dialed David England, a senior transportation manager to find out what happened. Dave responded quickly, the shipment left our Distribution Centre (DC) on time. Our tracking system says the truck should arrive in about an hour. Ill make sure it does and shoot you a text when it is docked. David hesitated, and then expressed disbelief at Deb Gales negative perceptions of DWCs delivery record, noting I cant imagine why Deb Gale is so upset. Were an industry leader. Our on-time delivery and complete orders performance is outstanding. Weve never performed better.

Confident Dave would resolve the immediate crisis, Diane hung up. Doug, however wasnt placated, and said as much. Diane, for someone who just dropped the ball with our most important account, David sounded a bit overconfident. He might not really grasp the situation.

Inwardly, Diane scowled, she trusted Dave. Well, lets double check and see how we are really performing. Diane picked up the phone again, this time calling Paul Osterhaus, Vice President of Information Technology, to verify DWCs delivery performance. With just a few clicks of the mouse, Paul pulled up the key stats, confirming that DWC had dramatically improved its on-time delivery over the past year. He said You guys have really done a nice job. Youve bumped your performance from 95% to 98 percent on-time delivery over the past twelve months, and your shipping 97 percent complete orders. It seems youre hitting on all cylinders and achieving best-in-class standards. Paul added, With service levels looking so good, you should be able to justify those new IT investments.

Doug still wasnt convinced, saying Im sure you like what youre hearing, but those stats dont change the fact that Deb Gale just chewed me out. Were clearly not delivering to Monsters expectations. And though the chargebacks for late deliveries make these failures expensive, the real cost is relational. We cant afford for Monster to drop us as a supplier or to reduce the number of facings they allot us. Deb drove this point home, saying You cant afford not to meet our needs. Shes right! Our other key accounts are just as demanding. If we are dropping the ball with Monster, we are likely disappointing the others as well. Come January, Monster is tightening its delivery time windows and Deb informed me that they will expect us to take on more value-added service.

As Doug stood up to leave, he added, By the way, they are lengthening payment terms effectively paying less for what we do. I hope your team can raise the performance bar. Diane acknowledged that DWC needed to step up service even higher, concluding Youre right, todays market is a tough place to do business. Our best customers are more than happy to soak up every ounce of service we can provide and then they squeeze us a little more.

Still unsettled after Doug left her office, Diane called David to begin a new conversation on DWCs customer fulfillment capabilities. After her initial greeting, Diane said David, despite all the customer-oriented initiatives we have pursued over the past two years, we dropped the ball today and not just any ball. She smiled as she continued, IF we are going to drop a ball, lets make sure doesnt belong to Monster. Todays experience reiterates our need to rethink our service strategy. Not all customers are created equal; yet, we still measure and manage to averages. Across-the-board excellence is a great goal, but maybe our one-size fits-all approach is outdated. We just dont have the resources to be perfect all the time. So, what are we going to do about it? What service experience should we promise? What infrastructure do we need to put in place to deliver to promise? David, this is a big deal. I dont want to have this same conversation with Doug again. I need you to put a team together and get this figured out.

Questions to Consider:

1. Why should Logistics managers worry about customer service

2. Keeping you answer from question 1 in mind, what is the relationship between customer expectations, a firms service capabilities, and ultimate satisfaction?
3. What questions would you include on a customer-satisfaction checklist to make sure you had a comprehensive, well-thought out customer fulfillment strategy in place?