SUPPORT NOTES FOR ARTICLE # 3.14: "GOOGLE’S SERVICE VALUE AND OURS"
1) For more on "retention economics" check out article 3.3 at this URL: 3_3.asp. And, "succeed with the service retention economics chain" (article 3.7) at this URL: 3_7.asp.
2) For more on how to crack target accounts see annotated "slide show #8" at this URL:
3) As a general rule, competitors that have distinctively better/consistent service in the customer’s mind can get 5 to 10% more than their "good service" competitors value added margin, which is the gross margin percent in most distribution channels. So, if competitors are quoting at 20% margin, the distinctive player can get last look and an extra 1 to 2 percentage points (21 to 22%) for their service. For more on how brilliant service can lower 10 of the 11 elements of total procurement cost for a customer (the 11th is "price") to deliver the best value at a higher price check out the following URL/documents:
4_2.asp. And, "Buy TPC at 4_3.asp.
To understand 8 generic operational service metrics and how they economically help both the distribution firm and the customer’s TPC check out this exhibit/URL: ./exhibits/8elements.pdf.
- Two articles on selling and buying the lowest "total procurement cost". "Sell TPC at
4) The four major stakeholder groups in any company get premium economic rewards in the following ways:
- Suppliers get to sell more volume and get paid on time, because the best service firm is both growing faster than and more profitably than the rest of the channel players.
- Employees get a total compensation package that can exceed the average for their job niche in a given metro area by 5 to 50%. Plus they get job pride, job security and job growth, because faster growing companies have more promotion from within opportunities. A job can become a career.
- Customers get the lowest total procurement cost for the best one-stop-shop, in stock source of goods with zero errors, delivered on time with extra service possibilities for better customers perfectly tuned to the customer and their respective niche.
- Shareholders get an ROI that can be 4 to 6 times the industry average and a growth rate that is 2 to 5 times the industry average.
- In the long run, a great company must engage, co-create and grow with all four stakeholder groups to achieve superior economic benefits for all four, but in a service firm selling commodity products today the "employees must come first". To understand this logic, check out this article/URL:
5) To achieve sustainable high performance service capability, a company must address and integrate at least four vital perspectives for running a business. These four lenses through which we can look at a business include:
- The strategic structure and intent.
- The family/communal caring and support of all employees.
- The management of political power to make things happen in a just way.
- And, the creation of a cultural set of values that everyone can believe in and work for.
A key value for each perspective might be: "excellence" for the strategy lens; "caring" for the family lens; due process/justice for the political view; and "faith in a 4-way-win commonwealth system that does well for all by doing right for all when looking through the cultural lens.
THE SPECIFIC STEPS FOR "GOOD TO GREAT" SERVICE FOR WHAT INITIAL CUSTOMERS?
We have to overcome the bias of most product channels to push and promote too many products to too many different types and sizes of customers with a one-size fits all service, price and terms model. Over 90% of all distributors are guilty of:
Under-serving the most profitable customers within a distribution locations’ historically, best customer niches, because of being too distracted and drained by selling too many losing items to too many losing customers. For case studies on the small order problem, see articles: 2.15, "tackle the small order problem now" at 2_15.asp; article 2.19, "re-thinking distributor profitability" + case study at 2_19.asp. Specific how-to educational training on analyzing and dealing with the "small order opportunity" are in modules #ed 3.5-11 in our "High Performance Distribution Ideas for All" training program.
Not having the best-tuned, focused, one-stop-shop, highest fill-rate inventory service for any specific target customer niche. To read a two-part case study on ABC supply and how they tuned their inventory offering to a target niche of customers with terrific results check out these two URLs: ./exhibits/CASESTUDYRethinkProfitPower.asp, and 2_22.asp.
Not having the rest of the service metrics that define "perfect service" for a target niche continuously measured and motivationally improved by all employees every day. For generic definitions for service metrics and how their respective benefits lower one or more elements of total procurement cost go to these URLs: "how to define service" 3_1.asp; the steps/economics of heroic recoveries at 3_5.asp; and "exhibit 3" at our site which was already referred to in footnote 3 above at ./exhibits/8elements.pdf.
- Over-serving lots of growing-nowhere customers that pay less in annual total margin dollars than they cost us in total service activities; they are net profit losers. For more on ranking customers by profitability in a simple, but effective way to then pursue a number of different plays check out annotated slide show #10 at our site:
To overcome historical, unspoken biases it is often helpful to "reframe" how we look at our company’s strategy and profitability and back a new lens perspective with some hard data analysis. I would recommend that every distributor experiment with ranking all accounts by their estimated operating profit contribution and not just by their sales or margin dollar volume. But, for all of our employees to buy into customer-profitability-driven opportunities and the subsequent change work, we will have to:
Rethink the mechanics of our service processes to make them reliable and flexible. For more on re-designing service processes go to this URL: ./exhibits/processx.asp.
Most will probably appoint service process manager(s) who will lead the service process re-engineering task as well as measure and promote continuous improvement of the service metrics. For an article on how to pick and get a service manager going at a distribution location check out this URL: 3_9.asp.
Create a new culture of service excellence through continuous good news sharing and the creation of new language, symbols, values and success stories. If a company doesn’t have values that everyone can emotionally tie into, then it is tough to keep on winning our service excellence reputation everyday. Both module # 5.2 in our High Performance training program and article # 6.3 at our site explain the how to’s for and sharing of "praising statements". Here’s the article URL: 6_3.asp.
- Do enough education and dialogue for a sufficient majority of employees to move into the "Let’s do it" column from the columns for "Fence sitters" and "Defend the Past". Our revolutionary and comprehensive video/DVD based training program entitled: "High Performance Distribution Ideas for All" will help any distribution company walk the management team and then the rest of the employees through all of the education and dialogue necessary to make service excellence happen one niche at a time. There are five links in the middle of our home page that lead to over 50 pages of information on this training program which is unconditionally guaranteed and almost for free through our "resellers". If you don’t see an affiliation group/reseller that you belong too, then call us to find out how easy it is to become a reseller. You can, of course, just immediately buy the product from us for over twice the price that resellers charge. J
- Anticipate that when big, important changes are pursued, there will always be some winners and some losers as far as perceived power, value, workloads, commission-able accounts, etc. All of these issues have to be raised and defused. The biggest esteem loser in their own mind can be the CEO. Who wants to admit that they have been leading a company sub-optimally? How should next generation leaders help their boss "reframe" their thinking and change their ways? For personal case studies on "leading from the middle" as a twenty-something neophyte working for a growth by acquisition distribution chain check out this URL:
If and when we do achieve distinctive service brilliance, we have to be prepared to sell it via "automated reminders" that make customers take conscious note of our service performance and its value benefits. For more on these, go to these URLs: unconditional service guarantees - 3_2.asp; and sales force selling of their/company service value at 3_8.asp.
All employees who have "moments of truth" contact with customers should have ready responses for two situations:
- If any customer even hints that they may be able to "get a better price" or that they need a better deal, will everyone be prepared to say with confident, cheerful conviction: "You are already getting the best deal. Although our price will never be the lowest, our consistently, best total service value still gives you the lowest total procurement cost. Would you like to hear the specifics (again)?"
- If a customer, perhaps with an emergency, asks for "extra service", everyone must instantly be able to know if the customer is a best or target account that is eligible for "heroic acts" within a certain total extra cost budget. If the customer is not, then we will say: "No problem, we can do it, but there will be an extra charge involved, etc."
If we do have next level service, well sold through all of our marketing methods, the objections will come up less and less, and ever fewer will want to hear the "whole pitch". And, if we initially know what classification status each customer is, we will know when to do "heroic acts" for free as opposed to up front contracting for extra fees for extra services.
Reading the article, these support notes and skimming through all of the linked documents may seem overwhelming and perhaps impossible for those who aren’t strong readers of the English language (15% of all warehouse personnel in the US do not speak English as a first language). Educating and transforming every employees’ thinking about how to reinvent company profitability and what’s in it for them requires a video-based training program in which key concepts are reviewed and discussed 7 to 10 times in an hour session. (For the logic behind this and a story read this article/URL – affordable education for front-line employees - 3_12.asp). Once again our training program, High Performance…, is the total educational, dialogue, transformational solution that is unconditionally guaranteed. If you don’t think you can use it productively you can pitch the invoice and return the kit to us. J
Link to Article 3.14: 3_14.asp
Merrifield Consulting Group, Inc. Support Notes for Article 3.14